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Forums » Creative Real Estate Financing » 10 WAYS TO BUY AN INVESTMENT PROPERTY WITH NO MONEY DOWN


18 posts by 14 users


Foreclosure Specialist · Miami Beach, Florida

Many people would like to invest in real estate but either they do not have enough money for a down payment or they do not want to lock their cash into a property purchase. It is possible to buy property with no money down.

1. Roll the down payment into the purchase price. Depending on your credit rating and lending history, some lenders will allow you to finance 100% of the purchase price. This will cause the interest rate and your payments to much higher than if you put money down. But, if you intend to sell the property quickly, it shouldn’t have much of an effect on your profit margin.

2. Negotiate a separate installment plan for the down payment. Negotiate a separate installment plan for the down payment. Sometimes the seller will allow you to pay the down payment on a monthly basis.

3. Trade something other than cash. This could include land, a car, a boat, jewelry or valuable collectibles. Find out what they want and need. Maybe you have, or can get, just what they are looking for. You could also trade services such as carpentry, auto mechanics, painting, dental work and other services that you can do for the seller over time.

4. Trade houses with the seller. Many professional investors acquire homes with no money down by trading one property for another. In some cases, they trade one large property for several smaller rentals. Property trading is also a legal way to avoid the capital gains associated with selling a property.

5. Get the seller to transfer their mortgage to you. This is a common occurrence in foreclosures where the homeowner is eager to sell and is willing to work with the buyer. You can do the deal as an assignment of contract and efficiently close the sale.

6. Apply for a loan assistance program. Talk to your bank, many lending institutions offer programs that allow buyers to put little to no money down on real estate purchases.

7. Find an investment partner. Look for an investment partner who will put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.

8. Find a property to rent-to-own or lease with an option to buy. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house and can get a bank loan then. Meanwhile, you can use the time to fix your credit and/or save for a down payment. Some contracts may put some or all of the rental amount towards the down payment.

9. Get owner financing or a land contract. Another option is to have the seller act as the bank. You make your payments, including interest, directly to the seller. Then after usually 3 to 5 years you make a lump sum payment to the seller. During this time, you should have enough equity to qualify for a standard bank loan.

10. Use a home equity line of credit from another property. If you have equity in another property, you could use that equity as a down payment on purchasing another investment property.

Mobile Home Investor · Spanaway, Washington

How many of these have you actually done a deal with?

Real Estate Investor · Northern, California

@John Stevenson I've bought a house using a version of #10. Though I didn't take out a HELOC. Since I had a house with no mortgage on it, I just took out a mortgage on it and got a check for the amount of the mortgage which I then used to buy another house. Worked out great.

As for the rest of your suggestions, I have to ask if you've ever actually used any/many of them? They just don't seem that likely to work nowadays.

For example, with #1, how many lenders are going to give you 100% of the purchase price for an investment property?

With #2, lenders usually want to know the source of your downpayment. I don't think they're going to allow the source of your down payment to result in additional payments to the seller.

With #5, have you run across many mortgages that are transferrable?

I guess anything is possible in theory. Just wondering how many of these are actually possible in reality.

Foreclosure Specialist · Miami Beach, Florida

This is a compilation from a bunch of different sources. There has been quite a few questions within the forum about how to pursue non-conventional funding. I was interested in opening up the topic for further discussion.

I am not saying that these will in anyway be the norm nor will work for most transactions, but once in a blue moon they may be able to be pulled off.

I encourage collaboration and any other creative financing options that have worked for others.

Mobile Home Investor · Spanaway, Washington

Here are some more compilations:

Deal Structures:
1. Delay the down payment.
2. Wholesale the deal
3. Pre-sell the property to a retail buyer
4. Joint Venture with the Seller.
5. Use a Hybrid Equity Split to make more on every deal.
6. Use Hard Money.
7. Use Private Money.
8. Use graduated payments to protect cash flow in the early years.
9. Use graduated prices to get a longer term.
10. Use a reverse credit for Seller to carry negative cash flow.
11. Turn the Seller into your Bank.
12. Combine subject to and Owner Carry financing.
13. Zero interest – zero payments loan.
14. If have to make payments – pay pure principal.
15. Call the payment a thank-you payment not an interest payment.
16. Let the interest accrue.
17. Ask for interest only payments.
18. Roll up monthly into quarterly, semi-annual or annual payments.
19. Pre-negotiate an extension or renewal of the loan.
20. Offer to cross collateralize.
21. Ask for seller subordination – pay Seller with borrowed money.

Nothing Down Techniques:
1. Seller as a Partner: Partners is a very last resort!
a. Raise the price – lower the terms.
b. Using talents (sweat equity), not money.
2. Realtor as a Partner: Raise the commission, reduce the cash.
3. Creditor as a Partner: Assume the Seller’s Obligations.
4. Renter as a Partner:
a. Use the rents and deposits.
b. Lease/Option:
5. Hard Money Lenders as a Partner: At all costs.
6. Mortgage Holder as a Partner: Discount yourself rich.
7. Property as a Partner: Split yourself rich using hidden assets.
8. Private Individual Partner: Pool their strengths with yours.
9. Buyers as a Partner: Flip yourself rich.

