When you buy a piece of property as a real estate investment, there are certain things you should know to look for. For example, if you're buying a home to rent out to full-time tenants, you'll want to make sure it's in a good neighborhood with appealing amenities. If you're buying a vacation property, make sure it's in an area that's not too restrictive for renters. And with any property, you'll need to check the specific location to make sure that in buying the home, you're not exposing yourself to added costs and hazards.
Now, many seasoned real estate investors, and regular homebuyers for that matter, know to look out for flood zones. In fact, there are tools available that make it easy to assess flood risk.
But what about wildfires?
This year, California experienced another series of catastrophic fires that caused widespread destruction throughout the state. While 76% of the U.S. homes at risk for wildfire damage happen to be located in California, that still leaves almost 500,000 homes outside the state at risk. As an investor, it's imperative you assess your wildfire risk -- and put the right protections in place if you're buying in a fire zone.
Many homebuyers are in the dark
Climate change and bouts of dry weather have put some parts of the country -- notably California -- at a greater risk of wildfires. But what compounds the problem is that many states don't have laws establishing disclosure requirements for homebuyers. While California does have some laws in place, they've been criticized for being nebulous. And while Oregon requires that sellers disclose whether a home is in a forestland-urban interface, it doesn't impose a specific wildfire requirement.
In fact, one big reason why so many buyers know to research flood zones is that there are more laws requiring disclosure in that regard. Because wildfires tend to be concentrated in the western part of the country, there's less widespread regulation.
How to determine wildfire risk as an investor
If you're looking to buy an investment property, you may need to be proactive in determining your wildfire risk. Thankfully, there are tools you can access to know what you're getting into. One good resource is the Verisk Wildfire Risk Analysis, which breaks down wildfire risk in the western U.S. as well as Canada. CoreLogic (NYSE: CLGX) has a similar tool that ranks wildfire risk based on a property's proximity to high-risk vegetation. There's also the Fire Hazard Severity Zone map for California investors.
One thing to keep in mind is that you may struggle to buy a standard homeowners insurance policy in an area at high risk for wildfires. In that case, you'll generally need a specific wildfire insurance rider that could make your coverage more expensive.
Protecting your investment
If you're going to buy a home in a wildfire zone, there are steps you can take to reduce your risk of damage. These include:
- Surrounding your property with hardscaping features like pavers, concrete, and noncombustible mulch.
- Avoiding vegetation on and around your property.
- Installing a fire-resistant roof and siding.
The Millionacres bottom line
You may decide that despite the risks involved, it's still worth buying a property in a wildfire zone. If so, prepare to spend some money to keep that investment as safeguarded as possible.