How do I invest in multi family properties with no money down?

37 Replies

Hello, 

I am new to bigger pockets and real estate. I'd like to know how to invest in multi family properties with zero money down?  I've seen so many advertisements. Is this even possible? 

Updated 27 days ago

How do I deactivate my post? It’s annoying. My phone keeps going off.

Just pay 10k to a guru to find out how. :) ( just kidding) if it was easy everyone would buy apartments starting out. I started out with SFR years ago, because that's where I was able to get started. Hopefully someone could offer someone that teaches this for a reasonable fee. I'm ears to here some replies to your thread.

Everything is possible but requires some work. For e.g. finding absentee owners, sending tons of mails and calling them. Hope to find someone who would do a lease option or seller financing with as little as 5% down which you can get from a hard money lender. Again, it’s not easy. If it was so easy, everyone would be doing it.

@Elisha Salgado

Multi units with no money down. This is possible, but it is the rare exception rather than the rule. You need a right set of circumstances for this to happen. 

Seller. Owned for long period of time and want out. Doesn't need the money and willing to carry the note. Property needs work and tenants are difficult to work with. Could be no tenants too. Property not easily financed due to condition. Property probably been on market for long period of time, and has an unrealistic asking price.

Buyer. No money but willing to put sweat equity into property. 

Odds of obtaining such a situation, probably 1 in 100. 

Terry

@Elisha Salgado Pay me a ton of money and I can give you all my secrets ;) j/k

There are ZERO no money down deals especially if you're a beginner. If you spend money on advertisements and marketing that by definition is spending money. Experienced investors (@Gino Barbaro can pipe in here as he did a no money down deal, I think) rarely come across such gems and even then they've put in the time, effort and money into having a system through which they can take this deal without putting any significant capital down. 

These kinds of claims are only propagated by scammy gurus to sell you their coaching. If you could buy assets for no money down, everyone would be doing it.  

House hack a multifamily, which everyone on here preaches. That’s often easier said then done but that’s gonna be your best bet. You can do zero down if you’re a veteran or 3.5 down or 5 percent down.

@Elisha Salgado No money down is extremely rare and it is very dangerous for beginners as well given your LTV is so high. You may end up running out of money.

Even there is no money down, you will need some reserve to pay for closing cost, loan origination fees, may be some deferred repairs and so on. 

My suggestion would be go with FHA 5% down and house hack, learn the business. That's how I started and I now have 28 units.

you better have a high credit score, good references , and be able to convince someone to lend you money.

No money down. Don't waste your time, that dog will not hunt.

Unicorn....

The real translation is "I'm dead broke or close to and I want to be a millionaire by buying real estate....how do I do it?"..... you don't unless you find a unicorn...someone that is going to pony up the $$ and let you be part of the deal for some reason because you bring something to the table that they can't.

So it can be done....... not impossible..... but rare.

If you don't have the $$ to start....advertisements.....down payments....etc etc..... then you don't have the $$ for inspections....closings....reserves for Cap Ex etc etc etc etc etc......

Originally posted by @Elisha Salgado :

Hello, 

I am new to bigger pockets and real estate. I'd like to know how to invest in multi family properties with zero money down?  I've seen so many advertisements. Is this even possible? 

  

I don't think you can delete the post but you can change the notifications under Settings. 

I know an investor, who teaches at the NYU real estate school who does this. But his vehicle of choice is a long term triple net lease aka NNN.

Properties would be those owned by someone for a long time, appreciated greatly, a tired landlord who wants to sell, mortgage free. He stresses that these owners would pay a whole lot in capital gains, and if kept to his death, heirs would be inherit at a stepped up basis, meaning heirs skips the cap gains at death.

He accumulated quite a portfolio, and NNN is his favorite tool as no one doing residential real estate ever heard of it, and if they did, thought it's only for commercial properties.

Originally posted by @Frank Chin :

I know an investor, who teaches at the NYU real estate school who does this. But his vehicle of choice is a long term triple net lease aka NNN.

Properties would be those owned by someone for a long time, appreciated greatly, a tired landlord who wants to sell, mortgage free. He stresses that these owners would pay a whole lot in capital gains, and if kept to his death, heirs would be inherit at a stepped up basis, meaning heirs skips the cap gains at death.

He accumulated quite a portfolio, and NNN is his favorite tool as no one doing residential real estate ever heard of it, and if they did, thought it's only for commercial properties.

that does not quite track.. once the tired out old landlord sells to your NYU prof  capital gains is established and paid each year as the income comes in.. there is NO stepped up basis.

what your talking about there is the tired old landlord keeps property till death heirs inherit and then there is a stepped up basis then the HEIRS can sell and not pay tax.. 

