If youve read my article Purchasing Property With No Money Down. . . todays article may seem a bit conflicting. Bear with me, though, and youll see that it is not. In Purchasing Property With No Money Down. . ., I explain how buying up property at inflated values at a break-neck pace is no way to be successful in real estate. I explain how this is a form of investment real estate finance that is possible but not advisable. In this piece, Id like to express that buying property with no money out of your pocket can actually happen and can be a great technique, if its done properly. Lets suppose you find a house that youre interested in purchasing as investment real estate. The owner, who also uses the real estate as investment property wants to get out quickly. This is a perfect opportunity for you to get the house with no money down. Note, look for ads that say seller financing or motivated seller to find these types of deals. In lieu of conventional bank financing, you may offer the seller his exact sales price, if he agrees to finance the sale for you. Before going this route, ask him if hes willing to take a considerable amount less than his asking price; if hes motivated, hell likely say yes, assuming hes going to get a bank check. Now, you come in with much more money, but you ask him to finance the loan. Heres where salesmanship is critical. Offer him a deal that he cant pass. If hes selling for $100,000 but was willing to take $88,000, youll give him his entire asking price of $100,000 with very special terms. Although you amortize the loan over 30 years, you promise him that youll pay him off in three years or less. Meanwhile, youll pay him interest only payments on the note at 8 or 9 percent. Explain to him how hell make all of this money on top of the $100,000, because youre not paying down the note with your monthly installments. Because youre giving him such a great deal, you will not pay him anything as a down payment. Now, you may be thinking this doesnt look like a good deal for you. Heres how you make it a terrific deal. The second you close the deal with the seller, you stick a for sale sign in the yard, announcing that the Owner will finance. Now, you sell the house for $110,000. You take a $5,000 down payment, and you take interest-only payments on $105,000 at 8 or 9 percent interest. You are making more than you have to pay the seller, plus you have the $5,000 in your pocket. This is truly a sweet, No Money Down investment real estate deal. NOTE: if the seller insists on a down payment, you offer him the $5,000 you plan to collect from your buyer. Be sure to get him to allow you to defer the down payment for three months. This gives you time to sell, collect the 5k and pass it along to him. This isnt as sweet as pocketing the $5,000 yourself, but its still a no money down deal. |
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