July 30, 2019 10:59 am ET
PANAMA CITY, Fla.—After Hurricane Michael swept over the Florida Panhandle last October, destroying thousands of homes and taking dozens of lives, David Dey started looking for property to buy.
The Lakeland, Fla.-based real-estate investor had been part of a group that flipped hundreds of damaged homes in and around New Orleans after Hurricane Katrina deluged the city in 2005. He bought flood-damaged homes in Houston after Hurricane Harvey in 2017. The destruction he saw in Panama City, Fla., was worse.
“Unfortunately, or fortunately, depending on where you look at it, everyone is going to go and follow the storm path,” said real-estate investor Marc Cox.
Mr. Cox got his start as an investor buying and renovating dilapidated homes in Baltimore. In 2000, he said, he bought two homes in Suffolk County, N.Y., that had been damaged by superstorm Sandy. After Hurricane Harvey hit Houston, he picked up two properties there. Now he is looking for storm-damaged real estate to buy in New Orleans and Panama City.
Mexico Beach, Fla., was almost completely destroyed by Hurricane Michael in October 2018. PHOTO: JOE RAEDLE/GETTY IMAGES
Last year had the fourth-most natural disasters since 1980 to cause damages estimated at $1 billion or more, according to the National Centers for Environmental Information, a federal data archive. The top three years also occurred in the recent past: 2017, 2011 and 2016.
Many of those disasters hit areas in California, Florida or the southeastern U.S. where populations had been increasing and real-estate prices rising. Once a disaster hits, those without insurance often are forced to sell their damaged homes. Those with insurance often do the same.
For a certain type of risk-taker, this offers a rare chance to buy properties on the cheap and flip them for a profit, often after fixing them up. Disaster investors also often face hostile locals, a shortage of contractors and materials, and volatile property prices.
“Any place that there’s a need, there’s an opportunity,” said Mr. Dey, who is 45 years old. “I’m not hoping for the storms, but they happen.”
Disaster investors say they are helping the communities in which they invest. They take financial risk, they say, and their money helps towns begin the rebuilding process when most property developers and lenders are reluctant to be involved.
Real-estate investor Gregory Owen shows one of the homes he built in Santa Rosa, Calif., to prospective buyers. PHOTO: RACHEL BUJALSKI FOR THE WALL STREET JOURNAL
Scott McElroy, a retired army counterintelligence specialist who owns a storm-damaged home in Mexico Beach, Fla., couldn’t disagree more. He is concerned that investors will take advantage of vulnerable homeowners, as well as build bigger, bring in outsiders and change the character of the town.
When they ask him for directions to potential investment opportunities, he said, he sends them in the wrong direction. He is part of a grass-roots campaign in Mexico Beach to make speculators unwelcome.
“It’s insulting,” he said. “You try to be polite, you try to be nice, because that’s just the way we’re raised. But it comes to a point where everybody has their limit. You’re already looking at loss. You’re already looking at monetary loss. And then somebody offers you some ridiculously low price.”
Gregory Owen has been buying fire-damaged lots in Santa Rosa for more than a year. PHOTO: RACHEL BUJALSKI FOR THE WALL STREET JOURNAL