I'm on the hunt for my first deal. I'd prefer to take the house hacking approach with a duplex, but another route I'm considering is buying a house with built in equity that needs some fixing up and can force appreciation. Then use the equity in the house to buy other other properties. Then potentially turn it into a rental down the road. I found a house that's on sale for 80K in an area where houses have sold for 110-120. It's in a good school district and a part of Oklahoma City that's growing. It looks like rents in the area are 900-1000 a month at the moment. Taxes were 1100 in 2017. There are a couple caveats. It probably needs a new roof, there might be a water leak, and it's a HUD home, so I probably need a private lender. I'll be doing a walk through on Monday with a realtor. What's your take on this?
Doesn't seem like much equity once you do the work needed. I think I would pass, there are better deals than that to be found. Just my opinion though.
Dont offer what they are asking. The numbers seem a little too tight when you add in the cap ex and possible water leak.
Thank you @Ron Daugherty @Dylan B. and @Josh Dillingham for the replies. I'm going to do a walk through of the house tomorrow with a realtor, but yeah, I think the numbers are too close for comfort. If it didn't need a roof or homes in the area were selling for 120-135, it would probably be a much better deal.
Offer what you think its worth, never walk from a deal because they are asking too much.....all they can say is yes or no. HUD houses are extremely competitive in OKC right now, but you have an advantage as an owner occupant because you get first dibs.
@Chris Hayes it will be property dependent, but often times yes you can get an FHA or other government loan for them. You can determine if it loan qualifies by looking at the property listing on hudhomestore.com, or by asking your agent. Also most of these properties qualify for a 203k loan which is an excellent loan option for an owner occupant though these loans aren't without their own set of hurdles and red tape. Hope that helps.
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