What do real estate investors need to know about investing in HUD homes?
HUD homes continue to be one of the most understood and under leveraged sources of real estate deals for investors. There may not be many of them in areas like San Diego and they may not be feasible for all real estate investment strategies, but investing in HUD homes can be very profitable in the right circumstances.
So how can real estate investors capitalize on HUD home opportunities? What are the pros and cons of investing in HUDs, and how are they different than other properties?
1. What Are HUD Homes?
This question prevents many real estate investors from getting involved in this particular niche. Most don’t have the time to figure out new investing strategies. Ironically, however, HUD homes are just ordinary houses. They have just been taken over by the government because of loans that were guaranteed to go bad. They are sold a little differently, but shouldn’t be neglected as an option.
2. Great Discounts
HUD homes still offer great discounts. In fact, investors continue to report in online real estate forums that they are shocked at their low ball offers being accepted. These properties must be sold and those in control of liquidating these homes are certainly under increased pressure to sell them.
3. How to Buy
HUD homes are sold a little differently than most real estate investors and home buyers are used to. These foreclosure properties are sold via online auctions. However, while virtually anyone can get access to home information, bids can only be made through HUD approved real estate brokers.
4. Control
Investors that already have a system down won’t like the lack of control over the process of buying an HUD home. Everything from initial offers, negotiations, escrow, title work and closing is controlled by the government.
5. Low Down Payments
In times like these, when some sellers and real estate agents are asking ridiculous earnest money deposit amounts, HUD homes can really be a welcome option. Choose between $500 to $1,000 down depending on the purchase price.
6. Repair Issues
HUD homes can have major repair issues. Those that don’t get snapped up in initial auction rounds and exclusive offers to owner occupant buyers can have major problems. Fortunately, HUD does provide a full property report with value and repair estimates. However, investors should always complete their own due diligence. Remember, even major structural issues don’t always mean there aren’t profits to be had. It is always essential to know what you are getting into.
7. Surprise Bonuses
Those that have bought and sold HUD homes before know that they can often come with some very pleasant surprise bonuses. In some cases, buyers have found actual repairs to be far lower than HUD estimated. Others have found extra rooms not listed, which provided dramatically increased returns. Some properties have even been significantly rehabbed and come complete with new bathrooms and kitchens.
8. Getting the Edge
Having the right discount broker on your side will certainly give you an advantage in obtaining one of these homes. If two brokers submit offers for their clients for the same purchase price, but one charges less commission, that one is far more likely to win as HUD is focusing on net proceeds.
9. You Are Ahead of the Game
By reading this, you are already ahead of the game in comparison to most others out there. So take a look at what HUD homes are in your area and see what deals you can land.
