Buying a property for $0 down or little down

[Tommy R]

I've been entertaining this idea recently of approaching for-sale-by-owner properties and offering ~10% more than their asking price (assuming it was a good deal from the get-go), but then offering nothing down or say 5% to eliminate the sellers risk,

Obviously I know many sellers won't be open to this or like this but I believe some would, I wanted to get your guys' feedback on this, is anyone doing this or has anyone does this? What has your experience been like / and is what is your feedback

Happy holidays~

[Mary B.]

Are you purchasing for all cash? Often fsbo of distressed property won't require down payments on SFR just so long as you are buying. They just want the property sold. I guess it depends on the property and terms(which are usually negotiable). If its no work needed whatsoever they are often more strict with price yet still may not require EMD...

Kudos,

Mary

[Josh R.]

@Tommy R It definitely cant hurt to make the offer. Be aware that most sellers will not entertain this unless they own the property free and clear (no mortgage) and even then only a very small percentage will agree. Just like almost everything it is a numbers game!

[Tommy R]

I mean I want to offer no money down, (and no cash), but then switching to offering 5% down to alleviate their worry

Another way of doing this I thought is that I could offer a handsome interest rate, like 8%, but in return I want only 5% down (and then for my own sale I could ensure there's no prepayment penalty just in case I want to pay it off/sell it in the future)

[Joel Owens]

If the property is listed with a broker usually the seller would need 5 to 6% down from you just to pay the broker. If not listed there are still closing costs and attorneys fees which cost money to set these up and transfer ownership.

Personally 5% down is nothing. The seller could have to foreclose and if it goes bad lose way more than the 5% you put down.

Eventually if you search long enough someone will want to dump a dog. An old person who has paid off might entertain the idea. The new Dodd Frank act really puts a damper on things.

[Tommy R]

Joel- that is why I'm seeking fsbo, otherwise 5, maybe 10% even could find some interested sellers I would imagine

[Wayne Brooks]

What will you do with the property then? You know what the payments are for 8%, with taxes and insurance?

[Tommy R]

would like to catch the appreciation of the property and very ideally have it be a good enough deal that it cashflows

[Tommy R]

another idea I have is to offer a higher interest rate to the seller like 8% but again with little down like 5% down

Anyone else have any feedback?

[Ned Carey]

Yes this has been done many times before. However finding that deal is the hard part. Like @Josh R. said it is a numbers game. It will take lots of leads to get this kind of deal. It is also up to your negotiating ability.

Also make sure you know your numbers. Just because you can get into a deal for little or no money doesn't mean it is a good deal. As @Wayne Brooks (the smartest man on BP without a profile photo) hints at, there are a lot of hidden costs in real estate. Good luck - Ned

[Wayne Brooks]

Thanks Ned (and Dion and some others may disagree), but I can't find any 20 old pics though. Tommy, also if the FSBO was a "good deal from the get go", it wouldn't still be for sale.

[Account Closed]

Originally posted by Joel Owens:

Eventually if you search long enough someone will want to dump a dog. An old person who has paid off might entertain the idea. The new Dodd Frank act really puts a damper on things.

Joel: how does Dodd Frank (new or old) put a damper on things? The OP is an investor and would be buying for a business purpose. As far as I know those deals don't fall under Dodd Frank.

[Account Closed]

Originally posted by Wayne Brooks:

Thanks Ned (and Dion and some others may disagree), but I can't find any 20 old pics though. Tommy, also if the FSBO was a "good deal from the get go", it wouldn't still be for sale.

Wayne: I suggest getting creative with your profile pic. Use blurry age 50 photos (like me!).

[Tommy R]

Originally posted by Wayne Brooks:

Thanks Ned (and Dion and some others may disagree), but I can't find any 20 old pics though. Tommy, also if the FSBO was a "good deal from the get go", it wouldn't still be for sale.

This just sounds silly, just because it made it to the MLS does not mean its not a good deal.

It may not be a KILLER deal, but that doesn't mean its not a good deal.

ie: I bought a property 4 years ago for 5k down, a 100k property, now its worth 150k+

And even just 2 years ago it was still worth about 100k, its only the past 2 years it went up in value.

I bought the property off the MLS.

I would consider this deal just fine. It's not a killer deal, but low and behold I made a relative sweet return on my capital. (nearly 100% a year over the past 4 years in appreciation).

[Tommy R]

oh and it is cashflowing $200 a month for me as well steadily