Foreclosure Houses

Started by Futuredoctr
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Futuredoctr

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So I've been thinking... Why not buy a house in foreclosure near school for my second year, and then rent it to incoming first years while I'm away on my rotations (our school ships away 3rd and 4th years to "core" sites) and residency.
The only problem, is this would be 1. my first house, and 2. I have NO CLUE where to begin. Can anyone give me some general advice about my proposed plan? Thanks
 
There are a bunch of sites out there that list houses in foreclosure, and what stage they are in. Google it.

Other things to keep in mind:
1) How much of the neighborhood is in foreclosure/might be in foreclosure?
(Foreclosed homes tend to bring down the value of houses near them, can decrease the neighborhood image/upkeep/etc, and could also increase the crime/vandalism in the area)

2) Some foreclosed homes are ripped from the insides literally. There are owners who while going through the foreclosure process rip out the appliances, wiring, etc.

3) Prices are still likely to drop some more and it will be a while before houses see any meaningful price appreciation. Don't get caught up in any Realtor related spin of there being signs of bottoming because activity has picked up, or may pick up over the coming months (It's the late spring/summer, which tends to be the best months for real estate).

4) Check out some rent vs own calculators and see if its even worth it for you and be sure to take into account: property taxes, likely price depreciation, upkeep, etc.
 
Above poster made good points about foreclosed properties. Many of them will require work and repairs which can be quite costly. It highly depends on the area as some areas right now just have high foreclosure rates due to mortgages and the houses are actually in fantastic condition for the most part.

I might argue against the speculation in the housing market currently because being a landlord isn't as easy at one might think. Plus you might not be in the area and would be force to sell. I bought my last house from a former student who tried to hold on as a rental property and couldn't maintain the upkeep (nor could they find students to rent it - even with the school's help).

If you have the funds and are a Mr/Mrs Fix-it it might work out for you. Otherwise I'd say save your money, esp in this market unless you find the perfect deal (meaning house in good condition, cheap price, with little improvemetns needed over the next 5 years).
 
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Thanks! I figured both pieces of advice were coming. I just got a wild idea, and I'm sick of watching $900 float away every month. I think your right though, and peace of mind is definitly worth it.
 
I've heard there are property management companies that will take ~10% of the rent to do all of the responsibilities since you will have difficulty being a landlord while doing 3rd year rotations. This would take care of that problem, but there are still a lot of issues to consider as the above posters mentioned.
 
zeloc said:
I've heard there are property management companies that will take ~10% of the rent to do all of the responsibilities since you will have difficulty being a landlord while doing 3rd year rotations. This would take care of that problem, but there are still a lot of issues to consider as the above posters mentioned.
Click to expand...
As a landlord, I would absolutely recommend hiring a property management company, regardless of your financial/scheduling situation. YOU DO NOT WANT YOUR TENANTS TO KNOW WHO YOU ARE!

10% is about right. My deal with my property manager is 65% of first month's rent on a lease, and 8% of each additional month. If he brings me a bad tenant (stays only a couple of months) he generally doesn't try to charge me another lease fee (i.e. 65%)
 
Sol Rosenberg said:
As a landlord, I would absolutely recommend hiring a property management company, regardless of your financial/scheduling situation. YOU DO NOT WANT YOUR TENANTS TO KNOW WHO YOU ARE!

10% is about right. My deal with my property manager is 65% of first month's rent on a lease, and 8% of each additional month. If he brings me a bad tenant (stays only a couple of months) he generally doesn't try to charge me another lease fee (i.e. 65%)
Click to expand...

Interesting approach to it. My mom picked up a real estate license to manage our properties and we've never really had a problem.

Are there any other fees involved? ie for dealing with eviction, or late fees?
 
mgdsh said:
Interesting approach to it. My mom picked up a real estate license to manage our properties and we've never really had a problem.

