Creative Finance with no money

Sabrina Hill · 2017-03-23T04:00:47-07:00

Hello BP Family,I've read a few things and heard about people buying investments properties with little to no money. I want to know if anyone could give me any insight as to what I could do to make that happen for me. I am in a situation where I have no money and I'm rebuilding my credit. There is a duplex in my area (Orlando, FL) that has been foreclosed on in a pretty decent area and I am interested in it. Here's a snapshot of my situation:No moneyRebuilding creditVeteran with VA Home loan (although credit is not there)Are there any creative solutions for purchasing a duplex in my situation. Furthermore, is there a such thing as an investor purchasing a property cash and owner financing it to me? I understand with the latter part of that question they would want a profit involved of course and likely sell it to me for more than they pay for it obviously. Is that an option? Any tips and advice are appreciated!ThanksSabrina Hill

Account Closed

Investor · Fort Worth, TX · Member since 2017 · 20 posts · 6 votes

9y

I think the best plan would be to save until you have the downpayment and repair your credit. There are other options, but you don't want to be in a position where you obtain the property and lose it. That will ruin your credit further.

1 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Account Closed

Thank you Andrew. I was asking for more creative solutions other than save money, build credit. I want to know for my general knowledge and also to see if it is something that I could even do. Do you have any tips to contribute to that? :)

1 Reply

Account Closed

Investor · Fort Worth, TX · Member since 2017 · 20 posts · 6 votes

9y

Besides building credit and saving which I still highly advise, I would say the second best option would be to find a co-signer or co-applicant for the property.

2 Reply

Michael Henry

Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes

9y

@Sabrina Hill Repair your credit and then use your VA home loan. Work on looking at houses and seeing where you want to live. Once you know where you want to live and how much the property cost then you will know how much you need to save up for a down payment. The next step is to make the necessary sacrifices to reach your goal.

Good luck

0 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Michael Henry

Thank you for your input. However, as mentioned in the question, I was looking for more creative ways to finance. I know that it is out there and so I'm seeking tips or ideas about that. The typical "save money build credit" is not so creative but more so traditional. I wont need a down payment with the VA loan. I asking for creative ways of finance....I want to know for my own information as well as general knowledge. I'm pretty sure I know where I want to live being that I live here in the area. Any ideas on creative finance would be helpful....

Thanks..

1 Reply

Sean Phillips

New to Real Estate · Falls Church, VA · Member since 2016 · 51 posts · 23 votes

9y

Sabrina, You talked about owner financing. You need to have conversations with the owner? You can also look into partnering with another REI or family member, someone that has either the cash or the credit. The part about being creative is that you need to expand on what you know so that you can offer that creativity. In partnering what do you provide in the partnership? How will the investor get paid back, when. How is the investment secured for them? meaning are you giving a note on the property? Are you looking at house hacking this? Once your credit is better between 1-2 years ideally then looks to refinance the property to buy out your partner. And that is just one way. If you arent already you should look into Brandon Turners book in the book store

http://get.biggerpockets.com/nomoneydown/

The other thing to keep in mind is have the patience to understand that there will always be more deals. And after you have taken care of the Credit and have the connections and built your team then you will see them and get the rewards from that time between then and now.

3 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

9y

Since you are already driving a beater, eating pb&j's for lunch, brewing your own coffee and saving all you can anywhere you can...

A tired landlord that has been self-managing since Jesus was a boy could be in a position to offer you a seller-financed transaction. They do need some money for closing costs and some security you won't walk (mine usually require 10% DPs) but that's easier to get than the whole enchilada.

Obviously an REO will need the money, so you'll need a partner on this duplex. Some potential partners or lenders may come out of the woodwork here.

There is more money out there than deals in most areas, but partners/lenders will want some positives from you. We know you are broke with bad credit. What are some positives you will bring @Sabrina Hill?

5 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Sean Phillips

Thanks so much Sean, I appreciate your input so much and thank you for actually answering the creative part of the question instead of the typical "save money and build credit answer". Those are all useful tips. As far as partnering, how would that be possible with no money. What are other things that a partner may typically look for or do other investsors even do deals with people in my situation?

1 Reply

Sean Phillips

New to Real Estate · Falls Church, VA · Member since 2016 · 51 posts · 23 votes

9y

There are people out there that dont have them time nor the inclination to manage the property. They want to invest and get a better return than what the banks or stocks provide. There are many people in your network right now that have the capability to help. Professors, your MD and or OB/GYN. You can work on creating an investment club but be careful on soliciting for money. Seek the advice of an attorney. Get in tight with the people in the CFRI.

