The destruction wreaked by Hurricane Ian can become a great opportunity for investors due to the property renovation rule.
Owners of destroyed houses on the northern coast of the Gulf of Mexico must comply with the Substantial Damages and Substantial Improvements rule of the US Federal Emergency Management Agency (FEMA), which also applies to commercial properties. This rule dictates that if the estimated cost of repairs or renovations of a property exceeds 50% of its market price, the owner must bring the structure into compliance with the flood damage prevention regulations. It would be impossible to insure the property otherwise.
Making the required changes in the structure requires significant funds, as explained by Zahra Antaramian, Field Operations Director at ADG4, a company involved in real estate management in Naples, Florida. Most homeowners simply don’t have enough money, so they are forced to sell their properties. Investors are the only potential buyers in this situation, as houses are severely damaged by the hurricane and not move-in-ready.
Hurricane Ian damaged more than 11,000 houses in Florida. As residential property assessments are completed, this number is likely to increase, representatives of the American Red Cross say. Many properties in Fort Myers Beach and on Sanibel Island were built in lowlands back in the 1970s – 1980s and were significantly damaged or completely destroyed by the recent natural disaster.
The 50% FEMA Rule is only one of the reasons why investors may be interested in Florida. The Sunshine State has always attracted them with its friendly tax regime. Workers pay no state income tax, which creates a huge demand for housing from residents of other states who have been moving here recently. The return on investment is not taxable in Florida either. This includes real estate investment and rental income. The only exception is the 6% sales tax charged on rental payments to the landlord for the first six months.