NJ Investment Properties 101, Part 5: Know Your HUD

Buying a HUD (Department of Housing and Urban Development) home isn’t necessarily a way to get rich quick. These homes are supposed to be sold as market value, after all, which would semingly make the great deals you hear about a myth. However there are some profit opportunites here.

One of the reasons you still find good deals on HUD homes, even though they are supposed to seel at market value, is that they are sold “as is.” These are houses that have been forclosed on and repossessed, so the previous owner may not have had the means nor the motivation to properly can for the home. They often have enough problems to scare away most home buyers.

What does this mean? It menas that due to the condition, the market value may be low compared to properly maintained homes. This can mean an opportunity for an investor who is willing to fix a few things. For example, a “problem house” to the general public can be worth $40,000 less than surrounding homes, while it may take only $10,000 to fix it up and make it look good.

Let’s go back to the beginning: What is a HUD home? It is a home that has a HUD-insured mortgage on it. When the owner doesn’t make the payments, HUD pays the lender what it is owed, and then takes ownership of the home. HUD tries to sell it quickly and at market value. Virtually anyone who can pay cash or get a loan is eligable to buy these houses.

HUD homes are found in all sorts of neighborhoods, although most are meant to be affordable to low-income and moderate-income families. These are homes that generally sell for the same as surrounding homes (except when they need a little TLC). To fund HUD homes in the price range you want, you simply look for neighborhoods in your particular price range.

If a HUD house needs fixing up, then the asking price will reflect that. HUD may offer special incentives such as an allowance to upgrade the property, a moving expense allowance, or a bunus for closing the sale early. The houses are sold “as is,” but HUD will allow you to get professional inspectiosn prior to making an offer.

To find out what HUD homes are available in your area, contact Dan Kurland at dkurland@weichert.com or call (732) 233-6969 any time!

To check out other articles in the NJ Investment Properties 101 series, click on any of the below links!

NJ Investment Properties 101, Part 1: Know Your Time

NJ Investment Properties 101, Part 2: You ARE Your Network

NJ Investment Properties 101, Part 3: Financing

NJ Investment Properties 101, Part 4: Achieving The Right Price