HUD wholesale home sales is a real estate investment strategy that is often overlooked by many who simply don’t understand how it works. So could this be a profitable source of new struggling properties to generate income or is it just overpriced?
HUD homes are often dismissed, even by seasoned real estate investors because they either don’t understand them or investors have been so spoiled or used to buying other properties that they didn’t need to search for them. Now, however, they may be worth a second look, especially when many are finding competition to market directly to homeowners and to bank-owned REOs heating up.
Why Consider HUD Wholesale Homes?
While it has quickly become nearly impossible to work with banks on decent terms in some areas and homeowners have become immune to marketing messages, the government continues to charge vacant and foreclosed homes in over a couple hundred thousand .
They want and need to get rid of these houses and offer some pretty hefty discounts to investors who buy them. Exactly how much they cost varies widely, but some investment companies have built sizable wholesale businesses on them and have consistently found properties at 35-55% ARV (after repair value).
What many don’t realize is that these properties can be purchased with very small deposits compared to other options available today and many of them are already being repaired by HUD. Sometimes this simply means new flooring, but other times it can extend to brand new bathrooms and kitchens and even roofs.
How to Buy HUD Homes
‘HUD houses’ are no different than other houses; they were simply houses that had FHA loans prior to foreclosure.
What is different is how these properties are advertised and sold. They are offered through HUD’s auction system. Anyone can bid on them and some may be very surprised at how cheap some are, but they must be offered through an approved real estate broker.
Not all brokers are approved, but it’s not that hard to find one that works in every area, and a list can be obtained directly from the HUD website. Of course, not all are created equal and since bids are weighted on the seller’s net income, it’s smart to find a broker who is willing to lower their commission so there is more room in the deal and other bidders can be beaten without giving up. the propagation.
However, while there are high profits and high volume deals to sell HUD homes wholesale, investors must be prepared to deal with government contracts, government deadlines and inefficient systems and wrestle with their choice of title company.
Still, for those looking for a new source of discount property deals, this strategy could lead to a slew of homes to remodel, for which the FHA has already approved loans, which could ensure they are easy to deliver quickly for attractive paydays.