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Disaster Risk When Investing in a Real Estate in the United States

アメリカ不動産に投資する際の災害リスク



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It is necessary for you to consider the natural disaster risk when investing in a real estate in the United States.
The most important thing to avoid in a natural disaster is human damage, but property damage cannot be ignored.
Especially in the recent years, the natural disaster risk is getting high due to the climate change.
Therefore, there is a risk in investing in real estate in the United States which may be different than those of Japan.
In this article, we will explain the types of the disaster risks and the ways to prepare.


"Natural Disaster" You Should Keep in Mind When Investing in the Real Estate in the United States

アメリカの不動産に投資する際に念頭に置くべき「自然災害」

The natural disasters have a significant affect on the circumstance of the real estates in the United States.
There have been the large-scale natural disasters in the United States almost every year such as hurricane and flood, and it is a key element to prepare for such natural disasters
In the year of 2017, the total amount of the loss hit the highest record of 306 billion dollars (About 34 trillion and 600 billion yen).
There is a high risk of natural disaster caused by abnormal weather, and there is a tremendous loss on the civic life and economy

Earthquake

There are many earthquakes in California, the Western United States as it is located upon the large fault.
There are not many earthquakes in the Eastern United States as it is further away from the plate boundary.
In 2011, the people are shocked by the earthquake of magnitude 5.8 in the State of Virginia, the East, which its magnitude is not rare in Japan.
The people are very concerned as such a large-scale earthquake occurred in the East for the first time in decades.
The countermeasure against earthquake may not be paid attention in the area with less earthquake.
Thus, there is a high risk of a huge damage by a sudden big earthquake as the preparedness to respond to earthquake may be underestimated.

Flood

There are many victims when the Hurricane Irma landed in the Southern United States in 2017.
Florida with the exceptional loss in that disaster, there are currently many more houses with the raised-floor-style and buildings with pumping functions as the countermeasures.
In addition to hurricane, the king-tide, the natural phenomenal of exceptionally high tide has become a serious issue in the metropolitan area of Miami causing water-overflow from the underground.
As a countermeasure, high-rise buildings with the raised-floor style is becoming the mainstream in thirty to forty years from now.

Hurricane

Alike Japan, hurricane is one of the serious natural disasters in the United States.

The Hurricane Harvey, landed in Texas in 2017, produced a severe heavy rain, causing the enormous economic damage of 180 billion dollars.
There were 251 fatalities in this hurricane, and the economy was severely affected as the oil extraction sites of the prominent oil companies were damaged.
There is a drastic increase in the number of buildings prone to natural disasters such as an earthquake and hurricane in the United States.
The damage by natural disasters may become more serious as many more buildings are developed in the area with high risk of hurricane.

Tornado

It is not common in Japan, but tornado is one of the major natural disasters in the United States.
April in the year of 2011 was knows as the month with the highest tornado strikes in the recorded history in the United States, as there had been more than 600 tornados from Oklahoma to North Carolina.
In the end of that month, there were more than a hundred tornados in two days, and the fatalities reached several hundreds.

Forest Fire

In recent years, the number of cases of a forest fire is increasing.
The serious damages have been caused by the forest fires in California in recent years.
As of September, 2021, more than 80,000 hectares were lost, and over 700 buildings were damaged by fire.
A thunder, the cause of a fire, is becoming easy to occur due to the global warming, and moreover, drought in this area with a strong wind is worsened by the climate change providing the conditions for fires to spread easily.

Understanding the Disaster Prone Area Before Investing in the Real Estate in the United States

アメリカで不動産投資をする前に災害地域の把握

The risk of natural disasters in the United States is getting higher each year, and 31% of the country's land and 57% of buildings such as houses, schools, hospitals are considered the hazardous spot.
The risk by the natural disasters are heightened by the climate change and the frequency and the severity is also increasing.
The scale of the disasters is getting bigger as the severity is getting serious, and many buildings and infrastructures are affected by, but it is also true that the urban and regional development is actively proceeded across the country.
You should mitigate the risk by understanding where is prone to natural disasters when you purchase a real estate property in the United States as it depends on the region.
As a reference to buying a property in the United States, the following list is the areas with the high natural disaster risk.

Los Angeles County

The county has the highest natural disaster risk in the United States with an earthquake, forest fire, mud flow, and flood.
The other possible disasters are tornado, volcanic explosion, and tsunami.
The insurance fee tends to be high as the population density in this county is high, and there are many factors for the greater damages to occur.

Bronx County, New York

This county suffers heavy snowfalls at least two or three times a year, and a flood and a tornado are also frequently happened.
4,700 citizens of Bronx are suffered from the power outage caused by the tornado in 2010.
The countermeasures for a heavy snowfall seems insufficient, and thus its damage tends to be great.
It matters to choose a real estate property with a good preparation for disasters even the frequency of heavy snowfalls is low.

Manhattan, New York City, NY

Similarly to Bronx County, the countermeasure for a heavy snowfall is insufficient, but it seems many people are not taking seriously as the frequency for heavy snowfalls is low.
There are many historical buildings in this area, however, you should be careful as they are vulnerable to natural disasters.

Others: Natural Disaster in Hawaii

Hawaii is designated as the area with the slightly higher risk of natural disasters compared to other states because of many volcanic explosion and earthquakes.
There was a great damage by the tsunami sixty years ago, and Kauai and Oahu Islands suffered greatly from the Hurricane Iniki in 1992 although there are usually not a lot of big hurricanes landing.

The Importance of Enrolling in Insurance to Avoid Natural Disaster Risk When Investing in a Real Estate in the United States

アメリカでの不動産投資の際は災害へのリスクヘッジとして保険加入は重要

There have been unprecedented natural disasters and unpredictable scale of disasters due to the abnormal weather.
You cannot be relieved even by referring the data and choosing a property with the low risk.
Therefore it is important to enroll in an insurance as a safeguard.
Usually, a general insurance in the United States does not cover the natural disaster damages comprehensively such as a flood, hurricane, and earthquake.
Depending on the insurance companies, they might cover a fire including a forest fire, and damages of thunder and wind caused by a hurricane.
However, it might not cover a flood damage even by the same cause of a hurricane.
It is necessary to enroll in a flood insurance, hurricane insurance, and earthquake insurance other than a general real estate insurance and fire insurance.
It is crucial to check which disaster is covered by the general insurance beforehand as it depends on the insurance company.
The fire insurance is the most important matter in the real estate in the United States in order to avoid the risk.
The risk for fire is higher than Japan as there are many old and wooden buildings.
By any chance, a fire does not only damage your property but also can spread a fire on the neighboring properties
It is necessary to enroll in a fire insurance as it is possible to be sued for the damage claims in the case there is a fatality by the fire.

Consider the Balance between the Return and the Risk

It is not easy to choose a property while considering the risk of natural disasters. You need to consider the balance between the risk and the return when you invest in the real estate.
It is pointless if the property has a high risk and its investment value is low.
It is desirable to enroll in an insurance as there is an investment value in the area with a lot of population and a high demand for real estate properties even though the disaster risk is high.
You have to be cautious to enroll in an expensive insurance for a low price property.

In Conclusion

The occurrences of natural disasters have become frequent in recent years in the United States under the influence of the climate change such as global warming.
In the area with many natural disasters, the real estate properties are modified to prepare a variety of disasters.
Nevertheless, it is difficult to wipe out all the risk of damage by natural disasters.
It is necessary to consider the countermeasures for natural disasters by getting thorough information within the United States before starting an investment.



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