Robert G. Allen No Money Down !?! Is It Possible ?!

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Robert G. Allen No Money Down !?! Is It Possible ?!

Edwin Duran
Orlando, FL · Member since 2014 · 62 posts · 17 votes

Hello BP'ers

So I just wrapped up reading Robert G. Allen's book "Creating Wealth", and I was really intruiged by his methods of financing his deals. He is really trying to drive home the point of finding win, win deals with as little money down as possible using seller financing. But my question is, how often can you come across these deals? Is it really possible to buy property with no money down? Im assuming there is a level of complexity that goes on in finalizing these deals..

Looking forward to your comments.

Thanks.

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Rick H.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
12y

I found myself at Mr. Allen's home at a BBQ several years ago. Not surprisingly, my other real estate friends and I had all researched ownership of his house before the party. Title not in his name.

As to no money down, sure it's possible. The odds are good that the goods will be odd. But the fact is, you'll occasional find a deal where down payment just isn't essential to make the deal. Example: you solve a problem that others can't, won't or don't know how to solve.

Jay Hinrichs - did you translate your Australian book into English? : )

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    its very possible.. however most of the time the situation will be

    1. the home is far over priced so seller willing to finance with no down.

    2. terrible area or Ghetto area.

    3. odd ball property that just won't move any other way.

    4. bad market and seller wants to create cash flow.

    I personally have sold with no down deals on my OREO.. I was out of state and just wanted nothing more to do with managing PM or tenants so preferred to sell.. But I usually get a token down.. I have sold a few of my OREO on BP with as little as 2 to 3k down and I carried the contract.. so yes it happens. But you have to hunt for them. And as markets tighten up those dry up.

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  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    Yes those those deals are possible, but not very common.  The only ones I have done involved very motivated Sellers and to be honest the deal was not very good, but it was a nice house.  I still lose about $140 per month in negative cash flow on my most recent one and that is not counting repairs, maintenance or vacancy.  I have a balloon in 3 years and after that it should break even on payments, taxes, and insurance, but I will still lose money on vacancy and maintenance/repairs.  However in 13 years it will be paid off.

    1Reply
  • Edwin Duran
    OP
    Orlando, FL · Member since 2014 · 62 posts · 17 votes
    12y
    Originally posted by @Jay Hinrichs:
    its very possible.. however most of the time the situation will be

    1. the home is far over priced so seller willing to finance with no down.

    2. terrible area or Ghetto area.

    3. odd ball property that just won't move any other way.

    4. bad market and seller wants to create cash flow.

    I personally have sold with no down deals on my OREO.. I was out of state and just wanted nothing more to do with managing PM or tenants so preferred to sell.. But I usually get a token down.. I have sold a few of my OREO on BP with as little as 2 to 3k down and I carried the contract.. so yes it happens. But you have to hunt for them. And as markets tighten up those dry up.

    Awesome, so I know its possible, but now my other question is how does it work exactly? Does the seller have to own the property outright? Or does does it become what i think Robert referred to in the book as a ballon payment ? The process seems somewhat complicated. Can you clarify?

    Thanks.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    please go into the archives on BP and read about wraps and all inclusive DT's a long with contract for deeds etc etc. I could write a book on al the methods you can buy..

    Waite a minute I did write a book   LOL... In all fairness I wrote one for Australians on the perils of buying in ghettos in the US..

    I am sure your not going to be doing that.. so just get on the archives and read up.

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  • Michael B.
    Apopka, FL · Member since 2012 · 207 posts · 120 votes
    12y

    There's a lot more to the deal than getting nothing down. That's just one piece of the puzzle.

    Getting nothing down deals that give you a negative cash flow is a really bad. Mr. Allen found this out the hard way. His deals tended to be little or nothing down, but he hemorrhaged cash on each one.

