Anyone have experience buying HUD homes, living in flips/rent?

Question

Hey Everyone,

My girlfriend and I have real estate goals of being landlords and within 10 years get to a point where we are generating $10,000/month in rental real estate by buying 2, 3, and 4 family homes and at some point, small apartment buildings/complexes.

We are looking  to buy a HUD home as an "owner occupant" in Connecticut in 2016, live in the house for 2 years while rehabbing it and then either selling or renting the property and then repeating this step all over again with a different HUD "owner occupant" home.

I would love to hear from people who have used this approach and their experience.

Some of my questions are:

What is the process of buying a HUD "owner occupied" home?

What is the benefit of buying a HUD "Insured" home ver "Uninsured?"

What are some things I should look for which makes a good deal and things I should stay away from?

Thank for the input!

Michael Noto · Answer

my number 1 recommendation would be to get an agent working for you that has been through a HUD purchase with a client.

They can answer the questions you asked on here in 10 seconds.

Melissa Gittens · Answer

I am working through the process right now. I have inspection for the home on Sunday for my own property. The most recent one I did hasn't closed just yet because of all the tedious requirements of their loan. It can be a nightmare because of the amount of paperwork they require but at the end of the day they will get a great property for under market value.

Melissa Gittens · Answer

I am a first time home buyer and wanted to purchase an income producing property that had  work that needed to be done. ( Mostly cosmetic work i.e.: Painting and new appliances)

check out this website it may be beneficial to you http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing

Melissa Gittens · Answer

Hello! you definitely should word with a licensed realtor in Connecticut to attain your goals. Especially one that specializes in HUD home purchases and can walk you through the steps. I am actually purchasing my first REO property that requires owner occupancy. The home needs some work and I will be using a FHA 203K rehab loan to rehab the property. It is a multi family.

Let me know if I can be of any assistance to you in 2016.

Aaron Montague · Answer

Great strategy!

A few things that will make your journey easier:

Keep increasing your income.  This gives you more borrowing power.  This will increase by new jobs, raises at current job AND rental income.

Build a business relationship with an accountant.  Don't base this on price.  It may seem a bit excessive at first, but the money you spend with one around tax time will be well worth not dealing with the headaches.

Find sources of cash that are recurring and make sense.  I primarily mean friends and family in this regard.  The ability to borrow 10k overnight can make a deal for you.  Just assure everything is in writing and the risks are explained to all parties.

Set specific goals for pricing your purchases.  I'll look at any deal that looks like it will get me to $125/door/month AND 15% ROI.

Rj J. · Answer

Thanks Melissa, congrats on the reo.

How was your experience?

Can you explain the qualifications/benefits for the 203k loan?

Thanks again for te advice.

Rj J. · Answer

Thank you for the advice Michael, I will do that.

Jean Howard · Answer

HUD homes are  properties that were purchased with a FHA loan that was foreclosed on.  Because the government insured FHA loans, many of these properties go  back to the government and become HUD homes.

Ray Fisher · Answer

We have bought numerous HUD homes, none of them have been to live in as an owner occupant. All as an investor, Hud qualified broker had to make offer, we had to have bank letter (proof of funds) available in 24 hours after acceptance.  Owner occupants do have first option.

Edward B. · Answer

I want to reiterate and emphasize that you need to work with someone who has experience with HUD homes, not just someone that has done one or two, thinks they can, or just says they can.

The HUD process is very particular and very unforgiving if you do not adhere to all of there nit noid rules and processes. There are examples in the forums of deals that fell through because the agent did not do things right, deposit the good faith on time, get a particular doc signed/initialed, send the docs to the right people on time.

I myself almost last a deal because of this. Luckily I was able to get the property but it went back to auction because my agent screwed up and he was otherwise an excellent real estate agent. Just not intimately familiar with HUD.

Anyone have experience buying HUD homes, living in flips/rent?

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