Possible Great Deal in Huntsville, AL?

Question

Today I came across what looks to be like a great deal.  I should note that this is a HUD home...to be honest I don't know much about HUD and how that needs to factor in my analysis, but:

Asking price: $55,000

Sq. Feet: 1,502

Average rent for this zip code: $850

Nearby comps are listed at roughly $85/sq foot.

The factor I'm unsure about when trying to analyze is cost of repairs - this particular house doesn't look to be in very bad shape, it looks like just cosmetic work all throughout is needed.  I've been trying to analyze a new deal every day as I am very new and inexperienced.  I'd love for those with more experience to weigh in, especially when it comes to estimating the cost of repairs and considerations needed for HUD homes.

Thanks a ton!

Shelby

Michael S. · Answer

@Shelby Ashley

The property you quoted is being offered for $36/sq ft?  Within Huntsville City limits?

That raises a ton of red flags.  The price could reflect any/all of the following:

1.  It's in a D neighborhood.

2.  It's got liens on it.

3.  It's got mold / asbestos / lead issues.

4.  The land is worth more than the structure and the house needs to be torn down.

Also, be certain you are comfortable managing this property before you buy it.  The tenants will likely be challenging, and many property managers won't touch houses below a certain rental amount and/or locations in the city.

With the Huntsville market so hot, also ask yourself why this property hasn't been already grabbed by other local investors/agents (unless its off market, then you could have a diamond in the rough on your hands).

Good luck.

Oren Kachel · Answer

Hi Eric!

why do you think there wont be any gain by flipinh this house?

and do you that maybe if in two years, it would be different?

Oren Kachel · Answer

Hey Michel!is there a big diffrence between on market and off market deals in Huntsville?

Michael Tincher · Answer

@Shelby Ashley I have been flipping homes for 7 years and started purchasing rental properties last year.  I've lived in Huntsville my entire life except for the four years in college, and have been doing real estate for 14 years. Feel free to reach me directly for any questions regarding investing or getting your license.

Shelby Ashley · Answer

@Eric Thomas those are all important things to think about.  Thanks for your response!

Shelby Ashley · Answer

@Michael Tincher thanks for your response.  Fortunately I've lived in Huntsville all of my life, so I have a basic understanding of the variances in property values across different neighborhoods.  You mentioned that you are an agent as well as an investor - have you been investing in Huntsville for very long?  I'm actually preparing to get my real estate license myself in order to gain a better view of the market from a "professional" perspective.  Thanks again for your

Eric Thomas · Answer

Of course, my opinion is worth what people pay for it (zip) but I'd say for that particular location, you might even want to look street by street.  If you look at the comps on something like zillow and then a satellite view on google, you might see (if i'm looking at the right property) that the nearby houses selling in the ~$85/sqft range are clustered together with nice yards / nice driveways / pretty neighboring houses, etc.  I would question being able to flip that particular one for too much gain, and while you might be able to get a decent rent price, your tenant turnover could also depend on the neighbors. I'd suggest a site visit, or like Michael Tincher suggested, get someone on location to be your feet on the ground.  Best of luck!

Michael Tincher · Answer

Hello Shelby,

Do you live in the Huntsville area?  This zip code is really hit or miss as far as neighborhoods go.  There are some new subdivisions, and then there are more of rural subdivisions in this zip code.  So I would suggest narrowing down your comps to properties more like the subject property.

I am a Huntsville agent and an investor.  If you would like me to be your feet on the ground in Huntsville, I'd love the opportunity.  I would expect this property to be under contract in a matter of days(I found the one you were referencing).  I am also able to answer any questions if I am able.  I have only purchased one HUD home and that was several years ago.

Michael Tincher

Capstone Realty