HUD program for Katrina Victims

As many of you know, the FEMA support for Hurricane Katrina victims who are in HUD homes is ending February 28th. I think some of them can apply for another extension, but the key issue is that these properties will be sold at some point and can’t be rented by HUD to Katrina victims forever.

I’m on a task force here in Austin and we’re kicking around ideas. Most of the Katrina renters would like to buy a home, but some do not have jobs or are not in a position to buy. What do you think of this proposal?

  1. HUD will allow investors to purchase the HUD homes (maybe at a discounted rate?) provided they lease to hurricane victims for a period of at least 2-3 years while the tenants build credit.

  2. The Katrina tenants will be on a lease/purchase program and must take a series of trainings to help them build their credit, improve job skills etc. The purpose is to give them support so they can prepare to be homeowners.

The problems I see is that we’ll need to provide some sort of rent concession or adjusted sales prices so the properties can at least cover the mortgage. Landlords also need to have rights to evict should they not pay.

Would you or investors you know go for this type of deal? Any other problems?


I would have no objection to dealing with Katrina victims IF they met my normal screening criteria. People that were renters in New Orleans (or anywhere else before Katrina) were primarily renters because they made bad choices in their lives. The truth is that most lower income renters don’t live beyond today and make a lot of bad choices. That’s the reason they are renters. I would not expect their credit to improve tomorrow, next week, or 5 years from now.

Also, personally I would not do any lease option or any other deal that only covered the mortgage. In my opinion, that is a recipe for financial suicide. Lease option buyers are really renters and they act like renters. The majority of lease option “buyers” never buy the property. Without covering all expenses and positive cash flow, you are certain to lose money when these “buyers” don’t buy the properties.

I hope that you wanted an honest opinion (that’s what you got).


There are SO many damaged homes around here ( town 17 miles north of New Orleans that took Katrina’s direct hit), I think we could do about what you’re wanting, but without all the HUD hassles. See my thread “1st rehab project” in the Rehab section, that’s one of the houses I’ve bought so far.

Also bought into another house, in New Orleans, and we are looking at one a few blocks away.

The house here in Slidell will have 44K in equity when rehab is done, the house in N.O. will have 150K, maybe more, when it’s done. The other one we have our eye on should produce about $100K at least.

I have contacts down here, i.e., Wells Fargo, local banks, RE agents, contractors, insurance guys, etc. But until these houses get rented out, and show some income, I may be cut off from buying any more. Let’s talk.