How Can I Buy A Great Deal Without Any Money?

[Brian Bernardo]

I am completely new to real estate but I've been reading books and articles on how to start. I have no money what so ever, but I have a good credit score. I live in New York and I am hoping to start in rental real estate. I keep looking at real estates that a for sale and keeping an eye out on their prices. New York is very expensive though. A duplex apartment (2 Floor) could cost over $900,000. If I get mortgage or Loan, even at a 5% down payment, that's over $45,000! Which I don't have!

So I recently found an $800,000 duplex that is being sold by the owner. The place is completely renovated by him, and he's been living there for over 30 years. Which I think is the perfect deal to start my venture in Real Estate.

My plan is to introduce seller financing to him so I can get a low down payment as well as a low monthly payment. He can increase the interest rate and maybe increase the length of the term. Seems like a win-win for both of us, if he doesn't need the money in full. He gets more money, and if I default/can't pay, he keeps the house and all the money I've paid so far, right?

I hope to house hack, living in the first floor (2 bedroom) and renting out the second floor (2 bedroom). I think I can break even with monthly expenses (monthly loan payment, monthly tax, and maintenance), if i pay out of my own pocket along with the rental income. (Btw, anyone from the Queens, NY region know how much monthly property taxes are? I estimated $6,000-7,000 annually, base on other properties I've seen).

My problem is, If the seller ask for at least 5% down, where would I get the money? If I ask an investor to loan me the money, how would that work? That means I would be paying the seller of the house plus the investor, which doesn't work cause I just break even paying the seller and monthly cost as it is.

Any tips, advice and comments are greatly appreciated. I'm new and Have no experience. Any input on what I'm doing wrong would be greatly appreciated!

- Brian

[Abel Curiel]

Hey @Brian Bernardo,

In theory, this scenario can work. The numbers, however, may have to be a bit different. 

A duplex in Queens in the 800K range will likely get you anywhere from $1,600-2,000/month from each unit. Being that you're in the other unit, you'd be paying over $2,000/month yourself - NOT including taxes, utilities and capex. 

Aside from this, you are talking about a very competitive price range in Queens. You'd likely have to pay a premium to hold onto a deal like this with little-no money down. Sellers are more incentivized to take on a conventional borrower or cash buyer- quicker closing, less risk of the deal falling through, etc.

This doesn't mean that your overall vision is impossible. House-hacking is a solid strategy. I'd even find someone to go in on the deal with you. Maybe someone with so-so credit but enough $ to put towards down payment and closing costs. 

I hope this helps!

Abel