Fire, flood and profit: Real estate investors are chasing crises

Natural disasters last year were the 4th-highest since 1980, causing an estimated $1 billion in damages

National /
Jul.July 30, 2019 02:27 PM
Homes damaged in Hurricane Katrina. (Getty)

Homes damaged in Hurricane Katrina. (Getty)

In the wake of natural disasters, some real estate investors are finding opportunity for profit.

So-called “disaster investors” are buying up properties damaged by floods, wildfires, hurricanes and other catastrophic events — and flipping them for a gain.

The practice is becoming increasingly common as the number of natural disasters climbs in the U.S, the Wall Street Journal reported. Last year saw the fourth-most natural disasters since 1980, causing an estimated $1 billion in damages, according to data from the National Centers for Environmental Information (NCEI.)

A string of wildfires in the Los Angeles region over the last few years have caused extensive damage, including last year’s Woolsey Fire, which led to an estimated $5 billion in real estate damage.

Lakeland, Florida-based investor David Dey, 45, has invested in multiple properties following disasters, including Hurricanes Michael, Katrina and Harvey, which hit southern states including Louisiana, Texas and Florida.

“Any place that there’s a need, there’s an opportunity,” Dey told the Journal. “I’m not hoping for the storms, but they happen.”

Investors are driving up the number of sales in affected markets. After Hurricane Michael hit Panama City, Florida, last October, sales dipped but ultimately increased. In Santa Rosa, California, home sales jumped 17 percent in the five months following a 2017 fire, according to data from Zillow. Home prices, on the other hand, can be volatile.

In areas affected by disaster, homeowners often choose to sell their properties, and those without insurance may be forced to — sometimes at a low price.

While disaster investors argue they are helping communities rebuild, the practice has faced criticism from storm-affected residents who believe they are exploiting vulnerable communities.

“It’s insulting,” Scott McElroy, owner of a damaged property in Mexico Beach, Florida, told the Journal. “You’re already looking at monetary loss. And then somebody offers you some ridiculously low price.” [WSJ]Sylvia Varnham O’Regan


Related Articles

arrow_forward_ios
Cherre CEO L.D. Salmanson (Cherre/Facebook)
Real estate data firm Cherre raises $50M
Real estate data firm Cherre raises $50M
Doctors and medical professionals have remained on time with their rent payments in the past year (iStock)
Medical offices are just what the doctor ordered for landlords
Medical offices are just what the doctor ordered for landlords
Cerberus Global Investments President Lee Millstein
Cerberus raises nearly $3B for new real estate fund
Cerberus raises nearly $3B for new real estate fund
Zigg Capital's Dave Eisenberg and Ryan Orley (Zigg, iStock)
Zigg Capital nabs $225M to invest in proptech startups
Zigg Capital nabs $225M to invest in proptech startups
NFT-based game The Sandbox is allegedly worth $37 million. (Getty, The Sandbox)
Digital “land” in video games attracts NFT investors
Digital “land” in video games attracts NFT investors
TRD Tips: Bradley Tusk gives a crash course on SPACs
TRD Tips: Bradley Tusk gives a crash course on SPACs
TRD Tips: Bradley Tusk gives a crash course on SPACs
Hedge fund manager Robert Citrone (Getty)
This “Tiger Cub” hedge funder owns nearly 10% of Compass
This “Tiger Cub” hedge funder owns nearly 10% of Compass
Apollo Global Management will take over craft retailer Michaels in a deal that values the company at $3.3 billion. (Wikipedia Commons, iStock)
Craft retailer Michaels to go private in $5B deal
Craft retailer Michaels to go private in $5B deal
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...