Is it smart to get your first property if you don't have downpayment money? Can it be done?

Question

Hi guys.

I really want to get the first property and I don't want to procrastinate. but I don't have the downpayment money. What should I do? Should I wait and save (it may take a really long time for that one). Should I do hard money or is that too risky? I don't have credit cards to use and I don't have a line of credit, but I really would like to jump in.

Brian Mathews · Answer

If you don't have the money for a down payment, you can't afford to own the property, you are waiting for a disaster to happen.  You will need reserves to handle any unforeseen expenses that may occur.

Nicole A. · Answer

Do you not have credit cards at all? How is your credit? If it's good, and you have no cards, I personally would say take a bit of time to apply for a handful or so on the internet. Do it all within the same day.

Use those cards, but pay them off monthly. After a while, call and ask for an increase in your credit line. If you already have cards, call them and ask them for an increase in your credit line. Between all my credit cards, I have around $100K in available credit to use. Most of them are about $15K-$20K limits each. My credit is good and I'm always getting those 0% checks in the mail.

This isn't overnight, but start now so you have it as an option later.

Another idea is to borrow the down payment from someone. My bank does not require that I show I've had my down payment for at least 6 months (they call it "vested", I think). So I offered a guy $100/month for 3 years if he'd loan me $20K. $100/month doesn't kill my cashflow, and it's making him much better return than the bank did. We have a promissory note.

Brian Gibbons · Answer

Hi Kay,

If you live in Philly, go to a mortgage FHA lender and see what else you need to do besides the 3.5% down.  Look at DTI and FICO.

You can ask a relative for the money from their IRA (not linear, as in aunt uncle, not mom dad)

Can you afford to maintain the house?

Best of luck!

Kay H. · Answer

ok. Looks like I'm going to need a little money first for emergencies. I will see if I can get some wholesale deals under my belt

Bill Jones · Answer

Hi Kay, Don't listen to the nay Sayers "Just do it" Here's one way

Can you still buy with No Money down? The definitive answer. Yes and No. It depends. The no money or nothing down deals are out there, they're just harder to find and have to be approached differently. (When this latest bubble bursts and it will...Creative financing will come into its own again.)
	No Money Down?
	Think of buying with no money down as 100% financing. In other words you're going to borrow all or most of the money needed to purchase the property.
	
	Here's what I mean. You find a suitable property for let's say $100,000 the seller owes the bank $75,000 how to we purchase the property? You offer to take the property "subject to" the existing bank loan, and ask the seller to loan you some of his $25,000 equity by holding a note for $12,500 called a wrap or an AITD all inclusive trust deed.
	
	Then you borrow another $12,500 from a third party who you would give a note secured by a second mortgage on the property as security for the down payment money.
	
	 Congratulations you just purchased a property for 100% financing or no money down.
	I should mention here that most of you will have different reasons for needing the information found in these postings. Maybe you have good credit but no money. Or you have the money for a down payment but no credit.
	
	The example used above is just one of the many ways the purchase could have been accomplished. However, by using other no money down or creative financing techniques such as a land contract, a lease option or equity sharing may be advantageous for you as a buyer or seller. We will explore all of these techniques in detail and more in subsequent postings.
	
	But no mater what technique you're going to use you want to make sure it's a win win for the both of you, however the one with the better knowledge of creative financing will ultimately come out on top. So it's very important that you have an understanding of your creative financing options so that you as the buyer or seller and not the other party can use the correct or best way to structure the deal.
	My lessons favors the buyer and will first point out their best approach and secondly the sellers approach. You as buyer or seller will have to determine the technique that works best for your situation. With that said let's get to it....Next time
	If you need any help structuring any type of deal give me a shout
	Bill

Stephanie Dupuis · Answer

In agreement with the above posters. Have savings for a downpay and reserves. Reserves are essential. It's likely you will need the reserves.

Robert Leonard · Answer

No cash, no credit cards, no line of credit, all means no way to pay for the unexpected if you figure out a "no money down" way to" jump in" to the business.  You really need to have your personal finances in order to avoid painting yourself into a corner.  Bad news travels faster now-a-days than it ever has.  If you get into a property in a subject to deal and find yourself unable to pay, do you think that won't get plastered all over the Internet and ruin your name?

Leverage (credit) is more powerful in real estate investing than in any other type investing the average person will ever encounter (I think commodity options is the only area leverage is more powerful?).  You are at a real disadvantage without it in this business.  That's why you should make it a priority to get yours in order.

You do not have to have 20% to put down on your first property, but you absolutely have to have some way to pay for the unexpected - always expect the unexpected.

Donovan H. · Answer

I agree with Brian here ...

You need to have reserves.  Don't tap yourself out purchasing the property.  There will inevitably be things that pop up even with the best or newest properties.  Also, what will you do if your tenant stops paying his rent a month after signing the lease?  Your bills don't stop because your tenant stops paying rent.  Evictions may take awhile through the court system and have costs of their own.  Plan ahead and have a substantial reserve.

Cal C. · Answer

100% loans can be beneficial but ONLY if the numbers make sense. However, it is absolutely imperative  you have access to funds to pay for any emergencies and there will be emergencies.  I just rehabbed a rental only to have to spend thousands more due to a burst pipe a few days later.

Is it smart to get your first property if you don't have downpayment money? Can it be done?

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