How did you buy a multi family with 0% Down?

Creative Real Estate Financing
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How did you buy a multi family with 0% Down?

Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

I know it's been done before- I want to hear how you've done it! 

I would ideally love to get a duplex for my first property- however neither the USDA 0% down loan nor the Washington state first time home buyer 0% down program allow for any income producing element. 

So I'm back at FHA at 3.5% which...which most places isn't a great deal...but a duplex where I live is going to fall around the $300k+ range. So I can save/put down 3.5%...but I'd rather put that into renovations.

My current options for 0% down seem to be : 

  • SFH that has an option to be converted to have a MIL or something of the sort
  • Negotiate a seller financing deal 

Who has other ideas? How have you made this work?

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Joshua D.
Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
9y

@Natalie Kolodij

We have done it 3-4 times now. The last one was this summer. Details are here... 

We used 25% down-payment (18k) funded from equity in one of our long term live in flips. (HELOC) 

We purchased the duplex for 72k and got a 54k conventional 30 year fixed. 

This summer we sold our flip and we made 45k AFTER paying off the HELOC.

No money down. Duplex rents for $1200 a month. PITI of $405 a month self manage for a profit of $600 a month. Great investment. CMA came back on it for 115k.

MLS foreclosure deal.

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  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    9y

    You could buy a 2-4 unit or buy a SFH and live in it for a year with roommates and then rent it out and buy another 1-4 unit.

    0Reply
  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    One must understand that laws and markets are not always what they where at one time, and what worked then does not work today. There was a time you could be poor as a pauper and buy all the real estate you wanted with zero down, it was called the housing bubble. Dodd Frank and the banks have put an end to that. 

    2Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y
    Originally posted by @Jassem A.:

    You could buy a 2-4 unit or buy a SFH and live in it for a year with roommates and then rent it out and buy another 1-4 unit.

    I can only buy a 2-4 unit with a FHA 3.5% down. None of the 0% programs qualify for this.

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  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    9y

    @Natalie Kolodij

    3.5% isn't much depending on the price of the property. I'd call around and see if any local banks or credit unions have a creative way that will allow you to put 0% down if that's the biggest hindrance. You could also ask for the seller to pay closing costs.

    2Reply
  • Chris Ehlert
    Tucson, AZ · Member since 2016 · 36 posts · 17 votes
    9y

    Good topic! I just asked my loan officer the same ?. In my market over here there is a lot of competition. So I looked for an on your lot builder that built duplexes. Depending on size, the price was 155k-195k plus your lot and development. Your lot would have to be zoned for multifamily. I need to put 3.5% down, but after the estimate with the contractor and putting it in the BP calculator. What I could rent it out for would pay for the mortgage, and if I refinance with the equity after it was built the cash flow was $700-$950/month. That was using all the factors in Brandon's webinar, but it would be brand new.

    1Reply
  • Joshua D.
    Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Natalie Kolodij

    We have done it 3-4 times now. The last one was this summer. Details are here... 

    We used 25% down-payment (18k) funded from equity in one of our long term live in flips. (HELOC) 

    We purchased the duplex for 72k and got a 54k conventional 30 year fixed. 

    This summer we sold our flip and we made 45k AFTER paying off the HELOC.

    No money down. Duplex rents for $1200 a month. PITI of $405 a month self manage for a profit of $600 a month. Great investment. CMA came back on it for 115k.

    MLS foreclosure deal.

    5Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    The VA is a $0 down loan that you can do it with.

    Although it may be easier and quicker to save up the 3.5% down :)

    Another option is the FHA 3.5% but have the seller kick in 6% concessions. This way you are actually going in at 2.5% less than you were planning on it.

    Just a thought and good luck!

    0Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Ya- Joining the military for better financing doesn't sound like an excellent choice haha 

    Ooooo I see what you're saying. Pay the 3.5% down but have the seller cover closing costs. It's a bold move in our competitive market but definitely an option. That's a much....more appealing way of phrasing it. 

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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    I think @James Wise just bought a multi family with 0 down....maybe he'll share some wisdom over here. 

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  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hi @Natalie Kolodij,

    Most tricks to do that rely on owning existing real estate. That's a huge part of why that first property is key. HELOC is the most common, as has already been mentioned.

    1Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    @Chris Mason I should just start asking you any finance related questions before I make a thread from now on huh? haha 

    Ya that is a bummer. I felt for me the house hack duplex was a better first option...I may need to look back to a SFH that is a good flip or rental so i have some exit strategy.

    I was intending to do a 2 year fix/flip if I did a SFH....but I may be able to do it in in less time then pull out equity for the down payment on a duplex to house back instead.

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    9y
    Use your tax return and save like crazy.
    0Reply
  • David Zheng
    Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    9y

    If you do the house hack method, you can get everything paid for by gift funds. this included the downpayment and closing costs.

    0Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y
    Originally posted by @Kerry Baird:

    Use your tax return and save like crazy.

     I'm looking for strategies other investors have used to buy for 0 down

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I've purchased a 7-plex, a triplex and 10 unit mixed-use with seller financing from 3 different sellers at 3 different times that were all $0 down for me.

    The terms on the 7 and 3 were 10% down, the 10 was 20% down. The 7 (2005) and 10 (2003) financing is still in place, the tri (2011) needed to be refinanced within 4 years.

    I used 0% for-a-time credit card checks and withdrew some 5 year ROTH IRA money tax and penalty-free. Once from my wife's and once from mine. The seller on the 10 also accepted a 3rd mortgage on a house I had in CO. It was an REO and the bank financed it for me.

