The good, the bad, the pros, the cons, and the opportunities that you can make whenever you buy a HUD foreclosure. HUD stands for Housing and Urban Development. There's all kinds of properties that are foreclosures in every single state around the United States. I'll share with you a couple of websites here in just a second.
Now, Housing and Urban Development runs FHA, which is the Federal Housing Administration. So when you get an FHA loan on a property, if that home is foreclosed on, HUD takes that property over. And then they put those properties on the market.
I'm going to walk you through two properties. One is priced at $290,000. It's actually on the water. You're about a mile boat ride from Lake Pontchartrain. And then the other one is only $99,000, believe it or not.
Both are really nice houses. Now, my name is Wayne Turner. For nearly 30 years, I've done just about everything when it comes to real estate.
And I'm excited to share with you all of these opportunities that you can gain and mistakes that you can avoid making. Once again, I've been in real estate for a long time. And I just share that with you so you can have the confidence knowing that the information that you learn from me, the stuff that we share, is from tried and true boots-on-the-ground experience.
Let's jump in. So you must know it's important to understand that the bank does not want to take back any property. They're not in the business of taking back property. They're in the business of making money, and they make money because you're paying them interest on the money that they loan you to purchase this asset, which is a house. So you just got to know that.
They don't want to take the property back. However… If you don't pay your mortgage, they have to. And when it's an FHA loan, HUD takes the property over and they put those on the market. Now, I mentioned sharing with you a couple of websites. One is called the hudhomestore.gov, hudhomestore.gov.
You can see every single property just like this one I'm walking around in every single state. Most states have anywhere from 12 to 13 to sometimes upwards of 50, 60 homes on the market. Now, you have to have a real estate agent. And if you need an agent.
In your area, you can connect to me, go to waynturner.com, click buying, tell me that you want to purchase a HUD house and you can be connected with a real estate agent in your market regardless of where you are. Or, you can just select one. It doesn't really matter, but you just have to know that these homes are available. Now, the negative or the downside, if you will, to purchasing a house like this is they are as is.
They will not do any work. That doesn't mean that you can't do an inspection. You just have to know that when you close and own that home, it's your baby.
And they're not going to fix anything. Now it's also important to know not only will they not fix anything, but you can't get particular types of loans. Like for example, if you wanted to do a USDA no money down, like you hear me talk about, you know, it costs you at least a thousand dollars for an appraisal and home inspection on those USDA loans because they follow the same guidelines as FHA and you can't get an FHA loan on a HUD house when it's in disarray, if you will.
So that right there, you can tell there was a previous roof leak, right? And then also you can see that there's a busted window. Now unfortunately, and I think it's crazy, you comment, you let me know, I think it's crazy that HUD won't fix that.
Like they have somebody that they pay to come in and winterize the property, and I'll show you exactly what that is here in just a second, but they won't fix that item. If they did fix that item, which is simple fix, right, then this house could actually go FHA and get an FHA loan on the property. And then same goes here, but they won't. They will not fix anything, and when they not fix anything, that means you have to get a conventional loan.
Now keep in mind you can purchase a house with a conventional loan. They also don't pay closing costs or anything like that. Very seldom have I ever seen banks pay closing costs.
Most of the time they're just like nope it is as is. You're either cash or you got to get a conventional loan. In that case you're going to need three and a half percent to put down for closing cost, five percent for the actual down payment.
So it's going to run you about eight and a half percent to purchase a house like this. Now as I mentioned You want to have it inspected, you can have it inspected, but they winterize these properties and oftentimes they won't let you un-winterize them. And here's what I mean by that.
When they winterize a property, excuse me, it's going to get a little dark here. When they winterize a property, they go through and pour the solution down the drains to make sure that the pipes won't freeze in the winter months. When they winterize it, most of the time they won't let you un-winterize it. So you just have to know that going in.
You can do an inspection on the property, but oftentimes you can't have the water turned on. And in some cases, they won't let you turn the utilities on either. So you're kind of going in with blinders.
So just know that going in, you may get a good deal on a property, but you don't know what's hidden behind the walls. You don't know if it has termites. You don't know if there's clogs in the drain. Somebody poured concrete down the drain.
I've seen all kinds of facets. So just know that you can get an inspection, but just kind of keep an open mind that you may want to have a little bit of money set aside in reserves in case there's unforeseen things that are wrong with the property after you purchase it. Now this home is just over 2,700 heated and cooled square feet and it's got balconies, two-car garage, it's got three bedrooms, four full baths, there's a full bath down, two full bedrooms, two full baths up. Really nice house. It may get a little dark but I want to show you upstairs.
