Can Your Rental Survive a Natural Disaster?
Published on: Wednesday, December 16th, 2015
As peak hurricane season approaches in mid-September, property owners along the Atlantic and Gulf coasts are holding their breath and hoping for a mild storm season, while those in Western states—especially California—are continually plagued by earthquakes, mudslides and drought-fueled wildfires. The country’s midsection, meanwhile, is home to tornado alley. While natural disasters can’t be completely avoided, there are a few things rental investors can do to ensure their properties survive.
RealtyTrac and CoreLogic, both real estate data analytics firms, recently produced separate reports looking at the risks that natural disasters pose for property owners, including rental investors.
According to RealtyTrac’s “2015 U.S. Natural Disaster Housing Risk Report,” a shocking 43 percent of U.S. houses and condos are in counties with a High or Very High risk for at least one type of natural disaster, and 29 percent of all houses face a risk for hurricanes.
Natural disasters are not only capable of unleashing devastation, but can also weigh heavily on homeowners’ conscience and affect home prices. Interestingly, the RealtyTrac report found that while home values are higher in higher-risk areas, home price appreciation over the past 10 years was stronger in lower-risk counties. Among 551 counties, home sales prices in counties with a Low risk for natural disasters increased 6.6 percent on average between 2005 and 2015, and home sales prices in counties with a Very Low risk for natural disasters rose 9.5 percent on average during the same time period.
Conversely, home sales prices in counties with a High risk for natural disasters decreased 2.5 percent on average over the past10 years, while home sales prices in counties with a Very High risk for natural disasters decreased 6.4 percent on average.
The “2015 CoreLogic Storm Surge Report” looked more narrowly at the risks of storm surges from hurricanes along the Atlantic and Gulf coasts. A storm surge happens when water is pushed to shore through hurricane-force winds. Surge levels, and potential damage, will vary depending on the speed and intensity of the storm.
The CoreLogic report showed that more than 6.6 million houses are at risk of storm surge damage with a potential reconstruction value of almost $1.5 trillion.
The states of Florida, Louisiana, New York, New Jersey and Texas had the most properties at risk for a storm surge. In terms of metro areas, New York, Miami, Tampa, Virginia Beach and New Orleans have the most properties at risk for a storm surge, according to CoreLogic.
Science and technology are getting better at predicting natural disasters so that property investors in high-risk areas can avoid as much damage as possible. To be sure, the risk of natural disasters doesn’t mean investors must avoid investing in high-risk properties altogether. It does mean an informed investor is a smart investor.
Investors who are buying rental properties in states or metro areas that are prone to natural disasters should carefully weigh the risks while preparing via appropriate insurance coverage and preventative measures. For example, to protect property from flooding, raise electrical system components and install sewer backflow valves, while for high winds, reinforce or replace garage doors and secure roof shingles. Check with a local building official, city engineer, or planning and zoning administrator on more ways to protect your property from natural disasters endemic to an area.