    His nothing down deals were cool to write about, and he sold a lot of books. Most of his investments were in California, where appreciation was running at 12% or more per year at the time. However that didn't save him from filing bankruptcy in 1996.

    He's continued to speak and write books since. He'll give a speech for a fee and still sells his books. But if you're going to do deals like him, make sure you understand just how awful monthly negative cash flow is. No investor can continue to grow with it. Even if you're a best selling author.

    4Reply
  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    12y

    I found myself at Mr. Allen's home at a BBQ several years ago. Not surprisingly, my other real estate friends and I had all researched ownership of his house before the party. Title not in his name.

    As to no money down, sure it's possible. The odds are good that the goods will be odd. But the fact is, you'll occasional find a deal where down payment just isn't essential to make the deal. Example: you solve a problem that others can't, won't or don't know how to solve.

    Jay Hinrichs - did you translate your Australian book into English? : )

    5Reply
  • Darron Stewart
    Investor · Hattiesburg, MS · Member since 2014 · 280 posts · 98 votes
    12y

    @Edwin Duran

    It's possible and so much more, open up your mind, read and research here and anywhere else you can. Find something you will enjoy and give it a try. We all love real estate here and most can give you great stories about what we have done. $1 deals, properties at pennies on the dollar, 1/2 or 1/3 of value deals, etc. best to you in your research, please find out for yourself and make an informed decision.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    @Edwin Duran 

    Sure its possible.  Robert Allen also wrote another more famous book, "Nothing Down".  I have heard him speak in person several times.

    The first 11 houses that I bought were all essentially nothing down deals, because I did not have any money to put down.  I used first mortgages, second mortgages, signature loans, and loans from friends and family.  Two of the houses I even brought in a partner.

    The sources of the properties that I bought were really varied, of the first 11 only 3 were from the multi-list. 4 were unlisted foreclosures, 1 was from the state highway dept., 1 was from a relocation company, 1 was broker owned rental not listed, and 1 was from word of mouth unlisted, not even a sign on the property.

    That was 800+ properties ago.  Now the last 100 properties that I bought 99 were all cash.

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    12y

    "No Money Down" by Robert Allen was a book that opened my eyes to creative financing.  Wade Cook, Peter Fortunato, the late Jack Miller, and John Schaub all contributed.  The late Barney Zick was my best teacher of notes and private money marketing.

    If you read the right books and implement, "thinking outside the box" with real estate, solving problems for buyers and sellers, you will excel.  

    Funny how many agents do not think outside the box.

    A good primer of thinking outside the box is

    http://www.amazon.com/Finance-Real-Estate-Place-Ti...

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Hi Edwin,

    NMD deals were more out there in the down markets years ago. The sellers just didn't want to deal with the asset day to day so you were buying yourself a job taking it on. The upside was when the market cycles your hard work would be rewarded with an equity gain with selling price increase.

    Today there is so much capital these deals are not easily found. Just do not expect a broker/agent to help with such matters. Too many people with money out there ready to do deals.

    Even on the commercial real estate side I have many buyers with capital ready to play that have been sitting on the sideline for years waiting for the opportune time.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    @Rick H. 

      I had a Aussie co author who put the OZ spin on it..  Terms are generally the same.

    Although I like this one   "Negative Gearing "  Their term for Negative Cash flow.

    so  an IP is either neutral Gear Negative Gear or Positive Gear..

    OZ real estate is the same as the SF bay area.. with the finer areas Like SF and peninsula average prices 800k and up... Same in OZ in the bigger cities.. Average little bungalow there is 350 to 500k... They are RE nuts.

    They also got sucked into buying cash flow rentals in the Mid west by the thousands by the same marketing companies that hit up Socal investors and investment clubs.. Virtually all of them over the last 5 to 7 years have gone to OZ for presentations and have hooked up with OZ marketing guys.. Who many in the way of Ethics make our marketing folks look like choir boys...

