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.

Within months of the storm, Mr. Dey and his partners began buying houses and apartments in the hurricane zone. He flipped a few of them without doing any work, turning an average profit of $10,000 to $15,000 apiece, he said. He is rebuilding some and has rented out others to contractors who arrived after the storm, certain of work but not of a place to sleep.

Mr. Dey is a disaster investor, a real-estate speculator who seeks to profit from hurricanes, wildfires and tornadoes. These days, there are a lot of them around.

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.”


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Many disaster investors made millions buying foreclosed homes in the wake of the 2008 global financial crisis. In the wreckage of natural disasters, many believe they have found a new opening. In the spring, floods devastated Midwest towns. In May, there were 13 consecutive days with at least nine tornadoes reported in the U.S., according to the National Weather Service’s Storm Prediction Center, a record. A July hurricane drenched parts of Louisiana.


In the fall of 2017, the Tubbs fire killed more than 20 people and destroyed more than 5,600 buildings in and around Santa Rosa, Calif. PHOTO: JEFF CHIU/ASSOCIATED PRESS

Disaster investors, mostly small and midsize real-estate development and investment companies, appear to be helping drive up property sales in affected areas. Panama City saw a dip in the number of deals after Hurricane Michael hit in October 2018, but sales have since increased. In Santa Rosa, Calif., the monthly number of home sales rose 17% in the five months after a 2017 fire destroyed parts of the city, according to a Wall Street Journal analysis of data provided by home-listing site Zillow Group , Inc. In both cities, sales of commercial property, including apartment buildings, also have increased.

Part of the increase might be seasonal. But brokers say interest has been greater than usual. “It’s crazy. I can’t keep up,” said Connie Overstreet, a real-estate broker at Overstreet Realty in Panama City. “I need two or three or four of me.”

Home prices can be volatile after a disaster, creating both the opportunity to make a fast buck and the risk of losing a bundle. In Santa Rosa, the median home-sale price rose 11.2% in the six months after the fire, but has fallen 8.8% since peaking in April 2018, according to Zillow. In Panama City, the median sale price fell by 5.3% between October 2018 and April 2019.

Construction costs in disaster areas often are high because jobs are plentiful but workers scarce. Repairs can be tricky, and building anew isn’t always as easy as it seems.

Gregory Owen, 60, a real-estate investor who has been buying properties in Santa Rosa for more than a year, said nearly every lot was so damaged by 2017 wildfires that he couldn’t determine where one ended and another began. He had to hire a civil engineer to mark the corners.


Gregory Owen has been buying fire-damaged lots in Santa Rosa for more than a year. PHOTO: RACHEL BUJALSKI FOR THE WALL STREET JOURNAL

The lots cost him an average of $250,000, he said, and he intends to spend another $700,000 or so building each house. He hopes to turn a profit of about $50,000 on each one.

Before he could even begin building, he had to clear up to 3 feet of ash and damaged soil. “When you’re walking around, it feels like walking on a sponge,” he said.

Still, he also plans to buy lots in Paradise, Ca., which was devastated by a wildfire last November.

Brian Burke, CEO of real-estate investment firm Praxis Capital, lives in Santa Rosa. He woke up on the morning of Oct. 9, 2017, to see flames rising about half a mile from his home. His house and his nearby office building were spared.

Now, Mr. Burke, who bought foreclosed homes in Northern California in the wake of the financial crisis, is buying up burned lots with a local partner. Their plan is to start building two new homes a month.

Investors expect competition in the sector to intensify. “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 2016, 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.

Mr. Dey, a Florida native, got into real estate in the late 1990s when he was in his 20s and working low-wage retail jobs. He saw an ad for a real-estate investing class on late-night TV. “Everything sounds amazing at 3 o’clock in the morning,” he said. He took the class and became a home flipper.

After Hurricane Katrina flooded New Orleans, he realized that thousands of evacuees had no intention of coming back and that their homes could be up for sale. Over a span of three years, he said, his investor group bought more than 600 properties. They flipped most of them without doing any work, making about $20,000 per property, on average, he says.

Investors bought flood-damaged homes in Houston after Hurricane Harvey. PHOTO: XINHUA/GETTY IMAGES

They funded the investments with high-interest loans, backed by personal guarantees. That came to haunt Mr. Dey during the 2008 financial crisis, which put an end to his first tour as a disaster investor. He lost nearly all his remaining properties and his primary residence to foreclosure, he said.

In the years after the crash, Mr. Dey rebuilt his business by flipping foreclosed homes to hedge funds, making $2,500 to $3,000 a deal, he said. Then, starting in 2017, a series of devastating storms hit the Southeast: first Hurricane Irma in South Florida and Hurricane Harvey in Houston, then Hurricane Michael in the Florida Panhandle.

Mr. Dey dusted off his Katrina playbook and went to work. In Panama City, he teamed up with a local investor who acts as his project manager on construction sites and helps spot new homes to buy. Investors from California, New York and other parts of the U.S. also are buying storm-damaged homes in the area.

Some disaster investors put signs on street corners. In Panama City, traffic-light poles often have five or six signs stacked on top of each other advertising tree removal, roof repairs or home buying. Some investors place Facebook ads. Joseph Metz, a property buyer in the San Francisco Bay Area, purchased homes in Panama City after sending letters to local addresses, more than 10,000 in a single month.

Others buy properties from people like Eugene Ursu, who signs contracts to buy homes with the intention of flipping them. Mr. Ursu, a 34-year-old real-estate agent born in the former Soviet republic of Moldova, spends his days driving through Panama City’s devastated neighborhoods, jotting down the locations of neglected-looking houses.

He calls the owners and tries to get a meeting. In their homes, often surrounded by mold and with wind blowing through missing roofs, he tries to establish a connection, asking them about people in the photos on the walls or other personal items.

“That’s how you get attached emotionally to them,” he said.

Then he makes an offer and hands them a prewritten contract. The key, he said, is to get sellers to agree right away. “I have that advantage, to get them at that low price right there on the spot,” he said. If he gives them a day to think, they might look for higher offers.

Of the more than 30 homeowners who signed his contracts, about half did so during their first meeting, he said.

Mr. Ursu doesn’t tell sellers he intends to flip their houses without fixing them up, though the contract specifies that he can. Once he has the property under contract, he places it with an online listing service and sells it. He said his average profit is around $10,000.

In one case, Mr. Ursu reached a deal to buy a storm-damaged house outside Panama City for $25,000 and immediately flipped it to a local investor for about a $30,000 profit, according to Mr. Ursu and a local sales broker.

Mr. McElroy, the Mexico Beach homeowner, said he sometimes had more than 10 investors stop by his home in a day. Now his home sports a “Not for Sale” sign. Such signs are found all over Mexico Beach.


Some residents of Mexico Beach want disaster investors to stay away. PHOTO: SCOTT OLSON/GETTY IMAGES

In Santa Rosa, there also is resistance to speculators, reflecting local concerns that new homes going up on devastated hillsides could fall victim to wildfires again. In the fall of 2017, the Tubbs fire, the second-most destructive wildfire in California’s history, killed more than 20 people and destroyed more than 5,600 buildings in the area.

“I don’t believe we can keep the fires from coming,” said Julie Combs, a member of the city council. “They’ve gotten worse and worse.”

Ms. Combs doesn’t object to locals rebuilding their own homes, but she is against investors building in areas vulnerable to fire. She voted against a 237-unit housing development planned by a California firm. The project got approved anyway.