Regarding your situation some investor may partner with you if you bring them a deal. Just like the one you are talking about. What makes your deal good? What are your numbers and how did you get to them? In this particular case if you are talking to the owner you can place the house under "contract" and look to wholesale it. This can be a good starting point in getting "skin in the game". If the numbers are right the money will come to you. Being able to see a win-win when you dont make as much money as you would like is the case as the investor/partner provides the cash/credit and in some/most cases the experience.

You have to have a plan on getting the property but to also have one on getting out of the property. The later being more important. This is how you and your investor partner get out of the deal. I think when you can explain to anyone how and when they get there investment money back plus whatever return you or the deal offer. Then you can market the deal and the investment money will come. Some Questions that come to mind:

1. what is the amount you are asking for?

2. how will you guarantee my investment?

3. what is your plan? meaning buy and hold of fix and flip?

4. do you have estimates on the renovation cost? for rental? for selling?

5. When does the investor get the money back? How?

1 Reply

David Zheng

Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes

9y

As Sean and some other mentioned. Is not just credit and money...but credentials that you need. For an investor/owner to blindly trust someone with 0 experience and not so great credit on any first deal with all their own money or on a seller financed deal is extremely rare. You can throw comps and big numbers and fancy words all day, but with almost no skin in the game and no history...well you will end up seeing for yourself. The reason people say build credit and funds so often is because it is the path of least resistance (although slow) and proves the most successful. I know its not the answer you wanted to hear, but I've been down this creative mindset myself many times and still do. Getting a good credit family member is your next best bet

2 Reply

Marshall Martinez

Lender · Portland, OR · Member since 2015 · 87 posts · 31 votes

9y

@Sabrina Hill The good thing about VA loans is they are a lot more lenient on credit. Many lenders will go down to a 580.

1 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Marshall Martinez

Thanks for the response Marshall! Do you know the name of any lender companies off top?

0 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Steve Vaughan Thank you for your input although my situation isn't nearly that bad. I appreciate your tips :)

@David Zheng I see what you are saying here, the way you broke it down makes sense...yes the process is slow for sure but it may be my only sure fire way of getting closer to my goal. I really appreciate your thoughts and inputs

0 Reply

Account Closed

Frankfort, IL · Member since 2017 · 63 posts · 18 votes

9y

Brandon Turner wrote a book on every possible strategy for investing in real estate, "The Book on Investing in Real Estate With Low and No Money Down." It has chapters on wholesaling, hard money lending, private lending, etc.

As well, there are also multiple guides under the BP education tab that aid in education.

Also, at www.biggerpockets.com/books BP has put together a list of the 20 best real estate books, and some may have info to help you!

@Sabrina Hill

2 Reply

Marshall Martinez

Lender · Portland, OR · Member since 2015 · 87 posts · 31 votes

9y

Originally posted by @Sabrina Hill:

@Marshall Martinez

Thanks for the response Marshall! Do you know the name of any lender companies off top?

The majority of wholesale lenders do.

Your best option would be to contact a local mortgage broker that works with multiple lenders.

0 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Account Closed

I haven't thought about doing that. I will get on it. Thank you

0 Reply

Diane Loveridge

Real Estate Agent · Fort Lauderdale, FL · Member since 2017 · 7 posts · 5 votes

9y

Sabrina - learn everything you can, and gain some experience. Try working under another investor for a while, and learn everything from how to analyze a deal to how to patch and paint drywall. You'll want anyone who might consider lending to you to know that you can offer them a solid return on their investment.

For my first flip, I needed $15k to bridge the gap between the $25k I put down, and my hard money loan. I sent an email out to a bunch of friends offering them terms of 2 points and 10% interest for that 'bridge' loan, so to speak. Several people offered me the money, including a high school friend who I hadn't spoken to in 20 years. But he knew I'd been a realtor for ten years, and heck I think he just liked me.

It is much easier to lose money in this business than to make money when you don't have experience. Get as much as you can before going off on your own. Volunteer for someone else if you have to. Good luck!

2 Reply

Frank Trigoso

Investor · Miami, FL · Member since 2016 · 75 posts · 23 votes

9y

I am somewhat in the same position as you. You need to sell yourself (persuade) and the deal. Your skin in the game is that you will manage the deal (time is money). However, two units is not much of a bang for the investor to earn his/her money back. You need to find a deal that the numbers are conservative, value add play, and three exit strategies for the worse case scenarios. Do your best to make it hard for the investor to say no. Offer mortgage interest only, 65/35 of equity when sold (investor receives 65%), even share a % of cash flow if needed.

Yes, it is possible but you need to bring skin to the game and that is by bringing value to the deal besides just being able to find the deal.

You could use collateral of someone you may know to help support the LTV or show some skin in the game. Look into portfolio loans, homepath loans, or find a partnership. Real Estate is all about sales. You need to sell your deal and yourself. Sell or be sold.