1. Have Realtor take commission over time.
2. Assume Seller’s obligations.
3. Prepaid rent as part of down payment.
4. Satisfaction of Seller’s needs.
5. First, Second, Third, Fourth, etc loans = All Paper.
6. Balloon down pmnt = some now, some x 6 mos, & Bal in 12 mos.
7. Use your talents – not your cash.
8. High monthly down payment.
9. Raise the sale price, but lower the terms.
0. Split the property. Sell part.
1. Defer the down payment with no mortgage payments.

Real Estate Investor · -, Illinois

100% financing is possible with small local banks. My bank is giving me 100% of purchase price (including rehab money if the property is not ready to rent). Not a dime out of my pocket. All I have to do is keep it under 85% ARV since they are keeping the loans.

Residential Landlord · Chicago, Illinois

What bank?

Real Estate Investor · -, Illinois

Athens State Bank. Very local to central Illinois, only has branches in two towns (each with only about 2500 people), doubt they would lend up your way.

I do all our banking with them, business, personal, kids, cd's etc.

Wholesaler · Riverside, California

My favorite way is to buy at 50% or below of ARV, borrow 60% from a private lender, use the extra cash to rehab the property and pocket the rest.. Tax free, because you don't pay taxes on borrowed money.

I also like subject to and using seller financing, or a combination of seller financing in 2nd position along with private money in first.

Foreclosure Specialist · Miami Beach, Florida

Originally posted by Aaron Mazzrillo:
My favorite way is to buy at 50% or below of ARV, borrow 60% from a private lender, use the extra cash to rehab the property and pocket the rest.. Tax free, because you don't pay taxes on borrowed money.

This is a great strategy here. Lender's love it because of the high equity position. It also works well for the investor because it leaves cash on hand. The low ARV makes for an almost guaranteed high yield when the property is flipped. The only challenge is finding the properties.


@Kyle J. , I own a duplex outright. I'm interested in how you got the mortgage on your place. What kind of mortgage was it, residential or commercial, and what where the terms, ect, ect ?

Trading property for property is a great way during these economical times. We would like to trade our mini resort for a nice house. Our place has curb appeal, but does need some work. One of us had a career change after purchasing, so we haven't rented out any guest rooms since 2009, but we do live in the main lodge section every summer for the past two years. Anyone interested in trading?

Residential Real Estate Agent · Colleyville, Texas

Aaron, I like your strategy. What private lender do you use?

SFR Investor · Wheat Ridge, Colorado

@Adam Lucart, private lenders are just that - private. Its someone you personally know. Anyone who advertises, or responds to ads is NOT a private lender. Usually, those are hard money lender who call themselves "private lenders". If you want to try to find one of those, you'll need to post in the Marketplace forum.

Jon Holdman, Flying Phoenix LLC

Real Estate Investor · Springfield, Missouri

Old thread, lots of stuff not worth the trouble commenting on, once in a blue moon, rare arrangements. This isn't touching on usable creative financing that can actually be accomplished by 99% .....

I'm from Missouri, Show Me!

First on Ryan's claim at 85%, notice he said he has CDs at this neighborhood state chartered bank. Loans are made with the right of set off, the only way to get past bank examiners over 80% LTV without PMI or an insured loan on RE. (Insured can be through economic development for example, so it's not a custoamary loan product for anyone off the street). If a small banks wants to make a loan that shows up on an exceptions list, so be it, they can, they don't go to jail.

Yes, I have had 100% funding before, different circumstances, collateral and banking history. A local bank here has a standard program at 125% LTV for doctors. Banks do make unsecured loans BTW. It's pretty irresponsbile IMO, to suggest on BP that such are usual or customary means to finance deals considering our general membership, I'd bet the mayor or my congressman here get's better loan terms than I do! Let's get back to reality. :)

Financexaminer@real estate investor dot com

Real Estate Investor · Columbia, Maryland

My creative way--which may not work for everyone--was to have a loan with an individual who has the cash for 25% down payment. We are a LLC and the bank I work with does commercial loans when a business is purchasing property, so they require 25% down.

However (!), the past two times I've done a mortgage, they don't look for any "vested funds". I literally was putting the cash in the account days before closing. So, like I said, works for some banks...try smaller banks.

As for the loan, I borrowed $20,000 and offered to pay the guy $100/month for 3 years. At the end of 3 years, I owe him the $20k back. We have a notarized Promissory Note, and after closing on the property, I file the loan with the County so it shows a lien on the property. This is just an extra step to make him feel secure.

I offer $100/month because it doesn't kill my cash flow, yet his money is making a lot more now than it was sitting in a bank account. I've told others about this and others are interested in doing this deal with me too! Also, before I buy, I make sure the property has enough cash flow where I can save plenty of money to have at least close to the $20k after 3 years. I'm working in Baltimore County.

· Aurora, Illinois

When you get the seller to assign the property to you, do you have to go through the same steps with the mortgage company as in purchasing a home?

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