Flooded home investors say it’s not quick cash

Investors who are buying, restoring and selling flooded homes in Cedar Rapids say it's not quite like the television show “Flip This House.”

It's definitely not easy money.

The initial investment is low. Prices from $6,000 to $12,000 are common for flooded homes, said Realtor Marlyne Miller of Skogman Realty. That's where the good news ends for buyers, though.

The homes are anything but a quick flip. Most of them must be gutted and require more work than meets the eye. New drywall, doors, heating, cooling, flooring and electrical systems are usually on the list. Some also need new siding, plumbing, kitchen cabinets and even roofs.

The market for the restored homes is unpredictable, but Miller said buyers who can't sell them can usually rent without difficulty because they are like new.

Todd Beyer, a 41-year-old gymnastics-school owner, honed his skills restoring his parents' flooded home on Ninth Street NW in Cedar Rapids' ravaged Time Check neighborhood. He and John Mangold, who also runs a gymnastics school, bought the house next door, which the owner didn't plan to restore.

After six months of work, Mangold and Beyer had the 868-square-foot, three-bedroom, 1950s ranch in better-than-new condition. They sold the house Sept. 29 for about $100,000, after sinking a large, yet-to-be tallied amount of money into it.

The men are now working on another house in the same row, which Beyer's mother-in-law has agreed to buy. Beyer said it feels good to help bring his parents' neighborhood back to life.

Across the street, plumbing and heating contractor Randy Novak has restored one house and is restoring another.

Novak said he learned about the first house from a family friend, who decided not to restore it and bought a condominium instead. Novak bought and began restoring the house. He noticed that nothing was happening at another flooded house on the same side of the street. It was in foreclosure, and the mortgage company, which was not from the area, agreed to sell.

Novak said he felt the houses were a sound investment, because it was already clear that the neighborhood was coming back, and it's far enough from the Cedar River that remaining properties are unlikely to receive buyouts or be taken for flood control.

The contractor plans to rent the properties, believing that the sales market will be stronger in a few years.

“I don't think you're seeing people buy these houses just to flip 'em fast,” he said.

Kevin Moline, a steel mill mechanic who has restored houses, bought a house in the 1400 block of Sixth Street NW, which he has gutted and sealed up for winter. He then bought a house next to his own flooded home off Ninth Street NW. He is also interested in buying a nearby duplex.

Moline said he became interested in buying flood homes after the stock market tanked, taking his retirement investment with it.

“I don't understand the stock market,” he said. “I'm going to invest in something I can drive by every day and say, ‘Yeah. It's still standing there, and it's still rented.' ”

Moline is taking his time, trying to avoid piling up debt on the rehabs. He will rent the homes initially and likes the fact that he'll be able to control the appearance of the house next to his own.

“To me, it's a job,” Moline said. “I see it as work.”

Flooded home investors are sometimes criticized as taking advantage of others' misfortune. Moline has even heard them called vultures. The investment, he said, will help restore the city's tax base, restore the appearance of flooded neighborhoods and bring residents back into the areas.

“I live in the area and believe in the area,” Moline said.

At least 696 home sales have been transacted in the flood-affected areas of Cedar Rapids since the June 2008 floods, said Beth Weeks, the city's chief deputy assessor. That number includes multiple sales of some individual homes.

“Some properties were sold as-is right after the flood for a minimal amount,” Weeks said. “Some of them were mucked out by the buyer, and then sold for a higher price to another buyer who renovated them and sold them again.”