No Money Down Strategies

Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes

Ok everyone, what is your best no-money-down strategy?

I haven't done one in a long time. I find that most no money down deals are just not good deals or good properties in the first place. Also, it seems much harder to do now post 2008 financial bubble.

Tell me your stories, strategies, and philosophies on the subject.

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

13y

Dawn, it happens and is for real, but rarely do they just walk away without money, unless there is another really good motivating factor. You also need to be in a position to pay that loan off quickly if the deal blows up and the lender calls it due.

4 big things you need to be in RE, capital/money, credit, reputation and knowledge. If you lack one, the other aspects must make up the difference. While I have all these, I could go at it with any one aspect. I just mentioned the credit and other asset approach examples, if you have cash it makes life much easier as Don mentioned. You still need knowledge and must be trusted.

Anyone reading this thread thinking they will be able to go at a deal with no money and no credit will need to have tons of knowledge, and thinking along those lines probably means they don't. I suppose some really slick salesman type might talk themselves into something, but they usually fail as they overload and can't perform. Anyone letting you into a deal also must trust you.

I've done many no money deals, one was a purchase over 850k and the seller paid me and kicked in additional cash for a development, never would have happened by anyone with less than exceptional skills, knowledge and with a personal reputation. That's why I get upset with gurus, saying or suggesting anyone can do RE right out of the box, just doesn't work that way unless there are some very good skill sets available to them. And due to that, so many get involved and excited and take the easiest route following some "program" and usually fail.

If you have money you can hire experts and managers. Credit alone can open doors if you have some business knowledge. Without money and credit, you better be really sharp and have a good reputation to stay in the game.

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Dell Schlabach
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
13y
We borrow all our funds from private individuals and one bank, they are all fully funded by the lender, no money down.

Thats my no money down strategy, reasonably profitable.

0 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Yep, that works. Are holding the properties or flipping them? Is the bank setting you up with a conventional loan or a portfolio product? I don't find too many banks that are doing much portfolio lending anymore.
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Mike H.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
13y
Hard money lender that rolls 100% of the project costs (purch plus rehab plus fees) into the loan and then I refi rate and term into a conventional or portfolio loan (local bank).

Whats nice about the second option is that most local banks can do that without any seasoning. Last year I bought a house with my aunt's money (I actually was using hard and private money both). Fixed it up, rented it out, and refi'd it with a local bank in just under 3 months time.

I ended up being about 4 or 5k out of pocket because I went over budget a bit on the rehab and paid some closings costs out of the pocket since it was a new bank and I wanted to start building a relationship with them. But on a 62k loan on a house worth 100k, I ended up putting in less than 10% and am making about 300 to 350/mo.

No money is doable. Just need to really cherry pick the deal in order for the purch plus rehab plus closing costs to come in under the 70% LTV that most banks providing the permanent financing would require on a rate/term refi.

If you can do that, you can be all in at $0!
0 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
That's for sure. But what about for a buy and hold strategy? Most buy and hold strategies won't support private lender interest rates. Are we reduced to the very rare 100% seller financing deal?
1 Reply
Chris Weiler
Flipper/Rehabber · Anaheim, CA · Member since 2010 · 188 posts · 118 votes
13y
Justin, one way you can invest in buy and holds without your own money would be to create an LLC with a money partner. They supply the capital and you do the work.
0 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Yes, simple and affective. Thanks, I almost forgot about that one. This is good.
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Okay, can I play?

One at a time only;

Provide your credit and guarantee the deal with the right to assume the debt in the event of default on the agreement. No money! You can partner to some extent or charge a fee. If the deal fails you step in with no money in it!
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Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Yes, that works. That also reminds me you can take over payments. What's that strategy called?

What else you got, Bill.

Does anyone have a recent actual creative, low down, deals to share? Not privately funded deals, those are pretty straight forward.
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Join a partnership on the management side, use a note as your at risk money collateralized by others assets. No money in it, take an equity position and earn fees.
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
13y
No money down strategies never worked for me. I have made my profit by using all cash to obtain properties at deep discount or to lend money at very profitable terms.

Leverage is a real estate tool that has many fantastic advantages. However, I always obtained my most deeply discounted deals by being able to move fast with a cash buy and no contingencies.
Private Mortgage Financing Partners, LLC
Website View Page
3 Reply
Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
Are "subject to" deals a real thing? I read about them on the web, but am very skeptical.

This is the one talked about where you approach a home owner that wants to walk away from their mortgage. You instead get them to sign title over to you and in turn you pay on their mortgage while the mortgage stays in their name.

This sounds like a fairy tale to me.
Podcast Guest on Show #29
0 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Dawn, check out the podcast interview with Karen Rittenhouse on Subject 2 (and other topics)

http://www.biggerpockets.com/renewsblog/2013/01/24/subject-to-direct-mail-woman-investing-podcast/
1 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Dawn, it happens and is for real, but rarely do they just walk away without money, unless there is another really good motivating factor. You also need to be in a position to pay that loan off quickly if the deal blows up and the lender calls it due.

4 big things you need to be in RE, capital/money, credit, reputation and knowledge. If you lack one, the other aspects must make up the difference. While I have all these, I could go at it with any one aspect. I just mentioned the credit and other asset approach examples, if you have cash it makes life much easier as Don mentioned. You still need knowledge and must be trusted.

