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10 WAYS TO BUY AN INVESTMENT PROPERTY WITH NO MONEY DOWN
Many people would like to invest in real estate but either they do not have enough money for a down payment or they do not want to lock their cash into a property purchase. It is possible to buy property with no money down.
1. Roll the down payment into the purchase price. Depending on your credit rating and lending history, some lenders will allow you to finance 100% of the purchase price. This will cause the interest rate and your payments to much higher than if you put money down. But, if you intend to sell the property quickly, it shouldn’t have much of an effect on your profit margin.
2. Negotiate a separate installment plan for the down payment. Negotiate a separate installment plan for the down payment. Sometimes the seller will allow you to pay the down payment on a monthly basis.
3. Trade something other than cash. This could include land, a car, a boat, jewelry or valuable collectibles. Find out what they want and need. Maybe you have, or can get, just what they are looking for. You could also trade services such as carpentry, auto mechanics, painting, dental work and other services that you can do for the seller over time.
4. Trade houses with the seller. Many professional investors acquire homes with no money down by trading one property for another. In some cases, they trade one large property for several smaller rentals. Property trading is also a legal way to avoid the capital gains associated with selling a property.
5. Get the seller to transfer their mortgage to you. This is a common occurrence in foreclosures where the homeowner is eager to sell and is willing to work with the buyer. You can do the deal as an assignment of contract and efficiently close the sale.
6. Apply for a loan assistance program. Talk to your bank, many lending institutions offer programs that allow buyers to put little to no money down on real estate purchases.
7. Find an investment partner. Look for an investment partner who will put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.
8. Find a property to rent-to-own or lease with an option to buy. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house and can get a bank loan then. Meanwhile, you can use the time to fix your credit and/or save for a down payment. Some contracts may put some or all of the rental amount towards the down payment.
9. Get owner financing or a land contract. Another option is to have the seller act as the bank. You make your payments, including interest, directly to the seller. Then after usually 3 to 5 years you make a lump sum payment to the seller. During this time, you should have enough equity to qualify for a standard bank loan.
10. Use a home equity line of credit from another property. If you have equity in another property, you could use that equity as a down payment on purchasing another investment property.
like Ryan said , (100% financing is possible with small local banks. My bank is giving me 100% of purchase price (including rehab money if the property is not ready to rent). Not a dime out of my pocket. All I have to do is keep it under 85% ARV since they are keeping the loans.)
I have been doing this one for about 15 years now, multiple banks , 15 and 20 year amortizations, 3 yr lock on interest rate. As long as i do my due diligence, renewal isn't a problem. I shoot for 70% ARV.
Thanks! I am working on my first deal and this information is extremely helpful. Thanks again 👍
Is anyone doing any of this in the pricier markets? Anyone in Seattle?
Fine ideas but most are not feasible or doable. I think it's an idea to find an equity partner who can come up with the down payment for a private or commercial lender, with ownership of the LLC divided in some form.
The first 11 properties that I bought were all zero down in one way or another.
90% bank financing, 10% private second
92% bank financing, 8% signature loan
97% bank financing, 3% signature loan
71% seller financing, 29% second mortgage on other property
66% mortgage assumption, 34% second mortgage on other property
80% bank mortgage, 11% seller credit, 9% signature loan
80% bank mortgage, 20% second mortgage on other property
100% signature loan
100% partner's funds
100% partner's funds
80% bank mortgage, 26% Section 1031 exchange, 4% seller credit
@John Stevenson Do you think these methods can also be applied to the other countries? Have you heard anyone who had done it there?
best advice ever! Motivated to start REIA in Sitka Alaska. Ready to listen, protect my investors and work work work!
Thanks again
I have myself in a tizzy....I am born and raised in NY but world traveled. I have only assigned properties over on Long Island in both Nassau and Suffolk. I was traveling back and forth to Florida in October of 2017 to see my Mom every week because she was terminal (not a pity thing I am getting there...), My mom died at the end of March 2018 and my dad died 3 weeks to the day after her (we weren't expecting him,...Doctors said a broken heart? It was and it was awful. I now live in Orlando as my full time residence and I cannot get myself to assign a property here EVEN AFTER my attorney and title comp said it was just fine...everything was in it's place!! I feel like a deer stuck in the headlight now. I did that one property and now I feel like I need a partner. Maybe because my teacher (taught my brokers class on L.I. ) was my partner but I'm being a big baby!! Any suggestions? Any partners?
David Krulac...that was a long time ago
#7 is the only one I would deal with. Be careful with over leverage using #10. #1 can work if you use an FHA to buy an owner occupant type of property, where you live in one of the units. You still have to put some money down.
Basically, real estate investing is not something for those who have no money. Something will go wrong in your career. Unforeseen capital expenditure. Tenant doesn't pay and you have to evict them.
Nice breakdown, eye opening. I would be interested to see how many people have had success with #4.
I've been successful at 100% financing (in a practical way) executing a BRRRR business plan through the combination of:
- Private money loan (high interest, but refinance out after the rehab)
- Personal loan or line of credit for the remaining balance (long term 2+ years, low interest ~5-6%, interest only)
This is a much more practical approach in my opinion, but is dependent on a few things:
- good credit
- not buying properties that would make my DTSR at a dangerous level...i.e. worse case scenario i can afford all payments
- income that supports the previous point
Just began reading about the BRRRR method, thanks a lot for all these tips.
@John Stevenson I ran across this post at the exact right time for me. Thank you for sharing! I hadn't considered requesting a installment plan for the down payment.
@David Krulac those deals are impressive - all from the same bank?
These 10 tips are all good and fine provided you do have liquidity and hopefully experience. If you try these while strapped for cash or not being experienced in the business, you could run yourself into a headache. Some more than others here.
Forgive me for my newbie question I'm really interested in wholesaling, what's the advantage to a seller to transfer their mortgage outside of a pending foreclosure?
Hard money or Private lending is an awesome way to get started. People new to investing in Real Estate may get scared by the interest rates but when you really understand how great of a tool Hard Money can be, its an awesome way to get your first few deals done. Experts also use Hard Money all the time. Its quick, easy and requires less criteria to qualify. As long as the rates are correctly calculated into your deal theres absolutely no reason not to.
@John Stevenson My latest creative acquisition includes a seller carry back of 90% LTV for 3-4 months while I rehab and stabilize the property. Once its tenanted, I plan to cash-out refi, pay the seller his interest and principal and ill be in it with no money or <$5K, 25% equity, and $200 month in net monthly income. BRRRR with a seller carry back twist!
@Jonathan Owens
Where is the resort property located?
Great information! Keep sharing...
LuAnn
@Vincent Ludegna my hard money lender will do 100 percent of purchase and 100 percent of rehab if the loan is under 65 percent of the ARV. It may be worth looking into. Also, you could do subject to or some other sort of creative seller financing. let me know if you need any other info.
