Replies

1. 
   Floss | Oct 06, 2004 04:39am | #1

   Chuck,

   I bought a HUD house about 12 years ago through the sealed bid process. The only differences in the transaction were that I had to close within 30 days after the bid was accepted and no warranties were given on the property and it was sold strictly "As Is".

   The place I bought was a real dump. I put in new windows, siding, roof,plumbing,electrical services, and wood floors. However since it was a double, I was able to live for free in one half while the rent from the other side paid for my mortgage and insurance.

   Like any real estate transaction, it is a gamble. As long as the neighborhood is on the up-swing then usually it is a positive experience.

   One word of advice. Don't price yourself out of the market. Fix it up with quality materials that will last but try to keep the property value in the middle of the lowest priced and most expensive homes in the neighborhood. This will help protect your investment and hopefully keep the neighbors happy as well.

   J.P.

1. 
   Comic | Oct 06, 2004 03:18pm | #3

   Thanks J.P. for the reponse. I find out today whether my bid has been accepted. The real estate agent indicated that HUD had the house on their A list which mean they thought it was in pretty good shape and should go pretty close to it's appraised price. The neighborhood is definitely a nice area. The lots are large and the houses are well kept. I looked at a few other HUD houses that were not as nice.

   I just finished a condo rehab and came out better than I projected and am currently looking for another project. Learned my lesson, I should have been looking for another project while I was working on rehabbing the condo. Got to keep the pipeline full.

2. 
   BillHartmann | Oct 06, 2004 07:23am | #2

   A friend of mine is an RE agent and is looking for some investment properties.

   Last week we did a quick look at a hud house. She said that they can be a real pain to deal with. But alot is up to the hud broker that is handling it and the bank that owns it.

   That they give preference to owner ocupied bids.

   But it will take a week or two until you hear back. It is a fix auction type of bid. They might not accept any and it might sit for a while and then they might end up taking a lower bid sometimes in the future.

   And their closings often take 45 days.

   Also she said that it is often worthwild to check with the neighbors about the history and what repairs have been made.

3. 
   daFarmerDave | Oct 06, 2004 04:27pm | #4

   I bought one.  I worked with a realator in the purchase.  It was my first home.  I painted the exterior.  I had to replace the AC condensing unit.  I had a problem with burner rollout on the furnace the third service man fixed.  I cleaned up the yard.  I tore down an outbuilding.  I painted a bunch of ceilings.  I put in a couple of new faucets.  Hail storm bought a new roof ...

   The economy went in a downturn.  My employer laid off 20% or 4000 people.

   So three years later I sold it for 20% more than I paid for it.  If you deduct real estate commission and materials,  I made two dollars an hour for my time.  Of course I saved a little on taxes and it was better than living in an apartment.

4. 
   blue_eyed_devil | Oct 08, 2004 04:49am | #5

   Chuck, I've never purchased a HUD but one of my employees did. He moved in to it and is living in it right now. I don't remember the exact numbers, but i believe he said that he immediatly had about 30k of equity after closing. The house was in good shape.

   Heres  site that handles the bids. http://mcbreo.com/

   hud.gov has a wealth of information.

   Basically HUDs can be good or bad, just like any other purchase. They are foreclosed properties that fannie mae or freddie mac has taken back.

   I've been told that Hud usually does not accept "short sales" (that's what you are attempting) unless the property has been on the market for a while. Experienced investors wait until the property has stewed for  a while, then send in their low bid.

   On the other hand, HUD, as well as other banks, will be much more inclined to look at short offers on "problem properties". Problem properties may have physical defects, be in bad neighborhoods, have bad histories etc.

   Don't be pushed into bidding too high for distressed properties. If they need repairs, note that in your offer.

   You might be eligible for Gov loans to do the rehab. Check with your local government to see if they have HUD funds available. Often times they have unused block grant monies specifically targeted toward rehabbing distressed properties for investors or homeowners. These loans can be converted into Grants that do not have to be repaid.

   blue

   If you want to read a fancy personal signature...  go read someone else's post.
1. 
   Comic | Oct 08, 2004 03:49pm | #6

   Thanks for the response. The house I was looking at was appraised at $135K. It was a 3 bedroom, 2 bath, on a slab. Two car garage. Kitchen had been gutted, no carpeting, it had siding issues, all windows and doors had broken seals and needed to be replaced, total of 9. Two skylights needed to be replaced, broken seals again. Some water damage in utility room. Original furnace and A/C unit probably 25 years old and needing replacement. Needed paint, floors, etc and both baths needed to be updated. Probably 1100 Sq ft. Nice neighborhood, nice size lot. I bid $115K based on repairs since it was not habitable. Winning bid was $165k. Neither my agent or myself could make heads or tales of why someone would bid $30K over the appraised price with all the work that had to be done. I estimated it would need $18k in materials alone without labor to rehab it.

1. 
   TROYLS1 | Oct 08, 2004 06:40pm | #7

   I have bought two and am currently living in one. The second one I purchased I am currently living in and have about 60k equity after I put 20k in materials into it. This includes paint, carpet, windows, kitchen remodel etc. The PO's had 4 dogs and 4 kids, none house broken. It was raunchy.

   The first one I bought and immediately resold. I had a buyer lined up before I closed on it. I started advertising it as soon as my bid was accepted. I bought as an investor after it was listed once for owner-occupant purchase. The property had 10 acres w/it, but was advertised as 1 acre. No one bothered to check the tax maps, I did and flipped it untouched for a 10k profit after taxes and closing costs. Same realtor I always use did the paperwork for free for the flip. 

   I heartily recommend buying one, but as you have seen the good ones are few and far between. Most end up getting way over bid. All these houses are open to owner occpuants first, then investors if no o.o. bids are accepted. It is tough to get one past the o.o.'s at a good price. And don't even think about saying you are buying as an o.o. if you don't plan on living in it for two years.

   If you need a project quickly, start riding around the streets of your target area and writing down street addresses of vacant/distressed properties. Ask neighbors about vacant properties, check tax records etc. Remember, in real estate you make your money when you buy, not when you sell.

1. 
   blue_eyed_devil | Oct 09, 2004 07:49pm | #8

   Great post Troy.

   Good advice at the end too (making the profit atthe beginning...not the end).

   Legwork is definitly a huge component of the real estate investing business. Knowing the market, understanding your own personal style and goals and having the courage to act on them is vital too.

   Zillions are made in real estate, but it is a business....that has to be learned.

   blue

   If you want to read a fancy personal signature...  go read someone else's post.