You Could Be Missing Out On Profits By Ignoring Home Rehabs
How low can you pay for a home in your market? Can you get one for $30,000? $10,000? How about one dollar? Investors who live in the Rust Belt or other areas that were overbuilt and were slammed by the housing bust can find some incredible buys right now.
If you look on Realtor.com, you can find over 150 houses, condos, and multi-unit buildings around Chicago for $10,000 or less. There are over 130 in Minneapolis for between $7000 and $30,000. In Detroit, there are over 3,444 listings available for $25,000 or under! The prices get down to $40. In Cleveland you can get some decent homes for under $20,000. 520 of those homes in Cleveland have a starting auction bid of one dollar!
The common characteristic of most of these houses is that they are bank owned. The bright side is that banks tend to be more worried about getting these properties off of their books than they are about making a decent profit off of the asset. Due to the extremely low prices and the banks desire to get the deals done quickly, most of these are all-cash deals.
A significant portion of these homes require some serious rehab work. Many of these are complete burn-outs that are going to require a full gutting. A lot of times liens, real estate commissions, and all required permits and fees have to be paid by the buyer. The buyers must do some complete due diligence to get inspections, surveys, and all other work before they sign anything permanent with the bank. Sales in the price range are always ”as is.”
There may be special local considerations to be aware of. For example, most of the 33 listings between $10,000 and $30,000 in the Cedar Rapids, IA area are in areas of the city that have been flooded. It would be critical to find out if the home is in a ”tear down” area and how quickly that work is expected before attempting to buy anything in this zone. In the case of ”as is” property it is ”buyer beware.”
A good number of the properties listed for between $20,000 and $39,000 in Cape Coral, FL are located in a portion of the town that has been assessed $25,000 for city water and sewer services. These cheap houses might not need much rehab, but the assessment must be factored into the deal when trying to calculate the true cost of ownership for the home.
Both the Housing and Economic Recovery Act of 2008 and the American Recovery and Reinvestment Act of 2009 contain several billion dollars for the rehabilitation of blighted neighborhoods, particularly in areas where foreclosure has been the highest. At least $4 billion of the Neighborhood Stabilization portion of the 2008 bill have been distributed to the neediest cities.
While investors can’t expect to receive any individual grants from the recovery acts, except maybe receiving money for making energy efficiency upgrades to low income housing, they could benefit indirectly if they rent to Section 8 Tenants. Money has been provided in these programs to get low income people individuals and families into nicer housing via Section 8.
Non-profit organizations and some cities might offer grants to investors in order to encourage them to purchase foreclosed or houses in need of rehab. Your local Housing Authority will have information for the options in your market.
Looking to find the best ways to invest in real estate? Then visit www.REWealthCoach.com to find the best advice on how to invest in real estate.
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