Within the last several months, most customers that I am working with are looking to buy foreclosed houses, rehab them, and then rent them out for a nice cash flow. They are then waiting for the day when they can sell them for a nice profit (as they own them after rehab at 75% LTV). I wrote about flipping houses in the $30-50k price range in Minneapolis several months ago, but there continues to be outstanding deals to be found in this niche.

When we find a house that we may want to make an offer, we check the City of Minneapolis Chapter 249 List. This list is updated about every 30 days and has condemned and boarded houses on it. If a house is on this list, it has most likely lost any grandfather status and will be required to be brought up to current building codes (which can add thousands of dollars to the rehab). If a house stays on this list for too long, it can be scheduled for demolition. I suggest you stay away from those!

Lastly, I always write a clause into any purchase agreement for bank-owned properties that reads as follows:

Buyer and seller agree that if property is condemned, loses its zoning, has new code compliance orders issued, or otherwise changes status with any governmental jurisdiction prior to closing, the buyer may cancel this purchase agreement by written notice to the seller’s agent and all earnest money will be returned to the buyers.

These couple steps are just a little extra protection when buying bank-owed real estate.

Have you always wanted to buy rehabs and fix them up, but never knew where to start? Don’t Wait! Get Started now.