How I Am Buying 20+ Houses No Money Down - Week 1

[Wendell De Guzman]

Week 1: I am buying 20+ houses in several suburbs in Chicagoland. Due to the fact that this is a LIVE deal, I cannot disclose all the details in a public forum. I will disclose what will be helpful to BP Nation specially with regard to how I am buying 20+ houses with no money down. This level of education is something you will never get from a real estate guru because this stuff is real and happening LIVE in front of your eyes!

The whole transaction is set to close in 90 days. Here are some details about these houses and later on, I will outline the over-all plan to buy all 20+ houses with me putting up NOT A SINGLE DIME of my own money in the deal. Every week, I will give you BP Nation an update - both the good and the not-so-good and you will LEARN with me.

DETAILS About these Houses:

1. Mostly 3 bedrooms, in several suburbs that appreciated more than +20% in the past 2 years. These suburbs are what I classify as C and B- areas. Here's my description of A, B, C, D and F areas:

2. These houses are rented an average of $1300/month and their market value is around $130,000 per house. So, yes - they fit the 1% rule (some of the houses are better, some are worse but these are the average numbers)

3. All these houses are rented, some are section 8 and rents are increasing. Properties are well managed and according to the seller, none of them need any rehab. Over the next couple of weeks, we will confirm this.

4. What's nice is that the seller is offering us GREAT seller financing terms on a second mortgage - which is less than what conventional mortgages charge (yes - lower than 4.75%!). The downside is - I am buying them close to market value (I still have equity but not what I am used to). But I ran the numbers and it makes sense to buy because of the way I will exit with the GREAT seller financing in place. See below.

How I Intend to Buy These Houses with NO Money or No Cash Coming from Me

1. My plan is to SELL some of the houses - in enough number so when I do, the amount of seller financing will be the only debt on the houses I keep. Since this is still a LIVE deal, I cannot share the actual numbers in a public forum but I might do so if you PM me. Anyway, here is an example:

Purchase price: $2M, seller financing $500K, let's just say there are 20 houses or each house is being acquired for $100K each.

So how many houses should I sell to have enough houses under the seller second? Here's a little algebra for you (don't worry - even a fifth grader can do this - LOL):

x = number of houses I need to sell

20-x = houses I get to keep

Let's say I sell the houses at some discount and by the time I pay the expenses, I have a net sales proceed per house of $110K

So the equation is:

$1.5M = x * $110K; x =13.63 or 14 houses

This means that if I can sell 14 houses, I get to keep 6 houses with $500K seller financing which is better than what the banks offer. In theory, if I can sell the houses and line up the buyers for each house, I can close them simultaneously with when I buy them. In other words, I can wholesale 14 - theoretically. However, in actual practice, specially if I have to sell each house individually to each buyer (so I have 14 buyers), getting 14 closings to sell the houses to coincide exactly to the day I close to buy them is probably not going to happen. So, I need #2 below:

2. Get a private lender that can raise (in the above example) $1.5M. Downside is they charge 12% p.a. and can fund 80% of the purchase price and they charge a 20% back-end. Arggh! This is very expensive money. I am also looking for cheaper money than that.

3. Raise $300K (or 20% of what I need) from my network of private investors.

So there it is - BP Nation. I might fail and the whole deal may not close. I might not be able to fund it for some goofy reasons of the private lender or through our due diligence, we find the property is not as good as the seller portrayed it. Whatever it is, I want to document this LIVE for all the world - specially BP Nation to see. Hope you will learn a lot and learn together with me.

If I succeed, then you will learn together with me and hope you get inspired in the process. If I can buy 20+ houses with no cash coming from me - it makes buying 1 house with no cash out of your pocket way easier isn't it :-)

I am also open to suggestions on what else I can do or options I can explore to get these deals with no cash coming from my pocket. For example, is there a wholesaler out there who was able to wholesale BULK properties? Maybe I can wholesale (using the numbers above), 14 houses to one buyer so I can keep 6? What other options or ideas do you have BP Nation?