3 Insider’s Secrets to Realistic No Money Down Real Estate Investing
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Any of us that have ever stayed up past midnight on a week night have been barraged with late night infomercials promising to tell us how to make millions in a few short weeks without using any money. The idea seems to be to good to be true. For the $39 educational offer they make it probably is. But there are 1,000’s of real real estate investors around this country that make good money without using any of their own cash or credit. Understanding three tactics and working hard could add your name to that list of savvy real estate investors.
Tactic Number 1 – No money down. If you are pitched the idea that you can buy real estate for pennies on the dollar and never have to give up a penny then you are probably being sold a bill of goods not worth the money. Yet it is very possible to invest in discounted properties without using any of your own money.
It took me a couple of years of buying properties and investing my savings at 10% down per house before I realized that at some point in time no matter how well I did I would run out of money. Either because all of my cash would be tied up in buy and hold homes making cash flow or I would get to the point that there were more deals coming in then I knew what to do with. Luckily for every one of us the supply of other people’s money (OPM) is virtually unlimited. Learn how to market your deals to other people with money to invest, either in their savings accounts or IRA’s and you will find that the no money down deals become possible, at least without any of your own money.
Tactic Number 2 – Bad Credit, No Credit, No Problem. Have you seen that pitch before? In today’s real estate investing market the number one problem investors face is the inability to get mortgages for investment properties. The fact is due to FHA guidelines it would be very difficult to get more than 10 properties in your name even with an 800 credit score and a boatload of cash in the bank.
Just like in our first tactic where we leverage other people’s money now we need to step it up and leverage other people’s credit (OPC). If you are thinking I don’t have a lot of friends and family with a bunch of money then start to think how many of them do you know that have decent credit? Enough to get a mortgage? Yes this number jumps quickly and now you can bring together your private money partners and your credit partners to fund and finance your deals even if you are three days out of bankruptcy and not even a penny to your name.
Tactic Number 3 – The biggest objection I get to using private money to fund deals is that the investor just does not know enough people with cash stores to bankroll a $200,000 house. Believe it or not my list of investors with this kind of cash is very small too. On the other hand do a survey of family and friends to find out how many of them have $5,000-$15,000 in savings or an IRA that are realizing very poor investment returns. You will be amazed to find this is most of them.
But how do I buy a house for $15,000? You probably don’t regardless of what you see on those government auction sites. What you can do is implement the tactic that brings this all together, a subject-to purchase. With this tactic we are taking over the deed to a home, the ownership rights, subject-to the existing mortgage. That means we are taking the responsibility of paying the mortgage and maintaing the property off of the hands of an often distressed homeowner. In return we are also taking over the ownership interest in the property along with any cash flow or future profits for selling the house.
Now we are leveraging the credit of the homeowner who already went through the trouble of getting the mortgage. Often times these homes are in pre-foreclosure and are behind on payments and usually in need of some light repairs. In walks our knight in shining armor, Uncle Louie. If Uncle Louie has the $11,000 to catch up the payments and do some paint and carpet we now have a great marketable home with none of our own money, none of our own credit and the homeowner gets rid of the pain being inflicted by their home. Of course Uncle Louie is getting a good market rate return for his investment of 10-15%. A WIN-WIN-WIN.
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