I'm looking at putting in a bid on a HUD property in Cincinnati as an owner occupant. The market is competitive and I missed out on a previous property. This will be my first HUD purchase. My real estate agent says that all cash deals have a leg up in the market. I have a relative that is willing to gift some cash and I can get some private money to cover the rest.
I recall a BP episode in which @Brandon Turner mentioned that he was buying a property all cash but it almost got ruined because his cash was private money and he ended up having to take out HELOCs to save the deal.
Can anyone tell me HUD's definition of 'all cash'? Would my scenario be an all cash purchase in the eyes of HUD? My understanding is that lenders typically ask for the last 3 months of bank statements. Does anyone know how far back HUD might look?
The purchase agreement states that I have to live in there for 12 months. However, the property has been boarded up and I'm currently out of state. I plan on relocating in the spring and will live there for 2+ years. The wording doesn't state which twelve months I am required to live there. Has anyone dealt with this?
Can anyone recommend a home inspector in the Cincinnati area?
Does anyone know if HUD has restrictions on me transferring title over to an LLC? I'd like to limit liability!
Thank you to anyone who can assist!
HUD Cincinnati all cash first time home buyer gift cash Hamilton county
Updated over 2 years ago
Also, for an intra-family loan. Does anyone know how often the loan should compound?
Hud does not care about cash deals only the net profit on the deal Hud requires you to move in within 3 months After 1 year owner occupied you can transfer the title to your llc
HUD places no priority on a cash bid vs a financed bid. The options when the bid is placed is to select FHA financing(If avail) or Cash/Conventional. After you bid is accepted , you will need to provide proof of cash by a bank statement or a pre-qual letter for financing. If you are borrowing private funds you will need a letter stating as such and be prepared that they may ask for proof of funds from your relative
You are supposed to occupy within 60 days for the period of one year unless there are extenuating circumstances such as excess repairs. You should be fine as there is no real oversight by HUD
@Ben Gammon to be clear, you're not using any bank financing for the purchase? As the others have said, your bid with HUD won't look any better as cash vs. financing. I have had asset managers question owner-occupant purchases that were all cash, though, because not many owner-occs have that ability.
Your agent won't even be able to put in an offer with HUD as an LLC during the owner-occupant period. If you're going to be occupying the property, I don't see why putting it in an LLC makes sense. To avoid "piercing the corporate veil" you'd have to have a lease from you to the LLC and do a bunch of tax paperwork every year.
@Sean Cole , yes that is correct. I am not using a bank loan since the property is only $40K.
Sorry, why would it not make sense to put it in an LLC? I would like to limit liability if someone trips on the property, etc. What type of tax paperwork would I need to do in order to not pierce the corporate veil.
@Ben Gammon if you are occupying the property then your home owners insurance should cover liability.
@Ben Gammon at a minimum, you'd need a lease and separate bank accounts. You can't title the property in the LLC's name and then pay all the bills personally. Any lawsuit would rightly claim that you hadn't kept the entity separate and were just using it for sham protection.
As @Percy N. said, homeowner's insurance covers what you're afraid of. Occam's Razor says we'd all own our primary residences in an LLC if that was the easiest route to go to accomplish what you're worried about. Don't overthink!
It is a fourplex....does that change anything?
@Ben Gammon , 1-4 units is still considered residential.
If you have been trying to bid on HUD properties with the buyer being the LLC, during owner occupied period, you will most likely be disqualified.
There are many threads on BP which give tips on bidding on HUD.
Also, make sure you have an agent who has successfully helped others purchase HUD properties.
The real "journey" with HUD begins once you are the winning bidder - then the signing of contracts in BLUE ink, 24-48hr turnaround for escrow, closing challenges, etc, etc.
@Percy N. and @Ben Gammon the HUD website actually won't even allow you to submit a bid as an LLC during the owner-occupant period. If you try to select "Business EIN" on the bid submission screen, a message pops up that the house is ineligible for investor bids. You could fudge and enter the EIN as a SS#, but it'd get kicked out by the contract reviewer if the bid was accepted.
Homeowner's insurance is still the way to go.
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