Though some people still maintain that global warming is nothing but a hoax, there's data that points to the fact it's a very real problem. In fact, climate change has led to a notable uptick in rainfall over the past three decades, according to research out of Stanford University. All of that added rainfall has caused almost $75 billion in flood damage across the U.S. in the last 30 years. And if the problem continues, buying and insuring property will become all the more tricky for real estate investors.
A very real threat
Over 14 million U.S. properties are susceptible to flood damage, according to First Street Foundation, a nonprofit research and technology group. But many property owners lack flood insurance because the federal flood maps that spell out flood zones are often outdated and fail to account for the impact of climate change, which can spur more episodes of intense rainfall. And not shockingly, minority communities in the U.S. tend to have a larger undisclosed flood risk than the general population.
Be wary of flood zones
Whether you're buying a home to live in yourself or as an investment, it's important to know whether that property is located in a flood zone and how serious your risk of flood damage is. To that end, you can start by visiting the Federal Emergency Management Agency (FEMA) website's Flood Map Service Center. Just plug in the address of the property you're looking to buy to get more information. Keep in mind that flood zones are broken down by risk so you can assess the potential for damage to the home you're looking to buy.
If you are going to purchase a home in a flood zone, you'll need to insure it properly. (Keep in mind that standard homeowners insurance does not typically extend to weather-related flood damage.) And in this regard, you have options.
You can buy a policy through the National Flood Insurance Program (NFIP), a federally subsidized program for property owners. Or, you can purchase private flood insurance, which may be more expensive but may also offer you a greater scope of coverage that can ultimately save you money in the event of a flood.
Of course, if the home you're seeking to buy is located in a very high-risk area, you may be denied coverage by a private insurer -- they have the right to do that -- in which a NFIP policy may be your only option.
Another thing to keep in mind is that being located in a flood zone could impact your property's value. And while you may not have such a hard time renting out a home in a flood zone, finding another buyer for it is a different story.
The Millionacres bottom line
Climate change is only likely to make the issue of flood damage worse in the coming years. If you're in the market for a new home, you might consider avoiding flood zones altogether. And if you do buy a home in a flood zone, be sure to put the right coverage in place to protect yourself from catastrophic losses in the event of a major storm.