Radically Cheap homes under $1,000
With the real estate market seeing some of the worst figures yet, home buyers are getting deals of a lifetime, with foreclosures being offered for as little as $1,000. In areas such as Cleveland and Detroit, banks have their books chockfull of properties and they are practically giving them away.
According to the foreclosure listing Web site, Foreclosure.com, in Flint, Michigan there are currently 33 foreclosures under $10,000 and 30 foreclosures under $5,000. In Detroit, the Web site lists 146 foreclosures under $3,000 and 55 foreclosures under $1,000.
There is a similar pattern in Cleveland, Ohio. The site lists 91 homes under $10,000, 30 under $5,000 and 34 under $3,000 - a practical smorgasbord of profit potential. Here is a link to view the list.
Why so cheap?
Lenders with large inventories of foreclosures tend to cut their losses early before spending a lot of money carrying the homes. Foreclosures that stay on the market for long periods of time end up costing lenders tens of thousands of dollars in the long run. The largest expenses come from taxes, property maintenance and marketing.
At this point lenders no longer want to make a profit and would actually rather take a loss then use the resources it takes to sell the homes at higher values.
When homes are offered for such low prices, many times the entire purchase goes directly to the agent or broker listing the property.
A Closer Look
A Detroit, Michigan home listed on Foreclosure.com is priced at $799.00. The two-bedroom, two-bath, 2,127 square foot home shown to the right, was last sold for $85,000 in early 2008. According to Zillow, a real estate valuation website, the home is valued between $78,300 - $122,400.
The home is located on Glenfield Rd and requires some handy-work. An average rehab could cost upwards of $20,000. Factoring in the cost of the home and the renovation, an investor is still looking at a profit of well over $60,000! The home can be seen here.
Another Detroit home, on Alcoy Street, is listed for sale at $2,000. This REO property has 3 bedrooms, 1 bath and offers 1,164 square feet of living space. There is a front porch, fenced-in yard and an unfinished basement. The Zillow value range is between $90,900 and $118,170. A picture of the home on Alocy Street, can be seen below and the property details can be found here.
The best deal yet is found in the Cleveland, Ohio area. A two-story colonial home located on Desota Avenue in Cleveland Heights is for sale for $1,000. The home has 5 bedrooms, 2 baths and offers a sizeable 2,787 square feet of living space. The home also features a front and back yard, detached garage and a storage shed.
The Zillow value range on this home is between $120,540 and $163,170. At the height of the market in 2006, the home's estimated value reached all the way to $200,000. Even with a large rehab effort there is still the possibility for a huge profit.
If the seller's market continues to lag, investors can always rent the property for a profit. Then sell when the market picks up, resulting in an even greater profit.
Cheap foreclosures, too good to be true? Well, not exactly. While these homes offer tremendous profit potential many will need some minor, and sometimes major rehabbing. Other homes just need some fixing-up and some good old-fashioned elbow grease. Learn how to rehab homes like a pro.
"East Cleveland has a beautiful housing stock," says Realtor, Tonya Stoudamire. "These houses just need someone to come in and love them a little."
It's important to identify the extent of the work before you purchase the home. That way you know what you are getting into and can accurately estimate your profit margin. Utilizing some basic common sense is sometimes the best approach.
These Deals Won't Last
Growing media coverage of homes selling for hundreds of dollars is getting around quick, and not just in neighboring communities. Investors nationwide and even across the globe are honing in on these mid-west steals.
"I recently received a call from a couple in Australia who wanted to invest in a few homes in the Detroit area," says Mary Andrews, a local real estate agent. "I knew they weren't interested in a vacation home, so they must have heard about the investment opportunities going on here."
Show me the money
Now that you know the possibilities, it's time for the reality- the financing and the rehab money. While most people can afford the homes with no financing, investors and home buyers should have some capital set aside for the renovations and the rehab costs. Many repairs can be done inexpensively with some hard work, while more expensive repairs can be funded with help from the government.
The U.S. Department of Housing and Development (HUD) introduced a loan program specifically for buyers purchasing fixer-uppers. The funding is through a type of mortgage insurance and is meant to encourage banks and private lenders to offer simple, long-term loans to cover renovations and purchase if needed.
Other programs spawned from the recent Housing Rescue Bill, such as the $4 Billion Neighborhood Stabilization Program also offers assistance to buyers. These programs offer grants for down payments or can be used to off-set rehab costs. More information on financing your REO property.
It was the best of times, it was the worst of times
What can be said of the worst of times; is that they are also times of great opportunity. Financial Manager, Edward Johansson, offers the following insight, "It is during economic lulls where tremendous wealth is achieved. You just need the drive and sometimes need to just take a leap of faith to get there."
Think you're ready to jump in? Start your foreclosure search today!