The following is the account of how I became the protagonist in my own version of Flip This House. I bought one of the many HUD foreclosures available through my local HUD foreclosure list . Over the next couple of months I went through the whole process of remodeling, marketing and selling.

Yes, I said selling.

Even though we are in a market “where nothing is selling” (early 2009) I was able to sell this house for a good profit and I am going to show you how I did my first “flip”.

I had been involved in many opportunities for education in real estate investing but house flipping was not one of them. Although I like to challenge myself in order to learn new things I was by no means prepared to tackle the challenges of doing the major overhaul that FHA foreclosures usually require and then attempt to flip this house. But, this house presented a great real estate investing opportunity so I knew I could not pass it up.

From FHA Foreclosures to HUD Foreclosures

FHA foreclosures are houses that are foreclosed upon by the lender (can be any bank) but the loan on that property was a FHA loan - meaning it was insured by the Federal Housing Administration. Therefore when the bank forecloses on the property FHA takes back both the loan and the property from the bank that foreclosed [1]. This in turn creates an opportunity for you and me, let me explain…

FHA transfers the property to HUD (Housing and Urban Development) for dispossession. HUD then tries to sell its many HUD foreclosures through a bidding process. Without going into the lengthy details of this process, the homes are first offered to owner occupants (people that are going to live in them) if nobody buys them then anybody, including investors, will be able to bid.

The way you can benefit from this is that HUD will automatically lower the price of the house if there are no bids. HUD foreclosures are different from regular foreclosures in that HUD does not care what the market value of the house is, if it doesn’t sell they will keep on lowering the price by a certain percentage, until it does . Better yet, the percentage discount gets bigger as time goes by.

So, when one of the agents I work with contacted me with this opportunity it caught my attention and I looked it up in the HUD foreclosure list. Sure enough because the house needed quite a bit of work (a lot actually) it had gone unsold for several months. The following are the lessons I learned in house flipping. I will show you how you too can flip this house:

• Cost estimating and the bid process on HUD foreclosures.
  Like I mentioned in my first investment article, this is crucial in order to estimate if you have a good deal in your hands. Doing this for a flip is different than for a long-term hold.


• Creating a scope of work, choosing the "must do, should do, could do".
  How to choose the repairs and upgrades that will get the house sold, while maintaining your budget.


• Selecting, Hiring and Managing Contractors.
  When explaining how to flip houses one of the best house flipping tips I can give you is to try and consolidate as much work as you can under the least number of contractors...


• Dealing With Problems When Flipping A House.
  You know they are going to happen but how you react to them will make all the difference.


• The Final Pictures
  After all the work was done what did it look like? See for yourself...


• The Final Analysis
  After all was said and done what did the numbers show and how much did I walk away with. Would I do it again?
• Keep your home safe with ADT Security.

And of course the before and after pictures!

Please check back soon for the follow-up posts or subscribe to my blog and RSS feed so you get the updates when they are posted.

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[1] http://en.wikipedia.org/wiki/FHA_loan#References

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