No Money Down - How To Buy Property With Nothing Down
By Andrew Larder
If you have ever watched TV after about 11:30 at night, you've seen people talking about courses on buying real estate with no money down. They show vacation paradises, gorgeous girls, fancy cars, and huge mansions. All of this is promised to you if you buy their course on making a million with nothing! If you want you can spend "only three payments of $99.99" to find out about this exciting area...OR...I'll just tell you for FREE!
One thing I must mention first, however, is that ANY information, combined with NO action, produces NO result. If I came over to your house and showed you everything in person and answered all of your questions, and then you did NOTHING.....it was a waste of time. Yours and mine!! On the other hand, if you combine information with hard work, persistence and, most of all, GUTS, you will be successful, whether you buy the courses, read the books for free at the library, or get the information from me, right here!
I mentioned GUTS because there's a price to be paid for everything. If you had a million dollars, you could buy an apartment building without hardly any difficulty. Just pick out one that you liked, had a good return, and passed a building inspection.
If you DON'T have a million dollars, what are you to do? Well get ready for some hard work, searching for the right deal. Get ready to have a whole slew of offers rejected, and maybe even laughed at. Get ready to hear some pompous real estate agent tell you (as one told me) "Son, I've been in the real estate business for thirty years now, and let me tell you, there's no such thing as a no money down deal." Get ready to work on a deal and spend time on it only to have it collapse.
You're going to put in your down payment in the form of "brain sweat equity". You're going to pay by acquiring more knowledge than others in the area of creative real estate, and by searching long and hard to find MOTIVATED sellers, ones who want to get rid of their properties desperately and therefore are willing to help you out. Most of all, you're going to pay by enduring the inevitable "start-up glitches" that ANY business or enterprise has. If it was easy to do, then everybody would be doing it, and there would be no properties left! It is this difficulty that makes it EASY, once you know what you are doing!!
OK, so here we go, but first you need to know ONE thing: IN REAL ESTATE EVERYTHING IS NEGOTIABLE!! Let me say that again, because it is the linchpin of the way creative real estate works--in real estate EVERYTHING is negotiable!
What does that mean? Are there any boundaries? NO!! Can you get someone to carry an agreement for sale for 25 years with little or no money down and no credit check? YES!! Are there ten ads in the paper offering just such an agreement, or one? Probably none! What does that mean? EVERYTHING is negotiable! If you find a motivated seller, one who is paying every month to own that property, one who doesn't have the skills to fix it up, one who moved out of town, or the country, then he MIGHT go for it! Notice that I did not say WILL go for it, but MIGHT!
Think of yourself when you had a car that you wanted to get rid of, because it was a piece of junk. If someone approached you and asked "how much?", you'd say "$1000, firm". But you knew deep inside that you just wanted to get rid of the headache!! And if you ever had to wait for a month or two with no one buying your car, suddenly you were not quite so firm on the price! And if the alternator had to be replaced before the car could run, pretty soon you just wanted it OUT of your hands!! NOW, you're ready to accept monthly payments, maybe hold something as security, etc. You just want it GONE!
It is the same with real estate properties! They go from being our pride and joy to an albatross around our necks--then we're ready to do WHATEVER it takes to get rid of it!
These people aren't going to jump up and down and say "I'm willing to take a no money down deal for my property"! They are going to be depressed, just like the fellow with a clunker in his back yard, sitting there for months. They are going to need some convincing, but if you find the "DON'T WANTER", the most difficult part is done! Then you make offers, look closely at each property to see if you can make a go of it (that's a whole other report!) if you can get the property--sometimes you don't want it either! Then it is just a matter of making offers, either in person, or through a realtor, until you find someone who is
ready to deal. The first time is the hardest, because no matter how many times I tell you (or the TV guys) that it CAN be done, you are going to think "not for me, not here in __________, not any more, not with my areas laws and zoning regulations, not with my personality, not with my brains, etc."
Don't you believe it! Look at all the people in the TV commercials-all types and shapes-they have ONE thing in common--they went out and DID IT!
ALL IT TAKES IS GUTS AND PERSEVERANCE!!
Here's the "stream of consciousness" of ideas on how to buy with $000.00 down, but keep in mind the whole time that IN REAL ESTATE EVERYTHING IS NEGOTIABLE!
1) The simplest way to buy with no money down is to get the seller to carry an agreement for sale. Monthly payments for 25 years are possible if the seller has no need for the money, and can be convinced to get his 6,7,8% return secured by his house instead of buying a 4% bond.
2) If you have good credit and want to put no money into a property, try a first mortgage, Vendor carries a big second for remainder. Seller gets , say 75%, and carries 25%.