    The prorated rents and deposits helped with the closing costs as well.  

    Awwh those were the days.  Haven't played with credit cards in years now.  

    I'd recommend looking into a seller-financed commercial apt building of 5 units+ @Natalie Kolodij.  Those sellers know commercial financing can be tough and can be more open to creative SF terms.  ID a few and mail them a nice letter.  Stay in touch and provide them value until they decide to sell. You could provide general tax tips or something.  Boomer+ landlords that have been self-managing for decades work for me.  Best of luck to you!

    5Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    @Steve Vaughan Thank you! 

    I hadn't really been thinking about commercial sized properties because of the financing. But If I'm going to pursue seller financing that's actually a really good idea. 

    There's actually an excellent (well, old and crappy and I love) 5 plex of single bedroom units that I didn't add to my list because I figured I'd go conventional financing. I'll send them a letter. 

    I keep thinking that! Maybe someone wants tax services - that's got to be a valuable barter for a landlord with several units around the area. 

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  • Ravi P.
    Investor · Schaumburg, IL · Member since 2015 · 219 posts · 104 votes
    9y
    Originally posted by @Chris Mason:

    Hi @Natalie Kolodij,

    Most tricks to do that rely on owning existing real estate. That's a huge part of why that first property is key. HELOC is the most common, as has already been mentioned.

    @Natalie Kolodij

    @Chris Mason brings up a good point regarding 0% down purchases.  It typically requires existing property or equity.  

    I completed a purchase by cross collateralize a condo I owned free and clear to acquire another condo that was in the same complex. My condo was valued between 100-110k. The property I was acquiring was a short sale and under contract at 90k. The bank financed the 90k purchased price and 2k closing cost. At closing the bank put a lien of 92K loan on both properties. The total value of both properties were over 200K. the banks LTV was less than 50% they ahd almost not risk. considering the rent for one month would cover PITI and both HOA dues for both properties.

    I have have read on BP that many who use this method are able to obtain 100% financing for rehabs on flips. There is also some magic formula that is used, I believe the rehab loan would be around 70% of the after repair value (ARV). The typical borrowers are experienced and have a few properties under their belt. The borrowers are also working with hard money lenders.

    Another method would require you to use other people's money (OPM) to use as a down payment.

    1Reply
  • Peter TverdovBusiness Member
    Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
    9y

    Do the FHA. Include seller concessions to cover your closing costs. Then you can do a 203k loan that allows you to finance your rehab on an FHA property. Buy a 2-4 unit building, do this. Profit.

    Don't let people tell you that you can't do it now. That's essentially what I did in a hot market and 2 years later I am sitting on a ton of equity thanks to forced appreciation.

    No one is going to hand you anything though...

    [email protected]732-289-3823
    0Reply
  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Not sure why you assumed I expected someone to hand me something ....

    It's was brought up to try to have seller concession cover closing and then put my money toward the 3.5% instead. It's an option but a super tough one in our market. Our average DOM this past summer were under 10 days with over 60% of properties selling above asking. 

    I can try to find that unicorn but approaching someone who literally didn't even have their property listed for sale then requesting them pay money to sell it to me doesn't seem like it will have the best success rate. It's certainly in the things to try pile though. Nothing MFH on market in this area has hit .5% let alone 1%-2% so my goal is to find something off market. 

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  • Jason Million
    Lender · Englewood, FL · Member since 2016 · 81 posts · 33 votes
    9y

    I'm late to the thread, but my thought on buying 0 down -  I have helped few people do this post frank dodd - ;-) .  

     1. Purchase on land contract/contract for deed,  negotiable 0 down with seller or just first payment down.  

    2. Record the contact on title

    3. Document 12 months of payments (this part is important for financing) 

    4. Refinance at fair market value. (Conventional /FHA/ Etc.)

    3Reply
  • Edna Keep
    White City, Saskatchewan · Member since 2016 · 10 posts · 2 votes
    9y

    There are many, many ways to buy real estate with none of your own money.  Thanks for sharing.  We primarily use Investor capital to purchase multifamily apartment buildings.  Apartments are considered IDEAL investments as they generate Income, Depreciation, Equity Build up, Appreciation and where else will the lender give 80% financing (leverage).  We have built a $47M portfolio in Canada primarily helping others invest in Real Estate.

    1Reply
  • Andrew K.
    Rental Property Investor · San Antonio, TX · Member since 2011 · 266 posts · 158 votes
    9y
    Natalie Kolodij thanks for starting this thread. Some great feedback so far! Steve Vaughan I like the advice you have to take down the MFs you mentioned. I'm going to try your advice with a 10 unit in my area. It's been held by the same folks for 30 years, I'm hoping for a seller financing play. -Andrew
    1Reply
  • Edna Keep
    White City, Saskatchewan · Member since 2016 · 10 posts · 2 votes
    9y

    We ask for a VTB on every single building we buy.  Not every lender will allow.  Ask the vendor who the existing lender is.  We were having difficulty with one deal because of the large VTB and most lenders wouldn't consider.  The sellers lender knew the building and the current seller s well and pushed the loan through.

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    9y

    Add this to the above...set up the closing to occur at the beginning of the month so that you receive almost a full month of prorated rent(s).  Security deposits at closing will help as well.  Raise the price of the property by $X and have the seller give you an $X repair allowance to be spent how you see fit.  The property will have to appraise.  Just getting creative.  Low interest credit card cash advance or unsecured online loan, if the numbers work and you have a disciplined predictable payoff approach.  See if the agent(s) will finance you their commission(s)...getting into something I have not done. Borrow from a friend or family member.

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