Buying a second home as investment

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Buying a second home as investment

Kevin Reid
Lakeland, FL · Member since 2014 · 91 posts · 18 votes

I live in central Florida and a foreclosure has popped up right in my neighborhood. It's being auctioned on Hubzu.com (I started a separate thread asking about them). This auction has a reserve, also a buy it now price. The home is worth about 200-215k and the buy it now is 134k, so I'm guessing the reserve is around 125k. The home has been on the block for a while now but no one has hit the reserve.

The home was built at the same time mine was around 2007 and looks decent from the outside. I am trying to get access to look around inside and maybe do an inspection. From what I can see from the windows it seems the bank has kept the utilities and AC on, and aside from a carpet cleaning and some paint it is pretty clean.

All that being said I'm am thinking of picking it up to rent for a few years, then I'll upgrade the kitchen and flooring and move into it, and rent my current home, or sell it depending on how strong the market is and move on to the next investment.

Problem is that while I have awesome credit (820+) and work history, I only have maybe 5k cash I can use for the property, the rest needs to be mortgaged. Am I fooling myself or is this possible? How would you guys go about it? Thanks for any help!

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  • Julie R.
    Admin · Brooklyn, NY · Member since 2015 · 2 posts · 0 votes
    10y

    Hi Kevin,

    Your story sounds interesting. I am a newbie and probably can't contribute much to your post. However, from what I've read from other posts, why don't you  reach out to the bank and ask them what the reserve price is. 

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  • Adrian Smude
    Rental Property Investor · Plant City, FL · Member since 2015 · 1k+ posts · 379 votes
    10y

    I've never purchased from an auction site but do not think they give you time for bank financing? If they do you moving into the home now would be better because it would be less down.  If not I'd still talk to a mortgage person to get pre approved and then look for hard/private money to purchase with.  Numbers sound great.  You could also look into partnering with someone; I could be interested after knowing more details.   Many options to get creative here.  

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  • Kevin Reid
    OP
    Lakeland, FL · Member since 2014 · 91 posts · 18 votes
    10y

    Numbers do sound very enticing which is why I'm considering it. I contacted them and I have to be pre approved in order to see the inside, so I have to make some decisions in the next day or so. We have a baby on the way any day now so moving into the house would be difficult at best. I'm going to see if I can get pre approved for a zero down again, if I can do that and get an equity line after closing I think it will work out well.

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  • Curtis YoderPro Member
    Rental Property Investor · Tulsa, OK · Member since 2014 · 241 posts · 187 votes
    10y

    @Kevin Reid This sounds like a decent deal depending on the interior renovations, assuming the exterior and structure are in great shape. A couple of thoughts...

    -Talk to your local bank, get the pre-approval letter from them if they will consider a zero down. No big bank will do this (IMO), but a local bank will lend on a portfolio basis if the numbers truly make sense. Maybe tie your home into the deal?

    -Consider a hard money lender to partner with you on the purchase and rehab, then refinance and get them out of it. That is what Hard Money wants to do. They will also give you a pre-approval letter, sometimes they work to get you in properties.

    - Make sure you do your homework, when you get access to the house take a full video so you can review later. Take a lot of photos and create a detailed estimate after reviewing the video and photos multiple times. 

    -Get a Brokers Price Opinion. The hard money guys will help you with this. This opinion will be pretty accurate and conservative for the most part. They are not in the game to lose money on lose appraisal.

    -Check your market for sales, a local realtor can help you with this. Filter the REO/Bank owned out and get a good retail square footage value. This will show a true equity value of the property when you are done.

    Since you are trying to do this with nearly zero money in the game you will need to step cautiously. This is why most people are not investors, this is a risky business. But the more you educate yourself the more success you will find. Good luck, you are headed in the right direction!

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  • Justin Stamper
    Investor · Orlando, FL · Member since 2012 · 822 posts · 303 votes
    10y

    HUBZU will entertain financing but I can tell you that out of the few times I have tried to use a bank to close on a HUBZU auction, it has never worked out personally for me. That being said, it is not impossible and would be a great place to start your investing (given that you can obtain lending)

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