Flooded home investors say it’s not quick cash

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

In fact, it's just about as different as it can get, several home investors said. The good thing about buying flooded homes with serious damage is that the initial investment is low. Prices from $6,000 to $12,00 are common, according to Realtor Marlyne Miller of Skogman Realty, who has worked with both buyers and sellers.

That's about where the good news ends for the buyers.

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 at best unpredictable, but Miller said buyers who can't sell them can usually rent them without difficulty because they are like new.

Todd Beyer, a 41-year-old gymnastics school owner, has some things in common with other flood-home investors. Beyer honed his skills restoring his parents' flooded home on Ninth Street NW in Cedar Rapids' ravaged Time Check neighborhood. He then found out he could buy the house next door, which the owner didn't plan to restore, and linked up with John Mangold, who also runs a gymnastics school, to buy and restore it.

After six months of work, Mangold and Beyer had the 868-square-foot, three-bedroom, 1950s ranch house 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.

Beyer said the project was about as lucrative as working a second job for six months, but he's not complaining. He could work on the project when it was convenient, and “not being on a deadline really helps,” he said.

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 bought and restored one house and begun 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, then noticed that nothing was happening at another flooded house on the same side of the street. He investigated and found out the house was in foreclosure. The mortgage company, which was not from the area, agreed to sell.

Novak said he felt the homes 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 both 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 in preparation for the winter. He then bought another house right 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 last year.

“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 while he sees what the real estate market does. 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 people who take advantage of the misfortune of flood victims. Moline has heard them called vultures, but isn't bothered. He says the investment 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. Nearly all of Moline's neighbors received sizable government payments to help them recover, Moline said, but some simply chose not to reinvest in their homes.