HUD properties can be excellent purchases. But you need to know a few guidelines.
First, most HUD homes come on the market available at first primarily to owner/occupant bidders. Very recently I helped a first time home-buyer purchase a HUD home for $63,000. We figure it will need some improvements/repairs (as most HUD homes will) in the neighborhood of $9,000-$10,000. We figure the ARV (after repair value) to be somewhere in the neighborhood of $85,000-$87,500.
So basically, this first time home buyer will put 3% down on an FHA loan and have approximately 16% equity! How great is that?
Investors, too, can purchase HUD homes but must be second in line to owner/occupants during the first round of bidding. After that, HUD is generally only interested in highest net bidder. But, as you can imagine, the “cherry” properties will be gone to the owner/occupants during the first round. What is generally left to investors are the homes with major structural problems, mold infestations, or worse. So you have to be careful.
Also, you purchase HUD properties “As Is”. Inspections are okay. However, you should look over the properties pretty well before you bid.
If you have any more questions about this field of real estate, just give me a call.