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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.
Originally posted by @Charlotte Dunford:@Corey Edwards My business had revenue and the line of credit was solely revenue based.
Thanks Jingwen. I figured there was something the bank used to base the line of credit on.
Are very small amounts down on property investment worth your time and hassle? Sometimes I feel like stringing together some little wins will help encourage and grow some confidence in investing in real estate as opposed to not even trying. I'm searching for an online stage that lets you open the advantages of flipping homes or owning investment properties, without the downsides. With little money down, is there a way I can invest in an arrangement of properties that produce predictable quarterly income and upside potential? Any ideas...
My favorite way is to find deals I can buy at 35-40% (or more) off of current market value and use the BRRRR strategy. In my market these types of deals come up all the time. I use a LOC from the bank or my own cash and repeat. To use a LOC all you need is a great relationship with a local bank and likely a strong financial background and/or proven expertise in what you are trying to do. I currently have a dozen deals going right now using the LOC and cash strategy to BRRRR the properties. At the end of every deal I have none of my own money tied up (when I use the LOC) or I get 100%, or more, of my original cash back (if my own cash is used).
The techniques can work. There seems to be an implied idea that no money down scenarios are for people that don't have money to invest. Most no money down scenarios are strongest when executed by experienced investors that have learned to buy in a traditional manner and succeed. The riskiest and most dangerous investing tends to be with people that don't have money and try to get into real estate with no money down.
@John Stevenson these are excellent tips on how to invest with zero money down. I would say HELOC is the most popular one out of the 10 as it is convenient and simple. Thank you for sharing these with us.
as per #8 and #9
I am a newbie investor, where I've found a potential deal. Elderly lady is selling her 10 investment properties. Says most are elderly long term tenants. Individually priced the homes combine too $847,000 with rents of $9150/month, $110,000K/yr. Combined assessments $556,100.....now how could one prepare a creative offer for this. They are simply wanting to get out, and walkaway from the headaches of managing these properties. How can I step in and take that over? What sort of offer could a guy present in a case like this? Thanks, appreciate any feedback.
Ryan
I use option 1 quite often!
Excellent list,
John Stevenson,
I've done numbers 1, 2., and 5 and now getting ready to do number 9. A land sale. The land sale has the benefit to the seller of lowering his Capital gains tax rate since he will not receive all in one Tex year and benefits me by postponing reassessment of property taxes until it closes.I've bought 3 properties over the years with Zero down so will have fun this next few years adding more with no money down.
Originally posted by @Travis Hanson:My favorite way is to find deals I can buy at 35-40% (or more) off of current market value and use the BRRRR strategy. In my market these types of deals come up all the time. I use a LOC from the bank or my own cash and repeat. To use a LOC all you need is a great relationship with a local bank and likely a strong financial background and/or proven expertise in what you are trying to do. I currently have a dozen deals going right now using the LOC and cash strategy to BRRRR the properties. At the end of every deal I have none of my own money tied up (when I use the LOC) or I get 100%, or more, of my original cash back (if my own cash is used).
does it have to be with a local bank or can it be mortgage broker also that can find a bank that will do something similar?
Anthony, I use only local banks in my community. I have yet to use a bank outside of my community or hard money or fed money.
Originally posted by @David Krulac: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
whats a signature loan?
@Anthony Liguori A Signature Loan is like an unsecured line of credit. It is un-collaterized and is not a mortgage on any real estate that you own. Therefore you can get one of these loans even if you you don't own ANY real estate. So its a perfect alternative for new investors. The loan is based on your good credit, your income and your "Signature", therefore the name. They places that have these loans are typically credit unions. Some that I've seen have these Signature Loans for $10,000 to $75,000.
Originally posted by @David Krulac:@Anthony Liguori A Signature Loan is like an unsecured line of credit. It is un-collaterized and is not a mortgage on any real estate that you own. Therefore you can get one of these loans even if you you don't own ANY real estate. So its a perfect alternative for new investors. The loan is based on your good credit, your income and your "Signature", therefore the name. They places that have these loans are typically credit unions. Some that I've seen have these Signature Loans for $10,000 to $75,000.
