You Could Be Missing Out On Profits By Ignoring Home Rehabs

What’s the lowest price you can find for a home on the market in your area? $30,000? $10,000? $1? If you live in the Rust Belt, or even some of the newer communities that overbuilt in the boom years and are now suffering, you’ll find some great buys right now.

A Realtor.com search of the Chicago area shows over 150 homes, condos, and multi-unit buildings for $10,000 or less. Detroit has more than 3400 available for under $25,000, and some even as low as $40. Minneapolis has over 130 available for $7,000 to $30,000. In Cleveland you can find some nice little places for under $20,000. There are even 520 homes with a starting auction bid of one dollar!

Most of these homes are bank owned. So the banks are often more worried about getting these toxic “assets” off of their books than they are about making real money off of them. For that reason, most of these are all-cash sales.

A good number of these bank owned homes require major rehabs. A lot are burnt out and require gutting. In these deals, existing liens, real estate commissions, and all required permits and fees are paid by the buyer. Make sure to do all of your due diligence to get surveys, inspections, and other work done before you sign anything binding. Home sales in this price range are “as is.”

Local factors might come into play with these sales. For example, most of the 33 listings between $10,000 and $30,000 in the Cedar Rapids, IA area happen to be located in areas that were flooded recently. The house might be in a “tear down” area, and you would have to find out how quickly the city was going to finish their work on the area. With these sales, the policy is “let the buyer beware.”

In Cape Coral, FL many of the properties listed in the $20,000 to $39,000 level are located in the Northeast quadrant, an area due to be assessed $25,000 for city water and sewer services soon. Many of the low price homes in this community do not need a lot of TLC, but whether the assessment has been paid or not is always an issue in determining the real cost of owning a home in the northern half of Cape Coral.

The Housing and Economic Recovery Act of 2008 and the American Recovery and Reinvestment Act of 2009 both include several billion dollars to be spent on the rehab of blighted areas, especially in areas where foreclosures had been especially brutal. Over $4 billion of the Neighborhood Stabilization portion of the 2008 bill have already been distributed to the cities that needed it the most.

Investors can’t really expect to receive any money from these grants directly, excepting portions of the bill that provide money for making energy efficiency upgrades for low income housing. Investors could benefit indirectly if they rent out their properties to Section 8 tenants because these emergency programs are providing money to get people below the poverty level into improved housing via Section 8.

Some cities as well as non-profit organizations could offer grants to investors to get them to buy houses in need of rehab and foreclosures. Check with your local Housing Authority to see the options in your area.

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