Opportunities often present themselves in the most unexpected places, and for those willing to roll up their sleeves and put in the work, flood-damaged homes might just be the golden ticket to affordable homeownership.

While some properties may be too damaged to repair, others hold the potential to be restored to their former glory – or better. For the determined, investing some sweat equity can yield big rewards, making homeownership possible at below-market prices. However, this path is not without its challenges, and understanding how to navigate these obstacles is crucial.

The first step in evaluating a flood-damaged property is obtaining a professional assessment. This comprehensive inspection should cover several critical areas: the foundation, contamination and mold issues, structural integrity, and utilities such as heating and water systems. Armed with this assessment, you can make an informed decision about the property’s potential and the scope of work required.

Once you have a clear picture of the property’s condition, it’s time to dive into the financial viability of the purchase. To do this, you’ll want to calculate the cost of renovations, the purchase price and, if financing is necessary, the borrowing costs ie. interest.

Traditional financial institutions, like big banks, often won’t lend money for homes with flood damage. But don’t despair there are ways around this, and alternative financing options may be available.

Consider consulting a mortgage broker who specialize in non-traditional lending. Private lenders are often willing to provide financing, generally with higher interest rates. While these rates may seem daunting, there are ways to determine if they are worth the investment.

One way is to calculate the difference in the total amount of interest paid over the term of the loan compared to the interest paid over the same term with a traditional mortgage. Add this difference to the cost of the home, including renovation and repair expenses. Then, evaluate whether this total still makes the property a good buy.

Along with this strategy, opt for the shortest viable term with the lender. Instead of the common three or five-year mortgage, consider a one or two-year term, or a period that allows enough time to complete repairs and renovations. Once the property is restored, you can re-apply for a more traditional mortgage at a lower interest rate. For example, on a property with a mortgage loan of $200,000 at 6.39 per cent (the going rate) vs. the same amount at 10.75 per cent there would be approximately $17,000 difference in borrowing cost on a 2-year term – and even less of a difference on a 1-year term. You may want a professional real estate expert to assist you along the way – especially at this point – they will be able to help you with market trends both current and future which will help to determine if the total purchase cost is worth it.

Part of the process will also be confirming that the property can be insured while you are renovating and after the work is complete. Lenders will require that you are able to get insurance for the property to qualify for financing.

The Subtle Art of Real Estate when it comes to purchasing flood-damaged homes is having the ability to approach the purchase strategically. As the old saying goes ‘you need to know when to hold ‘em, know when to fold ‘em – know when to walk away and when to run’. If you find a diamond in the rough and the cost is right, then not only will this open the door to the possibility of homeownership in a very tight market, but it will also contribute to community revitalization, making it a win-win scenario for everyone.