All the bedrooms are upstairs but you can tell it's an incredibly well-built home with big bedrooms. So here's a huge room here. I mean that's a big room right that's not the main bedroom either and then there's another one here but here's what's really cool the rooms are not only big but you got french doors that go out into that balcony remember I showed you the balcony so central heat and air another room here full bath there there's no power on so it gets a little dark and remember downstairs I showed you that leak you can tell there's a leak up here too directly below me was that spot on the ceiling in the living room you can tell that was from the from a roof leak This is pretty cool. I always tell people you can do these types of barn doors. Really nice feature.
This is a full bath. Now you can tell at one time at the framing they had bi-fold doors here. These bi-fold doors. I tell people you don't have to do bi-fold doors. If you'll look at that you can see there's plenty of space that if you wanted to you could put a set of those barn doors right here.
If you ever have like an open bathroom like that you can have somebody you can actually buy those doors. and have somebody install them. Now let's take a look outside.
This is really cool. Now if you're like me you love outdoors. I love being outdoors.
This is pretty awesome. This is a big covered porch as you can see. Make sure you get a good look at it and the house overall it's in good shape.
I mean on a scale of one to ten for a house that's 40 years old I'd give this one about a seven and a half because it just needs a little TOC. Structurally it's sound. Beautiful live oak tree on the water.
Like anybody can purchase this house. You've got a HUD home store. Select an agent.
If you don't have an agent, we can help you find one. But bottom line is anybody can buy this house regardless of where you are. Like for example, if you want to purchase this house and make it an investment property, you could.
Now you just have to know this, and this is what people get hung out on. They buy these properties immediately thinking that they can Airbnb them. Before you buy any property and think you're going to Airbnb it, you need to check with the county, the city, and the parish. Because for example, you couldn't buy this house.
an Airbnb. It's not allowed in the parish of St. Tammany where this home resides. But look, that's just for short-term rentals. You can still do long-term rentals. Like for example, this house, $2,700.
You could get easy, get $3,700, $3,800 a month for this house after you fix it up. Now, keep in mind, I'm talking about doing complete. And when I say complete, I mean, don't go half-assing it and forgive my language, but that's just what it is when you see people go in. Like if you're going to flip a house, flip it right. Even if it's a home you're going to live in, change the hinges, the doorknobs, all that stuff, it is not that expensive to be able to change that stuff out.
This is the kitchen, but you can see the cabinets are updated. White cabinets, does have a stove, does have a dishwasher. They almost never have refrigerators in them. But you have to know this too, if you look at any foreclosure, for example, and you're going to get like an FHA loan, you have to have a stove.
You don't have to have a dishwasher, but you have to have a stove. And it has central heating air, it's got to be working. Here's another bath right here.
which is pretty cool and then you got a door that goes out you got a utility room which is big so you can see these are great opportunities you just need to know going in that you can do an inspection you should do an inspection let's look at a few more things now a couple of features about this house and it checks all the boxes i say when you're building a house put in a fireplace unless you're just deep south or they don't do fireplaces but we're in new orleans louisiana it's like november and it's hot but still do a fireplace right it also has a cover front porch and a cover back porch. It also has a two-car garage. It also has a pantry. So you want to look for those things. Now just know this, these windows are the original windows in the house and they are just aluminum single pane windows.
So they're not the best window as far as, you know, your actual utility bills and that sort of thing. But just know that the house, you make it a home and there's certain things that you have to improve upon, if you will. Now you just have to know this, this is the most important thing. If you don't get anything out of this episode.
Just know this, you need to be approved. You need to be approved because when you're not approved and you're making a bid on these houses, if you will, because you're bidding on the houses and they'll tell you, okay, here's the date. I want to make a bid.
Here's what I want to purchase. But what they do is they start the price, for example, at $290 and they're not going to take much less than $290 and they just want you to bid on the property. So you can see $290 is a great deal on this house. Covered front porch, back porch. It's priced at $105 a square foot on the water with them.
boat covered boat slip and a lift like so it may be that somebody buys this house for 320 3 3 10 but you can bid on that property but the most important thing you want to make sure that you're approved because when you're approved it has nothing to do with the house you connect with the lender if you need a lender we can connect you with one go to waynturner.com but just talk with a lender talk with a mortgage company go to your local credit union tell them you want to be approved to purchase a house it has nothing to do with a home you they're going to look at your income your assets how much cash you got in the bank they're going to pull your credit verify your income and then they're going to approve you that's just like having cash and that's what you want to do before you even get your hopes up to look at any piece of real estate. Now it's really important that you know that that $600 for every $100,000 that you borrow does not include your taxes, it doesn't include your homeowner's insurance, doesn't include your flood insurance, and it doesn't include your mortgage insurance premium that you pay on a monthly basis if you don't put 20% down on the property. So just know that going in, that's why it's so important.
