Tips on Buying a HUD or Foreclosed Property
by Mike Adams
Everyone has heard that buy a HUD or Foreclosed property as a real estate investment can be a great idea, with high potential return on investment. This is true in most cases. There are pitfalls and potential problems that must be examined first and during this process to minimize the risk. Here is how the process should work for you.
When you did your first analysis of the property for a rental there is a rule of thumb that many investors use to determine if a property will fit their buying criteria. This is known as “The 1% Rule”. In the 1% Rule you are measuring if a property will cash flow assuming you are getting a loan. Even though you are paying cash this is still a good rule to use. The 1% Rule simply states that the monthly market rent must be equal to or greater than 1% of the purchase price. In this case 1% of $100,000 is simply $1000 (you are moving the decimal to the left by two – or simply crossing off the right two zeros). Well, anyone can see that $1200 rent is greater than the minimum $1000 rent which a $100,000 home will require. Thus, this is a good rental purchase.
One item you must consider is there will always be periodic maintenance on the rental unit over the years so you do have to account or hold reserves aside for those repairs. On a side note, I always recommend purchasing a Home Warranty for your rental properties. This covers may things an insurance policy doesn’t cover and you can search on the Web for local companies and how they operate.
Also, when purchase rentals there is always another item known as the vacancy factor. This is how often your home may remain vacant between tenancies
A question that I am beginning to get asked a lot is what I should do with my homes after I have bought them. Let’s assume you did buy in bulk from a REO package or simply found them through a Realtor or other personal contact. For the purposes of this article, let’s assume you bought them at 70 cents on the dollar.
There are always two schools of thought on the debate of should a person flip or hold onto a property or group of properties. Also, if you are going to “hold” a property, then what will you do with that holding time. If you “flip” a property then you need to be aware of any additional charges that you will acquire with the flip.
There are benefits to both strategies and there are cons to each as well.
In this article we are going to explore both and other potential “exit strategies”.
What exactly is an “Exit Strategy”?
An exit strategy is a term used to determine what you will do with a property once you have acquired it. This is a critical part of doing any type of real estate investing. If you know what you will do with a property (long-term or short-term) depends greatly on how you buy. As an example, if your plans are to flip a property then you will want to buy using a Title Binder. This will save you money on title insurance on the sale.
Evaluating your property’s curb appeal should be the first step in your plan of action. Look at your property from a buyer’s point of view, as if you are seeing it for the first time. What is your home’s curb appeal?
Is the lawn and landscape well maintained, or do you need to cut the grass and put down some new mulch? Is the lawn décor and furniture neatly arranged, or is it hap hazard and disorganized? Is the sidewalk or walk-way clean? Are the flowers and shrubs neat and trimmed?
Non disclosures- In all bank owned foreclosures, the back will not inform you of any issues that occur with the home. This includes termites, mold, internal and electrical damage, etc. If you decide to bid on a foreclosed home, please be sure to get a thorough home inspection and an estimate of the price of any damages that must be fixed. You do not want to purchase a home for $40,000 and have to do $50,000 worth of repairs when you could have purchased a new or nearly new home for $100,000 without any of the issues.
Real Estate Agent Safety and Security
Danger is Not Always Easy to Identify
” Gut feelings” Hesitation” Unexplained fear ” Apprehension”
These are signals that something isn’t right!
Joan Malone knows by firsthand experience that intuition can be a valuable tool for survival. She had told her husband that a particular customer had made her uncom-fortable, but she agreed to show the man more homes despite her gut feeling. Other indicators talked her out of listening to her unexplained fear – she had met with the well-dressed man who said he was an attorney twice before; once with family members present.
There is much more information and 3 simple forms that should be part of your offices routine, no matter how big or small. This was developed by the KY Board, but it’s application is universal.
Real Estate Agent Safety and Security
That reminds me of some of the safety precautions one should take…
Never show a home without another person knowing you itinerary. This can be fellow agent, your office manager, your company receptionist, the floor person ( make sure your info is passed on) or a trusted friend. That person should call your cell phone from time to time to insure your well being. Never meet a stranger at a home. Always meet at your office.
Find Out How To Start Building Your Real Estate Portfolio by Daniel Mc Grey guest author Nowadays, many people are wondering how to make their way into the real estate industry. First, you need to make sure that you really want to be in the business. Once you are ready to take on the challenge, [...]
At this time of the year, I clean out gutters, make sure drain holes are clear and use a cane to remove debris out of air bricks. I check chimneys as well, to ensure air is circulating around.’ Here are a few pointers for you to look for,
1. Do you have a chimney? * is it leaning? * is there any growth coming from the top? * can you see mortar missing from the joints? All of these can lead to potential problems
2. Check your roof covering * if it’s covered with tiles or slates, are any slipped or missing? Look out for tile debris and pieces of tile lying on the ground-these can be tell-tale signs of problem areas, that will allow rain to enter and cause rot very quickly.
How to Make Money in Real Estate by Flipping Houses by Chris Johnson, guest author How to Make Money in Real Estate by Flipping Houses Perhaps you have heard the term in real estate called flipping but are not quite sure what it means; very basically it means buying a home relatively cheaply and then [...]
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