Ive come across a HUD home and took a walkthrough last week with my agent. I like the property a lot. Its a 2.032 sqft 4bed 2.5 bth in a quiet neighborhood right outside of the Air Force Base in my area on corner lot.

Here are my concerns:

1) The dishwasher seems to have leaked and damaged the floor boards. My agent and I have stepped on the damaged areas but the floor boards dont seem to be damaged all the way through. The boards are soggy on the surface. I believe that this can lead to termites and extensive moisture damage in the structure of the property. Im not sure how much this can cost me to repairs.

2) HUD provided a document that vaguely lists the repairs needed for the property. The one that made my agent and I second guess the property was the roof. The document says "Roof Inspection recommended (damage to main support trusses observed)...".

3) The document also states that the HVAC needs to be connected. My guess is that it needs to be replaced. its pretty rusty

These three are the biggest issues that I am concerned about. Everything else in the property seems pretty manageable with a FHA 203k loan (which the property qualifies for).

HUD is asking $157,500 for the property and I know that a 4-2.5 in this area is easily worth $200,000+ ARV. Im just not sure if these repairs are worth the trouble

With your projected ARV I would say the number are just too tight. You could easily go about $20K in repairs and updates plus have insurance, property taxes do cover. What will be your share of closing costs?. What is your reason for buying this house?

Hud usually is thinking of owner occupants not really investors. Hard to say but just from the initial numbers I do no think there would be enough in this deal to bother with it. I mean if you afford to buy this house at $157K or there abouts you can probably find a better property to get into. 

Based on your $200k ARV, 75% of that would be $175k...and your cost to buy would be about $20k less. I'd make an offer about $5-10k less. If I got the deal, I'd take my rehabber through during the inspection period to see if the trouble you think you might have you in fact do have...and what the price to fix would be.

Based on your rehab estimate, either close or back out of the deal.

Those repairs wouldn't be a deal killer for me but the price that HUD is asking is. That's too much for an investor IMHO, to make decent profit. But you need to know what the ARV is and an accurate one. Dealing with HUD properties is a crap shoot.

But somebody may pony up and buy it. Patience is needed so you can buy right. Just a numbers game

Thank you all for your replies. I apologize for not including more info. I thought about house hacking and owner occupying for the required year with FHA. This area has great opportunities for landlords with the majority of the population being military (army, navy, air force), colleges and shipyard workers (the second biggest employer in the state).

A 4-2.5 should rent over $1200 easily in this area. My agent mentioned getting a termite and moisture inspection for less than $100 first instead of the home inspection for $300-$400. This will give us some insight on the water damage on the floor at a cheaper price than the full home inspection.

I may be able to get the roof inspected for pretty cheap as well. But I dont think HUD wants contractors in the property before the bid is accepted.