We did this a ton in the timber business.. IE timber owners many times had these properties through a few generations waiting for the timber to mature.. Now kids inherit they sell it right away at the stepped up basis and parents usually had next to zero basis 

Mine have been 'get your money back... eventually' but never no money down. Sometimes after 10 years I got my capital back, but I did get it. 

That's what an investor means. You invest to get a return.  "I am an investor with nothing to invest. " What?

There is no such thing as no money down. Consideration must be exchanged for a transaction to even be legal.

None of your money in the deal has an extremely high cost. The price is zero, but the cost is wasted time searching and scouring and the frustration that is. The cost is a partner that gets half or more of your deal because you didn't have a lousy few grand.  The cost is a 'mentor' that goes around you and leaves you nothing because you didn't know how to protect yourself. 

Better off earning more and spending less to save while you learn.  Being broke is a symptom of eating and drinking out, the latest gadgets, fancy cars and skinny jeans. Save and earn and learn. There are no shortcuts in RE.

Originally posted by @Steve Vaughan :

Mine have been 'get your money back... eventually' but never no money down. Sometimes after 10 years I got my capital back, but I did get it. 

That's what an investor means. You invest to get a return.  "I am an investor with nothing to invest. " What?

There is no such thing as no money down. Consideration must be exchanged for a transaction to even be legal.

None of your money in the deal has an extremely high cost. The price is zero, but the cost is wasted time searching and scouring and the frustration that is. The cost is a partner that gets half or more of your deal because you didn't have a lousy few grand.  The cost is a 'mentor' that goes around you and leaves you nothing because you didn't know how to protect yourself. 

Better off earning more and spending less to save while you learn.  Being broke is a symptom of eating and drinking out, the latest gadgets, fancy cars and skinny jeans. Save and earn and learn. There are no shortcuts in RE.

 it is quite amazing why folks think real estate is a space that should be entered with no money.. I understand why they think that given the pod casts  late night TV etc etc. but reality check is this is a capital intensive business.. and undercapitalized business fail most times.

Americans specifically have a very tough time managing personal debt.. and some of it is certainly regional.. IE west coast high priced compared to rust belt areas were homes are rentals are priced like used vehicles.. but even those low value assets will have running costs that will exceed cash flow many times..  

Originally posted by @Jay Hinrichs :

 it is quite amazing why folks think real estate is a space that should be entered with no money.. I understand why they think that given the pod casts  late night TV etc etc. but reality check is this is a capital intensive business.. and undercapitalized business fail most times.

Americans specifically have a very tough time managing personal debt.. and some of it is certainly regional.. IE west coast high priced compared to rust belt areas were homes are rentals are priced like used vehicles.. but even those low value assets will have running costs that will exceed cash flow many times..  

Oh I know. Nobody would think of trying to 'invest' in other sectors with no money.

No money index investing. No money antique, art or classic car flipping. No money crypto, baseball cards, stamps, coins, skateboards, bikes.  LOL 

nothing down deals are easy If this was 1995

Wow those were the days.  100% and 103% financing if you had a pulse. 

Even farther back depreciation to off set earned income from your other  businesses. 

It was almost difficult to NOT make a profit 

I think it was Jim Carrey who said to Lauren Holly "Oh I get it; you're telling me there's a chance".

Originally posted by @Elisha Salgado :

Hello, 

I am new to bigger pockets and real estate. I'd like to know how to invest in multi family properties with zero money down?  I've seen so many advertisements. Is this even possible? 

The best possible way to buy with "zero" down is if you are a veteran buying an owner-occupied home. Live there two years, then sell it (assuming some appreciation) with no capital gains tax. Lather, rinse, and repeat every two to three years. That would be one of the quickest ways to build up wealth with "zero" down.

Originally posted by @Bjorn Ahlblad :

I think it was Jim Carrey who said to Lauren Holly "Oh I get it; you're telling me there's a chance".

Comment of the day! You made me lol in real life... 

ooh just thought are there USDA nothing down loans in rural areas?

@Elisha Salgado

Here is one possible scenario:

I am currently buying another 6 unit with 100% financing, its not exactly no money, but I have secured a private loan for 10% of the 20% down payment. The bank is loaning 80% and all the rehab funds, I am taking the other 10% on a 401k loan, not because I need to, but because this is the cheapest money out there, the interest I pay goes back into my 401k so it is still a net gain. All of this is possible for a few reason however;

1.) This is an incredible off market deal that allows 100% financing and still cash flows very well.