    The transactions a lot of these folks got put into  In the worse parts of Detroit, Rochester , Buffalo, and every other big city was Criminal in my mind... Many would buy homes that never got rehabbed or ever got rented... And of course they all paid cash and then you think investing out of state is risky try it from 12 thousand kilomiters away and there night is our day.. Its really tough... Plus they have the same experience a solid CA rental will have People pay the darn rent and stay for years.  HUGE learning curve.

    So I wrote a little E book on how to do proper due diligence etc.. Over there there is no Zillow Truila,, and so investors rely on RE agents and Notaries to do title search's. WEre here in the US we have so much info at the computer.  And these OZ are intelligent hard working and very cashed up investors.. But they just did not know what they did not know plus they believe everyone they have no clue as to what a hustler in Detroit or Philly is like.

    there banking system is all on line NO CHECKS no Money orders no cashiers checks.. Rents are all auto paid first of the month if you don't have your rental check in your in default.

    So when they bought rentals over here many got so frustrated because they had no clue that 50% or better of mid west renters don't have and will never have a checking account to begin with.. Just a foreign concept.

    Now many did very well especially buying in ATL, PHX, LV  in the down turn.. But these are cash flow investors they would not even consider a Neutral or negative gear.. So they did not buy in CA OR WA... in any  numbers they flooded to those nice marketing companies promising 30% return in Detroit

    I can go on and on  but you get the drift Good Day Mate

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  • Robert Davidson
    Corte Madera, CA · Member since 2011 · 59 posts · 38 votes
    12y

    The other way to look at No Money Down deals is to think of it as none of your money.  If you buy a distressed property and quick flip it to a rehabber you can use private money (real private money, not the fake private money lenders who are just hard money lenders in disguise) for short term financing.  Go to a local real estate club and be active and you will meet people with money to lend short term.  Many private lenders will also lend medium term, less than a year, if you are going to fix and flip.  You don't need many .  I have four, plus one hard money lender, that will fund for me (one of my doctors, a neighbor, the owner of a restaurant I go to, and another real estate investor).  You could use two lenders on a deal, one on a 75% first note and a second on a second.  There is a big myth that money is hard to come by.  Nothing could be farther from the truth.  There is a lot of money if you buy correctly and make the right connections.  Remember, you make your profit when you buy, not when you sell.  As to Robert Allen, he filed bankruptcy several year sago and even said that NMD is easy, the hard part is paying the mortgage, because he didn't teach buying wholesale.

    2Reply
  • Pete T.
    Real estate investor · Las Vegas · Member since 2013 · 798 posts · 171 votes
    12y

    its possible and seller fi is just th most popular. there are even some straight up ones that you can just go to the bank and do on some properties- USDA, VA, and other special programs as well.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    @Brian Gibbons 

    "No Money Down" was actually written by Carleton Sheets

    "Nothing Down" was written by Robert Allen

    and

    "No Down Payment" was written by Ed Beckley

    just to set the record straight.

    I know a little something about real estate books.

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    12y

    I stand corrected lol

    0Reply
  • Manch Hon
    San Jose, CA · Member since 2011 · 160 posts · 167 votes
    12y
    Originally posted by @Jay Hinrichs:

    OZ real estate is the same as the SF bay area.. with the finer areas Like SF and peninsula average prices 800k and up... Same in OZ in the bigger cities.. Average little bungalow there is 350 to 500k... They are RE nuts.

    OZ RE is one of the biggest bubbles today, in the same league as Vancouver or Toronto RE I think? What's your thought when the bubble will pop?

    0Reply
  • Andy Argonaut
    Real Estate Investor · San Francisco, CA · Member since 2013 · 47 posts · 11 votes
    12y

    @Edwin Duran it certainly is possible to do such deals, but it's definitely like finding a needle in a haystack. Very few sellers will go for it. 

