Hud Repairs Allowed?
Written By: admin on September 22, 2009
One Comment
I want to buy a HUD property as an investor (no realtor yet). If I do this as an investor what repairs will HUD and the bank allow me in figuring out the loan I can get. I plot on putting 20% down, but I want my repair costs covered if possible (the repairs will be huge for the place I’m thinking about).
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You need to form a partnership to own the property. You will take depreciation and losses on your 1040. Your 20% will be partnership equity. You have to sign a regulatory agreement with HUD and obey all their rules. You will have to buy HUD mortgage insurance (and place it in escrow monthly, which means the first year you pay it up monthly AND set it aside monthly for the next full payment) You will have to have an annual audit, for about $5K, you will have to fund a "replacement reserve" which is like funding your depreciation into a separate bank account that HUD has control over and you can’t get it unless you submit invoices to them for approval. Which means you have to fund your reserve, pay the vendor, then question HUD to reimburse you for the costs. It’s pretty exacting but it can be done. Excellent luck. Read the fine print. Question lots of questions. It’s like sleeping with the devil.