My husband and I found a HUD property that we would like to purchase in Rhode Island. We heard mixed stories about buying these properties, and thought I would come here and ask what are your experiences? What should we know before jumping in? Is it worth it?
Thank you in advanced for your input.
My last house was a HUD house. The only weird thing is not getting keys at closing, but I knew that and made arrangements before. They also let the basement (finished) flood before closing and weren't willing to give back anything. In the end it was a good deal.
@Lissette Deleon I haven't bought one so I'm just going on what I've heard/read.
Competition these days for any property that needs work and is on the open market, is fierce. However I believe if you are going to live in the property you may have the HUD owner-occupant edge so it may be more worth it to go down that road.
They often need repairs, so you really want to make sure you have a good handle on how much repairs are going to be needed. Bigger Pockets has some great rehab resources, and you can obviously walk through with whatever contractor(s) you'd be using for the work.
I think that if you're careful with your numbers, and you conservatively round up on your costs and estimated repair times, and build in a buffer for "surprises" (there are always some, and the less experience you have, the more surprises you'll find, so the more buffer you should allow for them), you'll probably be fine.
Especially if you're going to owner occupy, and as I said if you stay conservative with your numbers, I think it's worth going through the process and putting a bid in. At the very least, you will learn a lot.
There's always the old saying, "if you want to make more money in real estate, make more offers" :)
If you are an owner occupant, you likely have first dibs on bidding, which is immensely helpful! "Invest Four More" has some great info about the bidding process.
My hubby & I currently live in our 203k HUD home and are here to say, it is ABSOLUTELY worth it. However, it's not for the faint of heart. Buying from the government is like playing the computer in chess - it's not fair, and it never will be, but once you get the house and get it fixed, you'll be sitting pretty. Put 3.5% down, fix it, refinance to a conventional, and you'll have an enormous ROI.
Know that most HUD houses have been mistreated before they were foreclosed upon, and then unoccupied for at least a year - leaving them in bad shape. Budget for surprises.
Send a message if you have specific questions! Happy to help!
HUD homes require a good deal of work, and will usually have some unforeseen issues. That doesn't mean you can't be profitable. My first deal was a fannie mae foreclosure HUD property. Since I bought it with a 203k loan, I was able to wrap all of my rehab costs into the mortgage. I ended up with a home that appraised for much more than my mortgage is ($350,000 mortgage, with a $495,000 appraisal). This means I made instant equity in the deal!
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