No Money Down Real Estate Investing Secrets
You want to get into real estate - either for your personal use
or for investment purposes - but you just don't have the cash to
get started? Here is what you do to get started:
There is at least one technique that virtually anyone can use as
long as the property seller is willing to negotiate with you. To
be fair, not every seller will be interested in this concept.
Your best bet is to find a property that the owner has great
interest in selling, whether because of moving, divorce or
frustration with tenants.
In fact, if you are currently renting and thinking about using
this technique perhaps your landlord would be happy to help you
out.
HOW TO BUY WITH NO MONEY DOWN
There are a few variations that can be used depending on you and
your seller. Do they want the market price or are they just
eager to get out from the monthly payments - perhaps facing
foreclosure?
The simplest method is to take over their mortgage payments -
called 'assuming' the mortgage. You will need to be approved by
the original lender to assume the mortgage. If you cannot get
approved for an assumable mortgage you may also try a 'subject
to' assumption where you merely make payments while the property
remains in the seller's name.
WHAT IF THEY WANT A HIGHER PRICE?
You take over the original mortgage AND create a second mortgage
on the remaining cost of the house with the seller. Offer a
high, interest-only payment for a short period of time - 2 or 3
years. Instead of having the money sit in a bank they can be
collecting a high interest over 2 or 3 years with the remainder
due in full at the end of the term.
When the term ends you should be able to refinance the cost, or
you can sell. Unless you hit a real bad market the value of the
property should have risen in that time.
WHAT IF THERE'S NO MORTGAGE TO ASSUME?
Easy. Most mortgage lenders merely want to make a good
investment. While your local bank may still shy away there are
plenty of financial lenders that would love to make a deal.
Financiers like real estate. The mortgage is usually based on
60-70% of the VALUE of the property, so as long as they know
they get their money back in the value of the property if you
default, they don't care what kind of money you make. Complete
the deal with a second mortgage created with the seller. If you
default they can still foreclose on the property and sell it,
paying off the existing mortgage with the proceeds.
As you can see, it can be in the favor of a buyer and seller to
work together - especially if the seller is motivated. If they
can't wait for a sale, you can still give them their asking
price with a little flexibility on their part.