2.) I have a track record of successful investments with both my commercial lender, and private lenders who are asking me for projects to place funds into.

3.) I have enough collateral, cash reserves, income, and experience that everyone involved is comfortable putting this deal together with me having "no money" into the deal. 

If you do not have the experience, track record, or cash reserves, you will need the most important thing. An incredible deal. If you find the right deal, you will have no problem finding the financing, there are many options for no money deals, but they all start with a great deal. Let me know if you have any other questions. Best of luck!

As @Caleb Heimsoth mentioned if you are a veteran and/or have VA benefits you can get a VA loan which is nothing down. You can use the VA loan to buy a single family home, duplex, triplex or fourplex if you're moving into the house or one of the units (for the multi-family).

Lenders... please correct me if I am wrong, but I don't think you can do mutli-family with USDA loans. They are loans for more rural areas and I thought were restricted to single family homes only. In my area in Northern Colorado, there are cities that you would not expect to qualify for USDA loans like Windsor and Wellington that you can use the nothing down USDA loan in.

Beyond the VA loan to invest in multi-family you are probably looking at creative financing strategies like marketing to find sellers that are willing to do stuff like owner financing, wrap financing, subject to, lease-options/lease-purchases, installment land contracts or the like. As people have suggested above, these tend to require quite a bit of effort to find, negotiate and purchase.

It is possible that you might find a significantly under-valued property where a hard money lender would loan you 100% of the purchase price on a multi-family (for example if it was being sold for 65% of the ARV). Again, that would take finding the perfect deal which you'll likely need to do some marketing to find.

A more common scenario is you might be able to partner with someone who has the down payment (and/or maybe the ability to get the loan) and you have the time and expertise to track down, negotiate, manage the deal. In this scenario, it could look like no money down to you even though your partner is investing a regular down payment and there is traditional financing involved. What percentage ownership you'd get for that is up to you to negotiate with them and it can vary widely.

In my opinion, there are probably a few more opportunities for you to find little or nothing down deals with single family homes (there are four loans here in my market that are nothing down for well qualified owner occupants on single family homes: VA, USDA, Key Bank and Compass Bank). Heck, there may be even more that I am not aware of. There are also 3% down conventional financing loans for single family homes, 3.5% FHA loans and 5% conventional loans. There are also some down payment assistance programs that can get you closer to $1,000 down or 1% down in some situations.

Loan programs come and go. Up until this month, there was a 1% conventional loan program and HUD had a $100 down payment program awhile ago (but that was probably a decade ago).

Originally posted by @Jay Hinrichs :
Originally posted by @Frank Chin:

I know an investor, who teaches at the NYU real estate school who does this. But his vehicle of choice is a long term triple net lease aka NNN.

Properties would be those owned by someone for a long time, appreciated greatly, a tired landlord who wants to sell, mortgage free. He stresses that these owners would pay a whole lot in capital gains, and if kept to his death, heirs would be inherit at a stepped up basis, meaning heirs skips the cap gains at death.

He accumulated quite a portfolio, and NNN is his favorite tool as no one doing residential real estate ever heard of it, and if they did, thought it's only for commercial properties.

that does not quite track.. once the tired out old landlord sells to your NYU prof  capital gains is established and paid each year as the income comes in.. there is NO stepped up basis.

what your talking about there is the tired old landlord keeps property till death heirs inherit and then there is a stepped up basis then the HEIRS can sell and not pay tax.. 

We did this a ton in the timber business.. IE timber owners many times had these properties through a few generations waiting for the timber to mature.. Now kids inherit they sell it right away at the stepped up basis and parents usually had next to zero basis 

Your answer "once the tired out old landlord sells to your NYU prof capital gains is established ..." is absolutely WRONG. When the professor establishes a long term NNN lease with the old tired landlord, the landlord retain "fee simple" interest, and the professor creates an "equitable interest". The property is definitely not sold.

Now if the landlord obtains a tenant, say signs a ordinary 10 year lease, it is clear he made no sale of the property and no capital gains tax is due. The difference between this ordinary lease and the Long Term NNN lease is:

1. The lease must be at least 30 years, and no more than 99, and the longer lease terms does not make it a sale.

2. With triple net, the tenant pays the taxes, repairs, and insurance, i.e. everything.

3. Its a master lease where the lessee is the master tenant and subleases to others.

Whether the lease is 10 years or 30, the property is not sold. Usually in these cases, there is an option to buy, but in cases of the old tired landlord, it is only exercised after his death. During this period the tenant handles all property management.

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