HOUSTON (Reuters) - Addressing a real estate conference in flood-ravaged Houston this month, longtime investor Ray Sasser detailed his strategy: buy up to 50 flooded homes at deep discounts, then fix and flip them for a hefty profit.

FILE PHOTO: Houses are seen partially submerged in flood waters caused by Tropical Storm Harvey in Northwest Houston, Texas, U.S. on August 30, 2017. REUTERS/Adrees Latif/File Photo

Sasser first followed that game plan after Tropical Storm Allison flooded the city in 2001. He bought homes for 30 to 40 percent of their pre-storm value, spent another 15 percent on repairs, and sold many a year later - at full value.

The quick recovery surprised him, he said.

“This can’t be true,” he recalled thinking at the time.

The bet that home prices in hard-hit Houston neighborhoods will fully recover after Hurricane Harvey could be riskier, Sasser and local economists said. But a rush of investors eager to snap up flooded homes reflects broader confidence in the resilience of Houston’s unique metropolitan economy.

While the region’s unchecked development has come under fire for exacerbating flooding, it also reflects its core strength: A rare combination of rich job opportunities and low cost of living, driving explosive population growth in America’s energy capital.

The surging demand has sustained home prices through four major floods since 2001 and a historic oil price crash starting in 2014. Though Harvey caused far more damage than previous storms, investors such as Sasser see plenty of opportunity in the region’s estimated 268,000 flooded homes.

Tara Waggoner, the Houston market manager for brokerage and online listings firm Redfin, said the firm’s local agents were getting about four times the number of calls they usually get from investors. They ranged from individuals looking to buy one flooded house to groups of ten or more pooling their money for a home-buying spree, she said.

“You have people with millions of dollars to work with,” she said in an interview days after the storm. “They want to go in, pay cash, get the discount and fix it up to sell.”

Sasser, a 35-year veteran Houston home buyer, spoke to about 100 investors who packed into a meeting of the Realty Investment Club of Houston - or RICH, for short. He said he had formed his own construction company to streamline the repair work.

His stories riveted less experienced investors such as Brandyn Cottingham, who sees the flood as an opportunity to ramp up his real estate holdings.

“In this business you look for distressed property, and we’ve got tons of that right now,” Cottingham said.

RICH President Belinda Lopez said she’s gotten calls from sellers eager to make deals.

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“They say: ‘This is my third flood - I’m done,’” Lopez said.

A MILLION NEW RESIDENTS

In addition to Harvey and Allison, Houston has taken on rising water from 2008’s Hurricane Ike and the so-called Memorial Day and Tax Day floods of 2015 and 2016.

None of the disasters slowed the region’s growth, as development has crawled like ivy across the subtropical plains of southeast Texas, enabled by lax local regulation.

Harris County, which includes Houston and many suburbs, has added more than 1 million residents since 2000 and remains the second fastest-growing county in the United States despite a recent oil industry downturn, according to U.S. Census Bureau data.

Though housing prices have risen steadily with the influx of demand, the region’s median home price of $230,000 remains well below that of many major U.S. cities.

The oil downturn did not crash the local economy or the housing market - as another oil bust did in the 1980s - because Houston has diversified and other sectors continued to add jobs, said economist and University of Houston professor Bill Gilmer.

That’s good news for housing investors. Houston homes are expected to stay in high demand even in low-lying areas, and home prices and rents are expected to rise with the sudden plunge of supply and jolt in demand from displaced residents and outside contractors..

There is money to be made, Gilmer said, in places that have flooded multiple times, or where residents are older and “may just want to move on.”

Many other homeowners, however, may have little motivation to sell out cheap, said James Gaines, chief economist at the Texas A&M University Real Estate Center.

Job losses from Harvey will likely be moderate, and out-of-work residents should find new jobs fairly quickly, putting them in a better position to withstand repair costs, Gaines said.

“Houston’s not a bad place to live - other than the occasional hurricane,” Gaines said. “It’s had four floods in the last nine years, and very few people have packed up and left.”

‘SUBTLE PSYCHOLOGY’

For investors who are seeking sellers, a big challenge will be talking to flood victims about buying their battered homes.

At the RICH investors gathering, Linda Muscarello - who calls herself the Queen of Foreclosure - spoke of the “subtle psychology” of negotiating with struggling homeowners.

Waving a bedazzled scepter at her audience, Muscarello advised investors to listen and nod when talking to owners of distressed properties, who can often have unrealistic notions of their ability to afford continued mortgage payments. Many homeowners hit by Harvey did not have flood insurance and may not have the money to rebuild.

Muscarello advised investors to talk to homeowners as if there is a chance they can avoid selling – even if the investor’s interest is buying them out. When discussing finances with homeowners unable to afford payments, Muscarello advised asking, “How short are you?”

“It’s very important you say it that way,” she explained. “It’s as if you’re still considering helping them to keep their house.”

While approaching a distressed homeowner can feel predatory if poorly handled, selling can help homeowners in some situations, especially if the home’s damage is coupled with job loss or damage to a business.

“The economic damage was mostly to small business – nail salons, barbershops,” Gaines said.

For those business owners, recovery could take two to three years, he said.

The big question for homeowners is whether they expect to have steady, long-term income that will let them ride out repairs that may or may not be covered by insurance.

If not, Gilmer said, “you might just want to give the keys to someone else.”