Are there any other fees involved? ie for dealing with eviction, or late fees?
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All other fees are my responsibility, since he is just managing the property, but that works both ways. I have to pay court costs for eviction (going through one right now,) but I get to keep all late fees from the tenants. I actually don't mind if tenants pay late (as long as they pay) since I get the late fees. In TX, I/we don't have to say that we are charging them (other than in the lease, which establishes that I am allowed to collect them) and what I usually do is just have my property manager keep track of them and withhold them from the security deposit at the end of the lease. Sneaky, but perfectly legal in TX.

Not sure what you mean by, "never really had a problem" -- if you mean haven't really had any bad tenants, then congratulations! But, these days, with people being foreclosed upon, the demand for rentals is increasing, but it is increasing because sub-prime buyers are becoming sub-prime renters.....or maybe I'm just having a run of bad luck with tenants these days.
 
To the OP:
I would check www.hud.gov They list a ton of foreclosed homes in all geographic areas. I would also find a mentor or advisor who is well versed in construction/home inspection to help out or partner with. You could get in way over your head very quickly if you're not careful. Most worthwhile foreclosed homes are bought quickly by those "in the know", so finding a worthwhile invest on the open market isn't as easy as it sounds. Good Luck.

Sol Rosenberg said:
I actually don't mind if tenants pay late (as long as they pay) since I get the late fees.
Click to expand...
Very true! At the end of the year, the late fees add up!

Sol Rosenberg said:
As a landlord, I would absolutely recommend hiring a property management company, regardless of your financial/scheduling situation. YOU DO NOT WANT YOUR TENANTS TO KNOW WHO YOU ARE!
Click to expand...

Why do you prefer your tenants to not know you? I'm guessing to avoid slip-n-fall type lawsuits, etc. I try to build a bit of rapport with mine so that they hopefully keep the place cleaner and the music a bit quieter than they would otherwise.
 
Hi
You are not clear with your thoughts, will you give more information. So I can help you out in this matter.
 
I'd be cautious buying ANYTHING in med school, much less a foreclosed property especially as you admit you know little about the subject.

I owned a condo throughout med school and didn't make a dime on it. As hard as it is to watch $900 "disappear" in rent every month, don't forget that if you owned you'd watch $900 "disappear" in interest every month.

Buying is often better than renting, but it isn't because renting = just pissing money away.

The better the price you get, the lower the interest rate, the longer you stay in it, the higher your tax bracket, and the lower the maintenance costs the better off you are buying. Even with all these things in your favor, a bursting market can still sabotage your plans to do better than just renting.
 
Buying forclosures (at auction) is MUCH MORE DIFFICULT than you think. First, you typically have to pay for the property in CASH at the time of sale. Good luck with that.
Second, you will have no ideal of the condition of the property, unless you somehow manage to see the inside.
Third, if there are people living in the property at the time of forclosure, have a good time getting rid of them. They will just sue the crap out of you and tie you up in courts if they know what they are doing, and meanwhile you have just bought a property you can't rent and are providing free shelter to the jerks who couldn't pay their mortgage in the first place.
Fourth, you have to do A TON of research on EVERY property you consider. That usually means going to the public records to make sure there are no Leans on the property. If there are, you will have to pay those. If a house forcloses on a second lean, then you are liable for the first, which can possibly be more than the value of the house!
Fifth, out of 50 properties that go into forclosure, probably 2 will actually be auctioned off. You have no way of knowing which ones it will be.
Sixth, you will be at an auction competing with people who do this for a living and will screw the crap out of you. If they see you bidding on a property they don't know about, they will take it from you just to screw you. They also have a lot more resources and cash at their disposal. The whole process is extremely corrupt as well, and if you are waiting for any specific property you will never know why it never comes up for auction. The agent could have given it to his best friend for all you know.

IMHO the whole business is very time consuming and simply not worth it. If you want to try it, go ahead- I did. but the headaches that result can last a long time.
 
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