0 Reply

Michael Henry

Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes

9y

Originally posted by @Sabrina Hill:

@Michael Henry

Thank you for your input. However, as mentioned in the question, I was looking for more creative ways to finance. I know that it is out there and so I'm seeking tips or ideas about that. The typical "save money build credit" is not so creative but more so traditional. I wont need a down payment with the VA loan. I asking for creative ways of finance....I want to know for my own information as well as general knowledge. I'm pretty sure I know where I want to live being that I live here in the area. Any ideas on creative finance would be helpful....

Thanks..

I see that you are very passionate about your goal. Some of this real estate information is dangerous because when used incorrectly it can be a very expensive mistake. So many time on this site when people ask a question you can get a response you don't like because we are genuinely looking out for your best interest. In addition, I think there is simplicity in "save money build credit" and is something to be long-cherished and shouldn't be overlooked too easily. There are sacrifice and discipline in saving money and building credit and through those sacrifices, you become a more disciplined real estate investor.

Sean Phillips gave a great response and I would just second what he wrote.

I truly wish you the best of luck

1 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

Michael Henry thanks for your response. I know that save money build credit is a sure way to get the best results. I was just wondering for general purpose. I always respect any response I was just looking for an answer to that burning question. I think everybody wants to know how to get started with no money lol. But I appreciate your input and I am excited to learn all I can here. Now question, what do you know or think about buying properties for the delinquent taxes and how would you go about doing such a thing??

0 Reply

Michael Henry

Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes

9y

@Sabrina Hill I can not speak intelligently on the topic of buying delinquent tax liens (a lien that is placed on a property by a municipality for delinquent taxes) mainly because WI statute does not allow it. In Milwaukee, WI the municipality forecloses for delinquent taxes and then takes possession of the property. I have purchased many of the latter but never of the former.

Ask that question as a new post make sure you say in Orlando, Fl and should get a lot of replies.

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Stanley Parsley

Investor · Chandler, AZ · Member since 2015 · 409 posts · 214 votes

9y

Sabrina

you have to go out and find the deal

make it happen

don't let people tell you no

get ahold of some private investors these can be found by talking to realestate agents, the city, the county, building sites

there are people out there that will work with you as long as you are persistent about finding the money to get a deal done

come up with differing ways to make a deal-

owner carry

rent to own

assume mortgage ect...

never be afraid of making a deal- once you get a contract signed on a deal you will be able to get the money-

try it it works

go find you a place- get a contract- go get financing, youll be amazed at whom will respond to a signed contract

enjoy

0 Reply

Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

9y

@Sabrina Hill , you've gotten a lot of great advice from some really great investors here. I'm going to jump on the save more, improve your credit bandwagon too.

The reason is unexpected problems. When you own real estate, there is ALWAYS an unexpected problem. It isn't always a HUGE problem, but if you have no money and bad credit, how can you fix the problem?

Let's say you purchase a property with 100% financing. Two weeks later, the AC dies completely. I think (not sure) that in FL you have to provide AC in a home, similar to a northern landlord being required to provide heat. How do you pay for a new AC system with no money and no credit?

What happens if you need to perform some plumbing repairs? Not as costly as AC, but still pretty pricey.

It isn't the actual purchase with no money that I'm concerned about for you, it's the repairs that can sink you.

You say your credit is bad, but you don't share the number. That's fine - you don't have to. But consider this, the FICO system - the most common credit scoring system - ranges from 300 to 850. But it skews toward the high end. Anything under 680+ is considered poor credit. When you get below 580, it's considered awful credit. It's actually better to have a 0 score than one below 550.

But save money, improve your credit doesn't mean that's the only thing you can be doing at the time. I would work on those two things in conjunction with any other ideas you have.

In a JV, usually both sides are bringing something to the table. What do you have to offer? Work on that pitch, while you're improving your credit and saving money.

[email protected]Podcast Guest on Show #261

2 Reply

Sabrina Hill

OP

Home Stager · Orlando, FL · Member since 2016 · 36 posts · 13 votes

9y

@Mindy Jensen

Wow Mindy,

That is an awesome response. I see now the importance of saving money and building credit. I am just so excited to jump in but as you said I should take that save money, build credit approach so that I don't sink the REI boat that I jump on. You all have been very helpful in helping me see the light lol

Thanks so much for your input!!

1 Reply

Rolanda Eldridge

Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes

9y

@Sabrina Hill..Look for someone to lend you money to buy Duplex, work on credit, refinance into VA in about year and stay for 1 yr..Keep it Moving..

1 Reply

Creative Finance with no money

Creative Finance with no money

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