Question: Discounting real estate in hurricane area using historic storm surge data
We are looking at a medical property in a hurricane zone at 13 ft above sea level.

The cap rate 6% is in line with what you would expect for this property.  The property is a little bit expensive per square foot for the area ($400/sqft.) Florida Gulf Coast... But it has a good tenet with a 10-year lease.

My question is how do I discount this property being in a historical hurricane area and sitting at 13 ft above sea level.

The storm surge maps show it being susceptible to category 2+ storm surges.

All the research I've looked at is a bit theoretical.  I would like a rule of thumb that gave me a percentage of purchase price....
[{"id": "hnvemz9", "text": "If you want something quick and simple, you should look at how much flood/windstorm insurance would cost. Cap that expense to get the value deduction that's attributed to that increased expense that your going to have to pay for this asset being in a storm surge area. \n\nHow close are you to the water source that would cause the storm surge? Personally, we are avoiding purchasing assets that are close to sea level/near the ocean given we expect in the next 10-25 years that those types of assets will only get more expensive to insure/get closer and closer to being underwater.", "replies": [{"id": "ho0n6co", "text": "That is a good idea.\n\nThere is storm surge data for this property and it claims that it would take a hit from a Category 2+ before it was a problem.\n\nIt is 13 feet above sea level..... and the record on the gulf coast is 27 feet.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hnvf0hf", "text": "Realistically, no seller is going to sell their property as a discount because it is in a hurricane zone. What you can do is reach out to an insurance agent you trust and see how much premiums are for named storm insurance then integrate these into your underwriting. I also recommend reviewing the lease to see if the tenant is responsible for Property &amp; Liability insurance", "replies": [{"id": "hnwdcin", "text": "I agree here, particularly with things like hurricanes that affect large land swaths/entire market segments. Effectively the market has already decided what it is willing to support given the risk, so I think a standard price analysis (including a quoted insurance number to calculate NOI) is sufficient.", "replies": [], "depth": 2}, {"id": "ho0mwz9", "text": "I'm not asking the seller for a discount.\n\nI am looking for a systematic method for discounting the value of a property in this situation.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hnvgleh", "text": "One thing I would look into would be your obligations as the landlord, I'm assuming based on the fact that you're asking this questions you would be responsible for the roof and structure maybe parking lot if its a single tenant property. See if there is a roof warranty that is transferable and the insurance policy the current landlord has. Also, you could negotiate a certain percentage of the purchase price to be held in Escrow.", "replies": [{"id": "hnvqnfg", "text": "Full triple net.\n\nI will research some of the details on the other points.  We just submitted the LOI... super early stages of due diligence.... I do the 'black hat' work on the research.   All doom and gloom for me.", "replies": [{"id": "hnyeax8", "text": "If it is full NNN I don\u2019t know how much of a discount you will actually get, especially if there is a competitive bid environment.", "replies": [{"id": "hnzg7hd", "text": "I'm not asking the seller for a discount.\n\nI am looking for a systematic method for discounting the value of a property in this situation.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hnyq0pa", "text": "You:  *\"I don't believe this property is worth as much as you say\".*\n\nThem: *\"It's worth every bit of the $400.00 a sf we're asking for it\".*\n\nYou: \"*I will offer you $325 a sf*\".\n\n(That's how you discount it).", "replies": [{"id": "hnzrxo8", "text": "You have no idea what I am asking.", "replies": [{"id": "hnzt9mi", "text": "Ok.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]