Over the past 12 months, I’ve done stories about flooded suburbs or areas impacted by last year’s downpour in southeast Queensland. Each and every time, real estate experts have warned to stay away from flooded properties, claiming the risks far outweigh the benefits. Well, I’m going to throw a spanner in the works and say that last year my fiancé and I bought a flood-affected property and it was the best financial decision we’ve ever made.
BY LAUREN CROSS
I actually think flood-affected properties have heaps of benefits. For starters, most of the best suburbs in Brisbane are near the river. So chances are if you’re buying a flood-affected property, you’re buying in a pretty good suburb. You’re also likely to get a discount and walk into a renovated property that you don’t need to paint or recarpet for at least another 10 years.
My fiancé and I happened to find a property in Brisbane’s southwest suburb of Chelmer. Before the floods, we were going to lots of auctions and constantly missing out on tiny dumps in suburbs including Sherwood, Graceville and Chelmer. It’s quite difficult and expensive to get into that particular area and at the time, we would have been happy with even a unit.
Then the floods came and went and our own property in a suburb called Darra (now an investment, also in the southwest of Brisbane) was flooded to the floor level. At the time it was pretty awful and the Darra property definitely dropped in value.
However, that didn’t stop our love of the Chelmer area. We’d drive there every weekend for coffees, day dreaming about living there one day. My fiancé told me he didn’t want to buy anything that even came close to water after what we’d already been through, but after about six months I happened to drive past what I’d probably call my dream property. It had everything I ever wanted – an ensuite, a pool, a fireplace, a private garden and a large kitchen. The real deal clincher was the large walk-in-wardrobe.
I begged my fiancé to sign on the dotted line and he finally gave in. We went to the auction not really thinking we had a chance but ended up buying the house that night. We were pretty stoked, knowing if it weren’t the floods, we never would have been able to buy into this particular area. But the benefits didn’t just end there.
The property was valued before and after the sale for $85,000 more than what we paid, so for us it was a substantial discount from day one. It also meant instant equity and with that, a chance to borrow more and buy another investment property. In fact, lots of flooded properties have instant equity. I found another example the other day:
Of course, not everyone thought our purchase was as awesome as we did. I recently went to a real estate evening where someone said to me “you weren’t stupid enough to buy one of those flooded properties, were you?” It was obviously a little awkward when I told him I actually now owned two flooded properties! But the reality is I couldn’t care less.
Many people will never be able to afford buying in an area like New Farm or even Chelmer, so if the only way in is to buy something flooded – I say why not? If you’re planning to live there for the next 20 years then I really don’t think it matters. Chances are it probably will flood again, but I’ll worry about that when I’m 60 (I’m taking odds of every 30 years).
Despite what everyone keeps saying, getting insurance is actually no more expensive for a flooded property than any other house either. Also, I really doubt that it will flood again in the near future (can you imagine how paranoid those operators would be at Wivenhoe Dam right now?)
Of course, that’s not to say you should be out there taking advantage of people. Sure we got a discount, but we lost a lot of money on the Darra property as well. We also tried to buy a few ‘dry’ properties but by chance ended up with the one we now have. We weren’t actively looking for flooded properties, it just happened to be the one we bought.
It’s a sad fact that most flooded properties are now worth at least 10 per cent less than their previous price, but personally I think that if that 10 per cent is the difference between you being able to afford a property or not, than perhaps the benefits outweigh the risk and the stigma. There was definitely a lot of fear at first but already people seem to be forgetting the floods and I’m noticing those huge discounts we saw straight after the floods are now becoming smaller and smaller.
The reality is blue-chip suburbs will always be blue-chip suburbs and flood or not, I personally think those suburbs will always be in high demand.
What do you think? Was I crazy to even contemplate buying a property no one else wanted to touch? Would you buy a flooded property or is it simply too risky or too difficult to sell if you need to suddenly offload it later?
Lauren Cross is a journalist/subeditor of Australian Property Investor magazine, www.apimagazine.com.au