Grab Your Piece Of The House Rehab Pie
by Bob Massey

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.

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!

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.

Most of these houses need significant rehab work.  Many are burn-outs that require gutting. Often liens, real estate commissions, and all required permits and fees must be paid by the buyer.  Buyers must do all the due diligence to get surveys, inspections, and other work done before signing anything permanent.  Homes in this price range are always “as is.”

There could be local factors that you need to be on the lookout for.  An example of this is that most of the 33 listings between $10,000 and $20,000 in Cedar Rapids, Iowa, are in areas of the city that have been flooded.  You would need to find out beforehand if the house is in an area of the town that is going to be town down, and quickly any work in the area is going to be done before buying anything there.  The policy is “let the buyer beware” in these sales.

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.

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.

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.