Is it worth the risk to invest in flood-affected properties?

Is it worth the risk to invest in flood-affected properties?

By Bianca Dabu
An aerial shot of a flooded suburb

While there are undeniably many risks in property investment, is putting your money down on flood-affected areas one of those worth taking?

Properties in Rockhampton in Queensland, as well as other areas in Northern New South Wales, have recently seen a drop in prices due to "being underwater".

"Northern New South Wales, Southern Queensland. It's been absolutely flogged," Smart Property Investment's Phil Tarrant said.

"You also see some damage from the cyclone, but it's what happens after the deluge, really. A lot of the northern areas are underwater at the moment." 

Some property investors would see the drop in prices as an opportunity to add up to their portfolio, but buyer's agent Steve Waters strongly advises against investing in flood-affected properties, no matter how low the prices get.

After all, just because something's cheap doesn't mean it's a good deal.

"If you do the figures over [a] period [of] time, then it's not going to help you. If you're one of those people that wants to get in and get out, well, maybe you'll make a dollar," Steve said.

"You're either an investor or you're a gambler. If you're that type of a speculative investor and you want to roll the dice, go ahead. Knock yourself out. But for me, it floods, I'm not going to go in there. I don't need the heartache in my life and I don't think anyone else does."

"If it's [flood-affected], then, obviously, there's insurance concerns with that," Phil said. 

"But you need to be thinking about why you would have a ... potentially flood-affected property in your portfolio. That's going to be something which is going to be detrimental in terms of valuation. It's probably not going to go up in value as fast in places in the same area that is not flood-affected."

Steve advises property investors to practice due diligence when dealing with areas that are usually affected by floods with the help of flood overlay maps, which are usually free to get online.

"They're on all kinds of websites. You got to use them. [Some investors are] hurting now because their properties have half-gone underwater or have gone underwater and there's some pretty considerable damage after that," Steve said. 

"Once again, the diligence beforehand. Sometimes it's cheap for a reason. You just got to stay away from the stuff. You don't need the heartache in your life. There are plenty of other opportunities out there."

Phil concluded that you can park your money better somewhere else that's going to get return on your investment.

Tune in to The Smart Property Investment Show's portfolio update episode to know more about how the team will make the portfolio cash neutral in the future, and why they advise against taking shortcuts in the buying process to ensure a property is the real deal.

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Is it worth the risk to invest in flood-affected properties?
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