3) Again with good credit, try first, smaller 2nd, and a Personal Line of Credit for remainder--especially if the gap is only $10-15,000. This can even work for low priced properties where the first mortgage is combined with a PLC for the remainder--be smart enough to go to another bank for PLC and tell them that you're going to make an invstment with money--and don't tell ANY bank that you're doing a no money down deal!
4) Payment over time-seller wants $5,000 down, for example. How about $400 per month for a year? You're still paying it, but over time-maybe the property will generate enough extra money to pay this!
5) Back taxes-I've done deals where I've taken over back taxes due--you can pay them off at your own speed, within reason!
6) Free rent-I've done deals where the seller had office space in the building and took 2 years free rent as down payment! Can also work for multi family.
7) Upon closing there are adjustments for that months rent--close on the 2nd or 3rd to maximize this-and for damage deposits, taxes to be paid for the period owned by seller, utility bills to be paid, etc. These can add up to a large amount!
8) Since the bank starts mortgage payments one month from closing, simply by paying an interest adjustment of 2 weeks allows you to use the first months rent and apply the second months rent to the mortgage payment.
9) Borrow on insurance policy, stocks, bonds, mutual funds, etc. If you allow the bank to secure the collateral they will be very accommodating.
10) Rack up your Visa, Mastercard and American Expres cards. A bit crazy, but I assume its a great investment!
11) Borrow from friends, relatives, boss (holiday pay?) Maybe even cut them in as partners!
12) Partners are a surefire way to get accepted for big bank loans, create enough down payments, etc. Always look for people who are interested in this area, and ask them what prevents them from buying investment properties. If its time, expertise, etc--then you have a fit! All that's preventing you is money--and you have found this great property haven't you?
13) Syndicate a group of people--say 9 investors and you get the last tenth for putting together the project--they will provide the financial strength for the loan, and maybe even the down payments! Anything is possible, remember? This is a lot of work to find these people, but VERY lucrative! Start with dentists and doctors, lawyers, everyone that you deal with!
14) Rent to buy--maybe you make payments for 3 years and then have built up the downpayment--meanwhile the property can go up in value, rents rise, and so on.
15) Option to buy--Seller keeps title and gets all revenue. You simply pay a sum for the right (make it REALLY legal!) to purchase the property at a certain sum in X years. There could be a trade for this option, example trade an item or service for the option.
16) Lets make trading an item or service for down payment its own idea!
17) Foreclosure property--maybe just before it goes into foreclosure you offer to keep up the payments and give seller SOMETHING, SOMETIME for his equity. (In a short while he's not getting anything!) Lots of work, lots of books and announcement services available.
18) Fix up damaged property--work deal with bank--example: as is it's worth $75,000, with clean up and fix up its worth 100,000--bank offers 75,000 mortgage based on future value--you have to do fix up--similar to sweat equity.
19) Lease property (ie an office building) from owner and sub lease it to tennants--must be very legal and usually needs strong rent up effort!
20) Pay someone to cosign for a loan
21) Get realtor to carry his commission as a note--they HATE this, but if its needed..
22) Balloon payment--nothing down, balance due in three years
23)Private money from mortgage brokers--ask them about it! High rate of interest, but..
24) Refinance property either before you assume it, or after
25) Find a partner where he takes writeoff for negative cash flow and you manage property--this can even work with buying your personal residence--investor is happy with $200 per month negative cash flow in return for your taking care of property, always a tennant (you) and investor splits profit when selling.
That's going to be enough to start some gears running in your head. The most important part is to keep trying, and to be creative. Combining parts of one idea and another, and always probing for what the seller wants will lead you to solutions. Always probe for ways to make both of you happy. Everyone wants all cash, right now--not everyone gets it! Think of the junker car in the back yard and look for ways to HELP the other person--they want to sell!
Most of all, keep looking! It is not a failure on your part if someone is clinging to the hope that they'll get a certain price, or certain terms. If they can-great!! If not, check back in a few months. Many properties are still sitting there and with a MUCH more receptive seller after they have the property "sitting in their backyard, rusting" (or racking up negative cash flow and maintenance and property management headaches). Try and try again!
Check online for new info and more opportunities, network with other investors, ads can be used to signal what you are looking to find, partners wanted, etc. Go to your public library for more real estate and business information. Keep your mind working and searching--keep looking for properties and more information--one idea can be worth a fortune to you --go to seminars when they come to your town--and the total adds up to the "Eureka!" screamed in the middle of the night.
Buying with a low down payment is obviously much easier than buying with absolutely nothing down, so be sure to save up your money to make it easier for you. Even a no money down deal can require cash for legal fees, closing costs, etc.
Best of luck!
Creative Real Estate Investing With Low Or No Money Down
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