And listen, you can easily go to mortgage payment calculator, just go to Google. type in mortgage payment calculator it's going to show you what the today's rate is around six six and a quarter percent it varies of course depending on the week year the month you get that but it actually will show you what your principal and interest payment will be but you just know that you also have to get estimates for homeowners insurance flood insurance you have to look up see what the taxes are on the property because those taxes are going to be prorated per dim per day per month and that's going to be added to your payment and you have to pay that private mortgage insurance so you can see You can purchase a house like this right now, $290,000, $300,000 house, your mortgage payment completely out the door is going to run you probably about $3,200 to $3,300 a month. Now, you could rent that property out if you wanted to, depending on how much money you put down and whether or not you want to live in it yourself or use it as an investment property. But just kind of know all of those figures going in. So let's do this.
Let's go look at that $99,000 property I was telling you about. Now this house is priced at $34 a square foot because it's priced at $99.99. It's 2,850 square feet. But I'm going to show you some things on this house that banks don't tell you, they don't show you. Oftentimes they don't disclose.
Sometimes it's that they don't know and sometimes you question, do they know? So let's take a look inside this house. This is another HUD foreclosure and I'm going to show you a prime example of what to look for as far as water leaks and most importantly mold in a home. Now look, this can be an affordable home, but you just have to know that Going in on a home like this, $99,000 sounds like a deal, but this home has to be gutted, and I'll show you a couple of reasons. One is the mold contamination.
So what happens is when you start looking real close, you smell that musty smell, you'll start seeing mold and signs of mold. It's not necessarily that the house was flooded, but remember I told you they winterize houses, and when they winterize them... The utilities power is turned off. There's no power in this home. There's no air in this home.
It's been hot all summer. So when you look at things like this, this is pretty interesting. Yeah, it's a residential home. That's a urinal.
But look at all the mold. Can you see that? That is mold. Now it may not be black mold, but it's mold. And if you ask me, all mold is bad mold.
I'll show you something else. Now when you walk into these homes, any homes, and listen, as I mentioned before, you have to be a certified agent with the Department of HUD in order to be able to access these homes. If you do, they're listed. You can get in to look at these houses. The vast majority of them are listed for sale.
But you got to know if there's a leak, right? You can't see it on this paneling, but there's probably mold growing inside the walls. I see some wood rot right there.
Once again, you buy these properties as is. Where is another thing that you need to look for? is ceiling fans.
See a ceiling fan on the inside of the house is made from a different material than on the outside of the house. On the outside of the house they're made to handle moisture and and just in the air right. They're not on the inside so when you go into a house even if you don't know anything about it a good sign to look for is warping of blades. When they start to drop and droop a little bit rest assured there's been moisture in that house somewhere. Now another thing that's really important to know in these hud houses is that the buyer is subject to a five percent cost so in other words if you bought this house for a hundred thousand dollars you've got a five percent cost and that five percent cost is five thousand dollars two hundred thousand ten thousand dollars you get that so they're charging you that in addition to the the purchase price of the house and keep in mind it's a bidding process and they open the bid you can make bids they are hud houses and you don't know they won't give you a counter offer they're just going to say no your bid didn't win or your bid won.
Now look, I always say you make your money when you buy, and that's because you've got to look at what you pay for the property. If you overpay for a property, then you're not going to make a deal, if you will. And listen, if it's a home that's in your school district or a neighborhood that you want to live in, it has all the boxes checked that you want in a house, it's not that you're overpaying, because keep in mind they're going to have the property appraised with the bank once you have your approval letter and make an offer and get it accepted. But most importantly, you just have to know... You don't want to overpay for a property and just because you're buying something like this doesn't necessarily mean it's a good deal because you can see there's a lot of work to be done to this house.
So anyway I'm going to get out of here. It's kind of hard to breathe. I'm Wayne Turner. Like the video. Subscribe to the channel.
I promise you you'll learn something new on every episode.