(An excerpt from 69
Ways To Make Money In Real Estate)
By Steve Gillman - 2005
You can sometimes find cheap properties this way.
These homes are sold "as is," and you may be competing
against many experienced investors.
The hype is that you can buy houses that the government has
repossessed for pennies on the dollar. Don't count on it. They
may go cheap, but they sell cheap for a reason.
HUD homes are homes that are sold by the U.S. Department of
Housing and Urban Development. They are homes that have been
foreclosed on by HUD. They are normally sold through regular
real estate brokerages. The intent is to get full market value
for these properties, and they sometimes do just that.
Buying HUD homes isn't a way to "get rich quick."
On the other hand, although these homes are supposed to be sold
at market value, you may still find some profit opportunities
here. This is because they are sold "as is," and often
have enough problems to scare away most home buyers. For an investor
who is willing to fix a few things, such scary houses present
Learn little bit about the process before you jump into it.
You may have to take some risks here. If the water is off, for
example, HUD will not pay to have it turned on just so you can
be sure the plumbing works. They might let you pay to do that.
Other wise, you may have to assume the worst and adjust your
offer accordingly. These are truly "as-is" sales.
Run the numbers beforehand, so you are certain there is some
profit potential. Then run them again assuming the worst about
uncertain problems, like not knowing if there are electrical
issues because the power is off. Be sure you can at least break
even in this second scenario.
Often there will be just one or a few real estate agents in
an area that handle all the HUD homes, depending on the size
of the city. Getting to know these agents will give you a "heads
up" on houses soon to be listed. A friend of mine bought
many HUD homes as part of his "fixer upper" purchases.
He always discovered unknown problems, but he also always made
a profit on these homes.