Anyone reading this thread thinking they will be able to go at a deal with no money and no credit will need to have tons of knowledge, and thinking along those lines probably means they don't. I suppose some really slick salesman type might talk themselves into something, but they usually fail as they overload and can't perform. Anyone letting you into a deal also must trust you.

I've done many no money deals, one was a purchase over 850k and the seller paid me and kicked in additional cash for a development, never would have happened by anyone with less than exceptional skills, knowledge and with a personal reputation. That's why I get upset with gurus, saying or suggesting anyone can do RE right out of the box, just doesn't work that way unless there are some very good skill sets available to them. And due to that, so many get involved and excited and take the easiest route following some "program" and usually fail.

If you have money you can hire experts and managers. Credit alone can open doors if you have some business knowledge. Without money and credit, you better be really sharp and have a good reputation to stay in the game.

5 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Bill,

I agree completely. You're in a bad spot if your only option is a no money down strategy. Sellers can smell that on you and it hurts your chances. People are going to have to work hard for a long time to build up enough knowledge and reputation to be able regularly pull these deals off.

I get asked about this topic a lot. I'm about to write about the subject and I just wanted to refresh my memory to try to give the most honest and even assessment on the subject. I'm expecting some guru's to give me grief.

I've done two no money in deals just this year but the no money down is never my goal and they never would have happened had I not had a track record to show. My goal is always to get a profitable deal. You can really get into trouble if you main focus is just not putting any skin in the game.

Thanks everybody and kee the suggestions coming if you have them.
0 Reply
Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
13y
Seems to me that no money down deals are easier when you have the money in the bank, and not so easy if you really have no money.
5 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Haha,... unfortunately I think that's true to a degree. It's just like getting a loan from a bank. They only want to lend to people who already have money.
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
13y
"4 big things you need to be in RE, capital/money, credit, reputation and knowledge. If you lack one, the other aspects must make up the difference."

Bill Gulley

Perfectly true, the reality SO different than the hype!
Private Mortgage Financing Partners, LLC
Website View Page
0 Reply
Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
I just listened to the interview with Karen Rittenhouse and it was fantastic. Thanks for posting this. It showed me that one thing I need to learn more about is wealth management. It's hard to imagine, because when you start you're just looking for wealth. But then once you have it, what do you do? That's the key.
Podcast Guest on Show #29
1 Reply
Dean Letfus
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
13y
In reality most strategies are no money down. The only "money down" strategies are properties you have to close using your own funds right?

So assignments, options, double closing, access and rehab prior to closing and seller finance deals are ALL no money down. I would say about 20% of my deals require my own money.
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Originally posted by Dawn A.:
I just listened to the interview with Karen Rittenhouse and it was fantastic. Thanks for posting this. It showed me that one thing I need to learn more about is wealth management. It's hard to imagine, because when you start you're just looking for wealth. But then once you have it, what do you do? That's the key.

I guess that was a plug for Karen. Besides that, it's not wealth management you need to be concerned with unless you are wealthy! It's BASIC real estate issues and transactions and RE financing rules, programs and regulations you need to concentrate on, not schemes. The key to RE is through financing, it's the foundation of every deal, even if you pay cash, that just means you are financing the deal yourself.
:)
0 Reply
John Jackson
Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
13y
Lease Options are "no money down" deals, as would be many Sub-2 deals.
0 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
Dean,

What's your best most creat no money down deal? Can you share a real story with us?

Justin
0 Reply
Justin PiercePro Member
OP
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
13y
John,

I favor lease options myself. Probably just my comfort level. Even thouse can be hard to get into without a good deposit. No?

Anyone got an awesome deal they pulled off with creative low down financing?

0 Reply
John Jackson
Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
13y
Justin Pierce I only pay a $10 Option Consideration.
Unless you are trying to get into a lease option for your own residence, then there is no need to put up any money on a lease option.
0 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
13y
Originally posted by Justin Pierce:
John,
I favor lease options myself. Probably just my comfort level. Even those can be hard to get into without a good deposit. No?

Anyone got an awesome deal they pulled off with creative low down financing?

Hi Justin Pierce

I focus on -

1. Lease Option Assignments
2. Sandwich Lease Options
3. Getting Private Lenders to lend 100% of a deal with their IRA at a reasonable interest rate

1. LOAs require a pretty house in nice neighborhood with good schools. $10 option, $200 in Marketing to get the house from seller and get the Tenant Buyer in. Market Rent and FHA Qualifying Knowledge and Sales Training to Sellers and Buyers are required. Credit Improvement to close 90% of Buyers is mandatory for a good local reputation.

2. Sandwiches. Same requirements as #1. You can get a Performance Lease where if the tenant buyer does not pay you the REI, you do not have to pay the Seller. This takes talent to do. If you were the seller, would you do that? But it can be done.

3. Private Lending has to do with working with custodians who facilitate Self Directed IRAs. The Private Bank concept is about OPM, or other people's money. Learn about it here. http://equityu.businesscatalyst.com/library/general-resources/private-bank-concept

Read everything you can about being creative with financing. in the mid 80s one of my business coaches suggested I read this guy http://www.amazon.com/s/ref=ntt_athr_dp_sr_1?_encoding=UTF8&field-author=Albert%20J.%20Lowry&search-alias=books&sort=relevancerank He is amazing!

Be responsible for your education in REI. See the vast resouces at http://www.biggerpockets.com/rei/

Best of luck to you!

Brian Gibbons
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