    Even if you do execute such a strategy, it comes with one big flaw. Allen's entire investment strategy is based on the assumption that real estate keeps going up in value, so you can over pay for the property now because it will eventually go up in value. Problem is, that doesn't hold true if there's a downturn. A good example is 2008 where tons of 100% financed properties were under water (and still are). 

    I owned several such properties in Florida, all financed with nothing down and all hugely upside down and I eventually let them go back to the bank. At the end, it wasn't worth all the work. 

    1Reply
  • Ben Leybovich
    Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    Hah - that's how I've bought everything I own...

    4Reply
  • Billy Rogers
    Investor · nowhere, TX · Member since 2012 · 242 posts · 84 votes
    12y

    John T. Reed has a nice little article about Robert G. Allen on his guru rating page.

    http://www.johntreed.com/Reedgururating.html#ancho...

    My personal opinion is that it's often not profitable and can be very dangerous to finance 100% of a property.  Like everything in RE , there are always exceptions.  The problem is he never mentions profits, just acquiring RE.

    2Reply
  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    12y

    It is how I have bought most all the real estate I own. We have 12 rehab projects 80k-250k per project, in the loop, all 100% financed with private money, purchase and rehab. 

    Our office complex was also funded with none of my own money, my current personal residence .....etc etc

    While there may not be a lot of sellers willing to do no money down deals, there is a lot of private money looking for a good return.

    1Reply
  • Michael Lemieux
    Investor · Deerfield Beach Florida and Tupper Lake, N.Y. · Member since 2013 · 307 posts · 118 votes
    12y

    @Edwin Duran , 2 of the last 3 house we bought were "no" money down. The last one was a grapevine deal. We put $500 down, seller held the mortgage. Paid 70k just sold in March for $147.

    0Reply
  • Edwin Duran
    OP
    Orlando, FL · Member since 2014 · 62 posts · 17 votes
    12y
    Originally posted by @Jay Hinrichs:
    please go into the archives on BP and read about wraps and all inclusive DT's a long with contract for deeds etc etc. I could write a book on al the methods you can buy..

    Waite a minute I did write a book LOL... In all fairness I wrote one for Australians on the perils of buying in ghettos in the US..

    I am sure your not going to be doing that.. so just get on the archives and read up.

    Thanks for the feedback, ill definitely look into these different methods you have referred to.

    0Reply
  • Edwin Duran
    OP
    Orlando, FL · Member since 2014 · 62 posts · 17 votes
    12y
    Originally posted by @David Krulac:
    @Brian Gibbons

    "No Money Down" was actually written by Carleton Sheets

    "Nothing Down" was written by Robert Allen

    and

    "No Down Payment" was written by Ed Beckley

    just to set the record straight.

    I know a little something about real estate books.

    Thanks for your expertise, thanks for clearing that up.

    0Reply
  • Edwin Duran
    OP
    Orlando, FL · Member since 2014 · 62 posts · 17 votes
    12y
    Originally posted by @Michael Lemieux:
    @Edwin Duran , 2 of the last 3 house we bought were "no" money down. The last one was a grapevine deal. We put $500 down, seller held the mortgage. Paid 70k just sold in March for $147.

    Woahh, lots going on there.. Would you mind telling me more about that deal ?

    0Reply
  • Edwin Duran
    OP
    Orlando, FL · Member since 2014 · 62 posts · 17 votes
    12y
    Originally posted by @Dell Schlabach:
    It is how I have bought most all the real estate I own. We have 12 rehab projects 80k-250k per project, in the loop, all 100% financed with private money, purchase and rehab.

    Our office complex was also funded with none of my own money, my current personal residence .....etc etc

    While there may not be a lot of sellers willing to do no money down deals, there is a lot of private money looking for a good return.

    Im pretty sure it can be nerve wrecking at first to use private money because of things possibly steering the wrong way. However, if you don't mind sharing did you start using private money from the beginning? Or did you use your own until you built some sort of track record so that these private lenders could trust you with their capital?

    0Reply
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