Does the "No cash No credit" financing really work??
Property Manager · san mateo, CA · Member since 2009 · 7 posts · 1 vote
Today I see a lot of montelongo, legrand, dc fawcet...They all preach no cash no credit. Let other people do this and that..creative financing. Is this all mumbo jumbo or can it be done? Have any of you done a creative financing deal where you didnt use your own cash or credit? Id love to hear.
Of course it is possible - that is how I got started in this biz - no cash and no credit. I found partners with cash and other partners with credit - I did all the work and split the profit 50/50 until I had enough to work on my own.
A lot of those guys also talk about a sub2 deal - where you find a distressed homeowner who needs to sell and you lock up their home on a sub2 deal and then you do a lease option with a buyer or sell to an investor and you make some cash in the middle.
You can search sub2 in this site for lots more info.
But yes - it can be done - but as others have said not the easiest way but a way lots of us started out.
To Answer Shawn's Question : Yes you can do no cash no credit on RE deals its called flipping perferablly with a trust ( Double/Simo I admit in socal the terms are thrown around to the point that it seems the same )
With that you can make alot more the just 3% or 6% commission on a deal.
I might be old school, but I dont think Sub2 is great for new investors. I think people's lives are tied to their homes in many cases, and during times like this you owe it to the seller to know what you are doing. We got into this mess because people were given loans with no money no credit for homes they should not have been able to afford.
Pick a type of investment you would like to focus on. Read a lot here on BP, in books, and talk to as many people as you can doing that type of work. Save your money. Then take action. There is nothing in this business that takes no money to do.
I really hate it when I hear about newbies opening up shop with no understanding of the business. I think it is great that people want to start, but slow down and learn people. Some may be able to start with no idea and get lucky. Most will fail. Give yourself the best odds you can and please undedrstand that when dealing with homeowners that you are not only representing yourself, but all real esate investors. Make us look good by doing what you say you are going to do.
I like your attitude Jeffrey! That is so true. I saw something above and assumed where the conversation was, sorry...I agree with Jeffrey, study and don't ever stop. Initially pick a strategy to make some money, but it very important to understand RE basics, if it's about land or buildings, you need to know it. The more you know, the better you can take advantage of what ever comes your way, not just one stategy.
I have made alot of money and never had a dollar in a deal, just knowing what to do with the situation. So, yes it is very possible to profit without a cash investment in quick flips. You'll need some money to hold properties. B
yes you can buy with no money down. I actually bought a 2-Family with no money down but did have credit at the time. I brought a partner into the equation that did have capital. Although this is not the suggested way to start. I would rather see someone with no money get involved in property management, selling investment properties or being a contractor on the properties. Build up your cash and cash flow then start buying property when you have credit, money and collatteral. You first have to learn how to save money or you will get yourself in big trouble. No money down with no credit is the reason why are banking system busted like it did. No money down is great to use when you have money and not when you have no money. That way you can use things as collateral. As for getting sued for backing out of a contract yes in fact you can get sued for specific performance but the tough part is acessing damaged cause by the person backing out of a contract. The appraised value can be used to help with this. I have sold Real Estate in Syracuse and over the years I have had people back out of Real Estate deals and no lawsuits have come out of it. It damages can be PROVED and the amount is high enough then it would be worth getting a lawyer involved. The way the contract is written then becomes very important. The way most contracts are written the is usually an out for the buy. i.e home inspection, lead risk assessment, due diligence period, approval of written leases, etc, there are many ways to build outs into the contract that make it fully legal to get out of a contract. Keep your earnest money deposit as low as possible if you are the buyer and at all costs do not give the earnest money deopit to the seller's represenatives. This conversation is all from experience I have had over the past 6 years.
Hi, as to contracts; I have made purchase contracts subject to me finding other investors/buyers within a set time frame, as long as a year. So the deal will either work or it won't.
Earnest money; While this won't work buying ORE/REOs, I have given an Earnest Money Note payable on the closing date.
Wholesaling: forcing you to find deals, that's pretty true. Wholesaling is a rather complex issue if you have no cash reserves, since you could get caught up and have to rehab yourself, if you don't get out. Estimating damages and rehabs is an art if you get down to cutting it thin. Another aspect that is not generally easy to do, is while finding properties is not a problem, finding the right buyer for a property is, especially if they have experience. I'm speaking of a new investor getting into this. It's pitting a novice against some old seasoned rehabber who only has to look at the property and scratch his head and say, "this is going to cost more than you think" and the novice will drop the price, there are so many issues to confront the newbie with that he might be working along time before anything is made. But, that's how you learn..
No cash, no credit and new to real estate? I'd say stay away from rehabs since you'll be dealing with pros, find someone who has had a decent property on the market and can't sell it. Tell them why it has not sold, needs updating (paint, carpet, little things, that's not a rehab) tell them they need to be out of the house and you'll sell it. They agree and do so. Get with your buddy who will do the minor things and the carpet shop to bill you at closing. Now flip it or sell it on an installment with enough down to pay hard costs and move the sellers one their way. You can take a slice of the down payment as well as the payments form the profit. These are easy to do, no big bucks at closing, no closing expenses for you, but you can turn several houses building up a monthly income. $2,500/3000 per deal. You can facilitate these deals with an option. You have several alternatives, get out of the way taking a small profit, stay in the deal and wrap it, paying your seller and your buyer pays you and if that's what you do, and you have done 5 or 6 deals, you have enough to payout one seller, or obtain a loan and buy one. It takes time and you need to be creative. You take an interest in a property with a motivated seller, facilitate a deal and stay between the two of them. I'm going to stop, but it's no money, no credit, no income and some knowledge. Bill
I am also with you Jeffrey. If you do a sub2 deal (or any deal for that matter) you have a moral if not legal obligation to do right by them. That includes keeping your word, making the payments you said you would make and not hanging them out to dry. That means having the cash to cover your obligations whether they were your fault or otherwise. This is another reason cash reserves are so important, especially when you have little experience and one mistake will put you on tilt. As you gain experience, you generally will have more cash reserves available to you as of course, ironically, all that experience means you should rarely need it for unforeseen circumstances. The key to any strategy is to understand its plusses and minuses and be fully prepared for both. Yes, this strategy is viable but not near as easy as it is sometimes portrayed.
Some excellent advice from all. Dealing with banks and default in general is a big pain in the a**. That is why I avoid default as much as possible. Too slow, too many regs and too much hassle. Just my way though, not necessarily the best way for everyone.
Good investing all
Mike C