How to make money with HUD properties?

Question

Ok guys, so I heard an audio in a blog of a well known wholesaler, it was a success story. I want you to explain to me if I understand right.

So this guy made an offer on a HUD home, his offer was accepted, he had to give $500 earnest money ($500 only because the price of the house was set below 50K)...
HUD gives him (anybody) 45 days to close...
Well this guy did not need to get financing lined up, because he was planning to sell this deal, so he started to market this property hard, point is he found a buyer that offered him more than his original bid to HUD. 
I dont remember if he used transactional funding or not but point is he walked out of this deal with $8,500 after paying all the closing fees...

I just wanted to know if this is as simple as he made it sound? I understand that if he did not find a buyer and was not planning on purchasing the property he could have lost his $500... But really is this possible, HUD being part of the government doesnt care that you buy the house from them and in less then 2 hours sell it for a profit?

Im just curious to know this actually works this way. If thats the case I want to start making some offers and hope they get accepted if they do Ill market the deal as much as possible and hope I find a buyer (which I should if the deal is good enough) and if not be prepared to lose the earnest money...

Ted Akers · Answer

Correct, the contract is not assignable and you can use transactional funding.  You want to be aware that there was an Owner Occupant period for bidding before you, but few traditional buyers and their realtors actually look to the HUD site when buying.  Also, be aware that you will typically be looking for a cash buyer, one using hard money (more so for fix-n-flip deals), AND you can now look for FHA loan buyers (FHA has suspended their 90 day no flip rule for one year).  Buyers using a conventional mortgage will typically see a 90 day title seasoning requirement.  However, if you can find a "mortgage banker" without title seasoning requirements that also could be used for your end buyer.  Good luck.

Steve L. · Answer

HUD is a government run organization.  There are two ways you check the offer:

1. FHA
2. Conventional/Cash/VA

Either way you get a minimum of 45 days.  I opened escrow 3 weeks ago and still don't even have escrow instructions.  Government employees don't care too much, from what my HUD agents tell me each deal falls out of escrow an avg of 3x.

Deposit is a cashiers check made out to "HUD or Your Name."  $500 for under 50k, $2,000 for over 50k.

HUD requires their agents to have special training and the offer forms are not typical forms, they're special for HUD. Only HUD agents have special HUD keys to access the property.  At least in California.

I doubt the contract is assignable, so you probably need to use flash funding...

Good luck.  HUD is probably a decent place to start, but nothing happens quickly.

Bill Lambert · Answer

Yes... this is possible.... but..... I would not recommend it.
In my area, NC & SC, HUD homes are sold first to owner occupant buyers with a 10 day priority bidding period.... OO buyers must sign a form that they will occupy the home for at least one year.... (don't cheat on this... the gov't can check up on you.... tax return address, your mailing address, utilities on in your name, etc..... bid brother is getting bigger by the day).  
You would have to see if the home did not sell to an OO before you can post a bid. 
Note:  all bids can only go through a HUD certified broker.... HUD will not sell you the home directly.... special sales forms, special HUD access key, etc.
Another potential stumbling block are anti-flipping guidelines that would limit potential buyers who are getting a loan from getting their appraisal to go through.

My suggestion is to make $$$ on HUD's like this (round numbers used... works at any price range):
1)  Buy a HUD home for $70K for cash
2)  spend $5K on carpet, paint, appliances, etc.
3)  Lease/option sell the home to a tenant/buyer... get as much option $$ as possible.
4)  Then get a 80% loan to value investor loan on the property 
5)  Smile!... you now have $5K in your pocket from the bank, $20K equity, $3K from the tenant/buyer.
6)  Start all over and do it again!

note:  most lenders are now limiting how many investment properties they will allow you to have and still get $$ from the lender.  I do have a lender that will now give you up to 4 more investor loans irregardless of how many prior properties you own.

With the fed monetizing our $1.5 trillion debt by printing funny money, how can we not have lots of inflation in the years to come.... this is the best investing opportunity time ever!!!!!!!!

Rodrigo Viei · Answer

Thank you very much Steve!

Steve L. · Answer

Yes, it can be done.  You can use transactional funding no problem on a deal like this.

Rodrigo Viei · Answer

Can anybody explain?

How to make money with HUD properties?

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