4 Lessons Learned from buying a HUD Home.
So its official! I have purchased my first home, and as a person who was looking for a deal, but also needed to put a roof over their head I decided to purchase a HUD house. Here are a few positives and negatives to consider
1) Equity Upside- research pre-flip and post-flip comparables if available. Luckily, Norfolk is an active flipper market and I was able to find several comparable properties. I purchased the home for 215, and if done correctly, the home will be worth 255-265 when we are done.
2) Limited Competition- there is limited competition for people purchasing HUDs as owner occupants. This is because HUD provides an exclusive bidding period only open do individuals or families
3) No History or warranty- Vacant properties will tend to hide their problems from you. For example, the property I purchased ended up having a rusted-out wye behind the kitchen sink that had been dripping water into the crawl space in the months leading up to its winterization. I had to tear out the drywall behind the cabinets to gain access to the damage.
4) Cash is KING- If I were to use cash vs. traditional financing I would have been able to take the initial investment out after refinancing and been able to employ it elsewhere. However, since this is a house I am planning on living in for at least 5 years, I believe that this first purchase (though very educational) is a disqualified as an income producing asset.
More to come!