So you would only be charged interest based on whatever you borrow ? And does it have to be a local credit union or any credit union out of state ... is it similar to a HELOC except it's not against your property. Almost like a personal line of credit ?
@Anthony Liguori you got it! its like a line of credit, no interest until you actually borrow the money. And it is easy, you go to the teller its like withdrawing money from your own checking/savings account. we have borrowed for down payments, rehab/repairs and paid back, then borrowed many successive times after without any new paperwork or approval.
Originally posted by @David Krulac:@Anthony Liguori you got it! its like a line of credit, no interest until you actually borrow the money. And it is easy, you go to the teller its like withdrawing money from your own checking/savings account. we have borrowed for down payments, rehab/repairs and paid back, then borrowed many successive times after without any new paperwork or approval.
So this is a thing just credit unions do ? And can it be an out of state or local?
Originally posted by @David Krulac:@Anthony Liguori you got it! its like a line of credit, no interest until you actually borrow the money. And it is easy, you go to the teller its like withdrawing money from your own checking/savings account. we have borrowed for down payments, rehab/repairs and paid back, then borrowed many successive times after without any new paperwork or approval.
You can potentially eliminate hard money lenders or private lenders if you have enough in this signature loan / line or credit
1. A bank could also do it but most banks don't. If you go to a bank try a local or regional bank with brick and mortar offices locally.
2. any bank or credit union may do it either local or out of state, but not every lender does this.
3. the last time i looked the interest rate was 8.99% at one lender. so the interest rate is not cheap, and I think it is best used for short term money. And there is private money that is cheaper interest, like maybe 5 or 6% and possible for longer terms. Particulally if you are borrowing from a private individual or an IRA or 401K where you're competing with bank rates like sub 1 or 2% even on CDs.
4. because of the high interest rates for hard money, it should be a last resort option, I've seen as high as 12% plus 5 points, that's a steep price to pay
as you can see I've used Signature Loan extensively:
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
Have never had the patience to use a Bank, most deals needed quick closing and Banks would delay or kill the deals.
Have had one Wrap Around all-inclusive trust deed from a Builder on a new condo. he needed to sell all units in Phase one by end of the week to get his investors on board got Phase two of development.
Next was a quick claim deed from a guy getting tired of being a landlord, he planned on letting it go back to the bank so had to jump in to save his credit
Third I had an investor for a property to Fix up. it was slipping into forclosure and only had 6 days to close,
4th has a multi Family 4 plex owner had in the family for 55 years so no mortgage. the owner did not want to continue owning and did not want to pay high capital gains so we did a structured land sale with owner carrying paper for 5 years with one payment per year to keep his capital gains at a minimum, This year 2020 will be looking for others soon with the economy tanking.
had never considered #10 to borrow against another property to use to buy a zero down deal. But plan on doing one someday soon.
@Kyle J. FHA loans used to be assumable. Not sure if they still are. I don't know about conventional mortgages. It likely depends on the originator and possibly when the note was originated.
Make it clear for first time buyers to confusing
Originally posted by @Dell J.:using a personal loan to invest in the rust belt areas
How did this work out for you? And what banks specifically did you use?
@Ryan B. Your mention is the second times ive seen this. What is the name? Do I just walk into the bank and ask about the different mortgages they offer, any prereqs?
In my personal experience, if you have to go extremely creative to come up with money to purchase a property, it may just not be the time for you yet. Getting into these complex scenarios is never a good idea. You can end up in financial trouble very easily. I'd say if you don't have the money to start, focus on getting that money by working your butt off and saving the cash to begin. You don't really need that much money to start! Even getting a side gig like mowing lawn, washing cars, delivering food can put $10k in your pocket in a few months and then you can start investing in real estate with your own cash.
Kinda think the nothing-down is a bit mis-leading. You'll need some money down in 99.9% of cases. You also need to do the math. If you're truly nothing down, your debt will eat up more of your NOI.
Maybe FL is different (I'm in OR), but the closest I've seen is a seller willing to do carry-back financing.