Zero Money Down New Housing Developments?

5 Replies

Hi BP Community!

I'm actively saving money to get my first deal, and am considering many different strategies... Brrrr, Turnkey investing, Hard money etc. I'm an avid BP podcast listener and I've learned that the less money down you can put into a deal, the faster you can move forward on to your 2nd and third investment homes etc. 

Recently I've learn of some no-money down, new housing developments new Dallas TX. This seems a bit too good to be true...Has anyone invested in a similar community? I know zero money down will decrease cash flow... but for a completely NEW house and zero money down, minimal cash flow may be justified.

Thoughts on this strategy?

Thanks,

Katie

@Kathleen McCabe Sure, this is possible but there will not be any cash flow. You will actually end up with negative monthly cash flow because the monthly payment will be so high.

I am assuming that you are talking about buying directly from builders in all of the new subdivisions in DFW. I see a lot of these builders offering zero down and no closing costs because they have too much inventory.

Example: You purchase a new construction home for $250k - $300k and put zero down. Your payment will be well over $2k per month when you factor in P&I, insurance, taxes, HOA, etc. let's say it totals $2,500 per month.... but you can only rent it for $2,000. You would have to come up with $500 per month.

Originally posted by @Colton Fairchild :

@Kathleen McCabe Sure, this is possible but there will not be any cash flow. You will actually end up with negative monthly cash flow because the monthly payment will be so high.

I am assuming that you are talking about buying directly from builders in all of the new subdivisions in DFW. I see a lot of these builders offering zero down and no closing costs because they have too much inventory.

Example: You purchase a new construction home for $250k - $300k and put zero down. Your payment will be well over $2k per month when you factor in P&I, insurance, taxes, HOA, etc. let's say it totals $2,500 per month.... but you can only rent it for $2,000. You would have to come up with $500 per month.

 You guys sure this isn't just for owner occupied buyers? I don't think anyone is selling non owner occupied new builds to you for no money down. Doesn't make sense from a lender's standpoint, regardless of the inventory surplus they may have.

@James Wise Good point. I have never purchased a new construction home with the intention of making it a rental. A lot of these zero down loans are only available if you use the builders lender... so if you buy a Highland Home they will incentivize you to also use Highland Lending.

Originally posted by @Colton Fairchild :

@James Wise Good point. I have never purchased a new construction home with the intention of making it a rental. A lot of these zero down loans are only available if you use the builders lender... so if you buy a Highland Home they will incentivize you to also use Highland Lending.

It's not an issue of the builder's lender really. Its any residential lender. 25% down is the norm on non occupied residential home loans. Your low down loans like FHA or 5% or in this case 0% conventional loans are reserved for owner occupants.