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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.
There is a workshop on Lease Options in Troy next week- It would give those that are interested a better understanding of some creative financing strategies for homes. MichiganRealEstateInvestors .com or call 248-three nine four-0150
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Real Estate Agent MI (#222005)
- Wendy Patton
I would find out what the is seller position do they really want a large tax or would they like a monthly income, or become even a lender. It is all about being a deal maker.
In a recent podcast, Gabriel Hamel mentioned that "you don't have a money problem, you have a networking problem."
#7 is the most important skill someone can learn is raising money.
There are some very interesting and creative ideas here. I have one question...What percentage of investment deals closed do you think are done with No Money Down? I would love to hear feedback from this group?
I hadn't realized that #2 was an option. Thank you!
great advice
Michael Krupp - It depends on how you define No Money Down (NMD). If you define (NMD)
as $0 being involved in the down pmt., I'd say it's a relatively low %, but, if like me, you define (NMD) as $0 of MY MONEY being involved in the down pmt., I'd say it's a much higher %.
I, and many others I know, have done many, many deals using none of OUR money for the down pmt.
I love Brandon's book of investing with low or no money down on this topic!
How does this one work? Say I want to buy this house with a mortgage on it. Seller transfers. Do I pay him the amount of the mortgage? That doesn't help me. How does seller get full value? And of what advantage is it to me if I'm still paying full price for the home? The mortgage and remainder? Seller wants full price so...? I don't get it.
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.
Originally posted by @Nicole A.:@Shadonna N. I brought my deal showing the numbers (my top purchase price that I wouldn't go above, taxes, rent income, cash flow, etc) to a guy I know that has cash on hand. I knew he was looking to get more return on his cash than whatever it was getting at that point in time. So when I showed him I knew what I was doing (by showing him the numbers), he was happy to work with me. Sometimes you just gotta look for someone you know that has some cash on hand.
Hi Shandonna, by chance can you show me how your number works with this deal? I'm very interested in this. I'm also a newbie in RE
Originally posted by @Ryan Deasy:@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.
This is a great forum. thanks guys for having this talk. I'm taking in all I can and trying to find all the ways to play the money game when it comes to creative financing.
Can the bank call the note due in full if the owner attempts to assign the mortgage without the bank's permission? I was told that all bank mortgages have a due of sale clause attached.
Great info! I always try to keep my buyers informed as well about all the financial strategies of them getting into a home with little to no money. Especially when upfront down payments are hefty for the higher price range and one wrong financial move could cripple somebody. Helps keep more cash on hand for other investments, repairs, emergenices, etc. Always good to use best possible leverage that makes sense!
What a great thread! Many of these strategies involve finding motivated sellers. Marketing for off market properties owned by motivated sellers is a great way to find deals that may require you to put no money down. You can send letters to or call on properties that have distress, or buy lists of sellers with pain points- which creates their motivation to sell. By being a problem solver and helping relieve that pain point for a motivated seller you can negotiate really favorable terms - as long as the deal is a win-win. I have used lease-option/partner combos, seller financed/partner combos, and 100% seller financing to make deals work. If you help the seller get what they need you can get the financing and terms that you want. Keep in mind you may have to pay closing costs, or an option fee, or for the marketing to generate the lead. But these costs are SO low compared to saving for a down payment and paying 20% or more up front.
Another great option I have used is the VA loan, which is a loan backed by the Department of Veterans Affairs that allows active duty military, veterans, and even spouses of veterans to get 100% financing on a primary residence. Combine that with a house hack that pays your mortgage AND cash flows and you have gotten into a deal for no money down that pays you each month (it's very nice). With the VA loan, you can even negotiate that the seller pays the closing costs. So you can truly get into a home for no money out of pocket.
Originally posted by @Tony Lee:Originally posted by @Nicole A.:@Shadonna N. I brought my deal showing the numbers (my top purchase price that I wouldn't go above, taxes, rent income, cash flow, etc) to a guy I know that has cash on hand. I knew he was looking to get more return on his cash than whatever it was getting at that point in time. So when I showed him I knew what I was doing (by showing him the numbers), he was happy to work with me. Sometimes you just gotta look for someone you know that has some cash on hand.
Hi Shandonna, by chance can you show me how your number works with this deal? I'm very interested in this. I'm also a newbie in RE
@Tony Lee here are some actual numbers of a deal I've done (I've done lots of these)
Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Financing Needed
@Gary Houck
Any property less than 5 units will be considered a residential loan. 5 units and more will be a commercial loan.
I haven't read the entire thread page for page but the term "no money down" are investors not including earnest money, a home inspection and appraisal?
Originally posted by @Harrison Barber:I haven't read the entire thread page for page but the term "no money down" are investors not including earnest money, a home inspection and appraisal?
It isn't safe to do a "no money down" unless you have access to cash. This isn't for people who have "no money", it's just a way to use the least amount of your money so you can buy multiple properties quickly. And that is only good if you have access to cash and if the properties are cash flowing. For instance, you can team up with a partner who has money and funds the deal and then you can say "it's no money down "for me", but it still does require some money. It just doesn't involve a bank.
It's marketing, just like calling a hamburger a "Whopper", what the heck is a "Whopper"?
In my experience so far I cannot find any sellers interested in holding the paper. Especially for residential 1 to 4 families. I think this becomes more viable with commercial property where mortgagor is usually a business verses some random individual. It takes a lot of trust to lend money / hold the paper. You want to know who you are dealing with.
Ways I've actually done deals with. Most are not no-money down, but are low money down.
1. Seller financing with 10% down.
2. Business line of credit with $0 of my own money out of pocket.
In off market deals in which there is a good amount of equity (i.e. purchase price is 80% of value), I have worked with several deal lenders willing to take second positions to cover the remaining 10-20% of the purchase price not funded by the primary lender.
Originally posted by @Charlotte Dunford:Jingwen, did your business have established credit already or did you use your personal credit to get the line of credit?Ways I've actually done deals with. Most are not no-money down, but are low money down.
1. Seller financing with 10% down.
2. Business line of credit with $0 of my own money out of pocket.
Originally posted by @Dale Osborn:How many of these have you actually done a deal with?
i only put 2500 into 175000 loan. possible to do it for less too but im in a hurry and had the money.
@Corey Edwards My business had revenue and the line of credit was solely revenue based.