Now that the banks are releasing their stock of REO homes to the greater Houston market, savvy homebuyers have some shopping to do, whether you are looking for a home for yourself or investment properties to rent. Some of the rules are a little different if you are seeking your dream home or a place that will be a rental.
If the home is for you, you may know what you want. You know how that extra large family room will especially suit you family and how the alcove off the second bedroom will work great for a little office for you. Even if the place needs renovation, you have a vision for the finished product. If the place is in a neighborhood that is convenient, safe, and desirable to you - go for it.
If the place will be investment property, your goal should be to find a place that you can easily rent, or down the line, resell after you have fixed it up. Even if you wouldn't want to live in the home personally, it might work out great for a tenant or the next buyer. If you are aiming to rent out the home, make sure to ask your Realtor® how many other foreclosures and bank owned homes there are in the neighborhood. That will give you an idea of how much competition you'll have when you are looking for a renter.
Needless to say, the sale price has to be right - including any add ons like back taxes and your expected cost of repair. Obviously, most bank owned properties need some work that ranges from some relatively minor painting and cleaning to major rehab work. Whether you are buying for yourself or investment purposes, you don't want a home that requires so much work that the price of the finished product will be out of whack with neighborhood values. If you buy the home for yourself and plan to live there for 100 years, you might to sink money into features that your family will like, but you probably won't see much return at sale. For homes you plan to turn over, you should be more focused on the rate of return.
You can expect to sink $15-20,000 into cosmetic renovations on an investment unit, so make sure to think of the whole picture when you're buying. Experts say that you should plan on charging 1% of the purchase price in rent each month, but that is not realistic in most markets. You should talk to your Realtor® to get a good handle on the sale or rental market. Spending $20,000 will mean you need to need to charge $200. Will an extra $200 make the rents too high in the area?
Getting an inspection done prior to making a purchasing decision is a absolutely necessary. If the home is not accessible, scope out the neighborhood and talk to the neighbors to see what they know about the condition of the place. In any case, make sure that your Realtor® writes an escape clause in the contract for you in case the inspection uncovers major damage.
With some many homes offering both the potential of being either a lucrative investment or a money pit, having a good Realtor by your side like Kathy Kipp is essential. She knows the Pearland real estate market and can guide to the best deals in bank owned and foreclosure homes.
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