Zero Down Real Estate Investing

Zero Down Real Estate Investing



Zero Down Real Estate Investing
Zero down? Why would a​ seller want to​ walk away from closing with nothing? Well, they wouldn't, and​ that brings up the​ most important point about real estate investing with no downpayment: the​ seller almost always needs cash at​ closing, but it​ doesn't have to​ be YOUR cash .​
A Zero Down Example
I'm selling a​ small rental property right now, with payments of​ $400/month .​
The buyer has a​ good credit report, and​ the​ $5,000 downpayment covers closing costs and​ even a​ foreclosure, if​ necessary .​
So at​ this point, I​ don't care where he gets the​ downpayment .​
a​ $6000 cash advance on a​ low-interest credit card for​ example, would cost him about $135 per month, and​ give him enough for​ the​ downpayment and​ his closing costs.
In this case, with rent around $600 per month, he would be okay .​
In some cases, however, that extra $135 might cause negative cash-flow .​
So be sure that however you do it, the​ numbers work .​
By the​ way, I​ would have set the​ payments at​ $350, if​ he had asked, because it's the​ price and​ the​ interest rate that are important to​ me.
Other Zero Downpayment Methods
While there are sellers (like myself) that are able to​ offer terms and​ low downpayments, usually you have to​ find a​ way to​ get at​ least 70% of​ the​ price to​ them in​ cash .​
Think in​ terms of​ how to​ get a​ primary loan, then how to​ raise the​ money for​ the​ remainder .​
a​ couple examples follow.
Some banks still do no doc loans, meaning they don't require verification of​ income, source of​ downpayment, etc .​
They generally loan only 70% to​ 80% of​ the​ property value, but if​ the​ seller is​ willing to​ take a​ second mortgage from you for​ the​ other 20% to​ 30%, you are in​ with no money down .​
The seller gets 70% or​ 80% in​ cash, plus payments for​ years to​ come .​
You'll have two payments, of​ course, so be sure the​ numbers work.
You can borrow against your home or​ other property to​ come up with downpayment money .​
If you borrow for​ a​ vacation, and​ leave whatever you don't spend in​ your checking account for​ a​ while, you can use it​ without violating bankers rules about borrowing for​ a​ downpayment.
Even if​ you live in​ a​ small town, there are usually a​ few note buyers .​
These are investors that buy land contracts, mortgage loans and​ other notes at​ a​ discount .​
If a​ seller takes a​ purchase money mortgage from you for​ $100,000, for​ example, a​ note buyer might pay him $85,000 for​ it .​
So how does that help you or​ him?
An example: a​ seller prices his property at​ $195,000, and​ expects to​ sell it​ for​ $180,000 .​
You offer $205,000 in​ the​ form of​ a​ mortgage for​ $160,000, and​ another for​ $50,000 .​
You have arranged for​ the​ sale of​ the​ first mortgage at​ closing for​ $136,000 to​ a​ note buyer .​
The seller gets that cash now, plus payments from you on the​ second loan for​ $50,000 .​
Notice that this adds up to​ $186,000, which is​ more than he expected to​ get out of​ the​ deal.
These are just some of​ the​ ways you can buy with zero down .​
Real estate investing is​ about making the​ deal work for​ all parties .​
Find a​ way to​ get what you want, and​ get the​ seller what he wants .​
That is​ more important than having big cash on hand.




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