I'm going to be going over seven different ways to purchase a property with no money down.
And this applies for investment deals, as well as potentially if it's your primary residence
and you want to do some house hacking and then every other type of deal in between.
And I know a lot of people are probably going to say, "This is clickbait." However,
I've used almost all of these strategies, and I'm going to give you examples of each one.
So the first no money down type of deal is what's known as an equity partnership.
That's basically where one person who maybe doesn't have any money or resources
goes out and finds a really great deal. And maybe they manage the project and then their
partner will be the one that finances pretty much everything. And then you split it 50/50,
or you can work out, you know, it's completely subjective. You can work out 70/30, 80/20. You can
work out different arrangements. And I think this is good if you're completely brand new to real
estate, you have no idea what you're doing. It can be a good strategy. However, I would also say it's
definitely the most expensive form of financing to give up 50% of a deal. Honestly, finding a good
deal is the hardest part in real estate. What you'll soon realize after doing some
investing is that finding it is the most valuable part. If you find a good deal,
you can find the money pretty easily. There's plenty of people out there that have money
to deploy that are looking for something like a good real estate deal, for example.
I would use it if you're getting started, but it's definitely not the best form of no money down.
The next type of no money down deal is using private money or hard money lenders. Now with
private money lenders, they can be a little bit more flexible. My private money lenders,
if I find them a good deal, they will basically fund like a hundred percent of the property.
And then I might have to bring some closing costs to the table. However, oftentimes you can have
what's called gap funding, and that's basically where you just find a lender, it could be another
real estate professional who understands the business and know that you got a pretty good deal,
or it could just be a friend or family member that pays basically for the difference for the closing
costs. Now the thing with hard money lenders, they're usually a little bit more strict than
private money lenders, so they're going to require you probably put a minimum of like 10% down
and that's more when you're going to have to really find the gap funding, gap lenders.
You can find those online. And gap lenders are going to be a little bit more expensive because
it's not really secured by anything, so it's kind of like a riskier type of loan. However,
that's why I like to try to rely on private money as much as possible because they can
oftentimes be a lot more flexible with what they lend. And then maybe you find a friend, family
member, real estate associate who can bring the remainder to the table. I just did a deal where
my hard money lender brought a significant amount to the table. And then I just had a friend that
basically brought, it was like 20,000 to cover the rest. And we had a formal agreement set up.
The next type of no money down deals are seller financing. And seller financing is a thing where
again, it's going to be completely subjective on the seller, but oftentimes if someone's
doing seller financing, they're more motivated and they might be willing to be flexible. Some sellers
might require a down payment, other sellers, as long as they're getting a good monthly income
that you're paying, they might not require a down payment. And seller financing happens when the
house is basically completely paid off. And so the seller will basically become the bank. And you can
ask your title company exactly how to structure this. And the reasons why a seller would even do
seller financing to begin with is they're going to save some money on closing costs. They can
get some passive income every single month from really a higher interest rate because typically
seller financing, they're going to charge a little bit more than a traditional bank would.
And a seller can also oftentimes sell their property faster by doing seller financing and just
get rid of the headache because there's a lot more people that are looking for flexible terms.
And the reason that a buyer would look at a seller financing deal is because number one,
they wouldn't have to go through a bank and then it's not going to be as many closing costs and
it's going to be a faster transaction. You don't see seller financing deals too often,
but you will come across those and you should try to become the transaction
engineer where you can make any type of deal work. Because oftentimes with seller financing,
because you don't have to qualify and do all this other craziness through the bank, you can
oftentimes pay a little bit more for a property. And that's of course, if it's cash flowing or
has a lot of potential and a lot of upside. Before we go to the next strategy, if you're
looking for the real estate investing resources that I use on a daily basis,
check out the links below. Additionally, if you're looking for real estate mentorship, I do offer
different forms of mentorship. So you can reach out to me in one of the links below as well.
The next type of no money down deal is what's called subject-to-financing. And this is kind
of a gray area in the real estate industry. It's basically where the seller still has a
loan with the bank and you basically just overtake their payments. The deed gets transferred to you,
but the loan still remains in the seller's name. And the reason it's kind of a gray area is that
there's no official agreement with the lender. And every lender has something that's called a due
on sale clause. If the property is transferred, technically they could force you to sell it.
Now, from what I've heard, that almost never happens. The bank really wants their payments
every single month. As long as you're making the payments, the bank is not going to call
the loan due. And I was actually just looking at a small apartment building where I was going
to do a subject-to and the reason it worked out for... It was going to theoretically work
out for everyone, is that the seller was super motivated and they didn't have enough equity in
the property to really sell it the traditional way with paying a real estate agent 5, 6% and tons and
tons in closing costs and waiting around another three or four months for this buyer to close.
Basically I was going to come in and overtake their payments. Now this deal that, like I said,
they didn't have a ton of equity. It was basically like a market price. I was basically paying
the market price for this apartment building. However, the reason that I was interested in it
is because the monthly payment was pretty low. I could get about $5,000 a month rent. This was a
four unit apartment building. And I think the guy's payment was like close to 3000, maybe a
little bit over 3000. And this deal also had a lot of upside. It was in a very up and coming area.
Even though I was paying market price at the time, I think in the next three or four or five years,
I'm probably going to look at that property, it's going to be worth like one point something.
They wanted, I think it was around 750 for this deal. It would've been a pretty good
monthly payment for me and the seller could basically get this property off their back.
Now there would still be the risk that if for whatever reason I didn't pay the mortgage every
single month, since the loan is still in their name, that would really hurt their credit score.
So subject-to is you really have to find a very motivated seller, good monthly payment, but maybe
not a ton of equity in the deal. Of course, you should always talk to a title attorney or do
your research for these types of transactions. The next types of no money down deals are FHA and
VA loans. Now before you tell me, VA funding fee and FHA is 3.5%, yes they are. However, with FHA,
you can get the 3.5% as a gift from a friend or associate or coworker, whoever it may be.
And then you can have the seller pay the closing costs. If you're buying FHA, you can pretty easily
find someone that might be willing to give you 15, 20, 30 K, whatever it is and then just negotiate
with the seller to pay your closing costs, which are going to be probably roughly about 2 to 3%.
And the requirements to get approved for an FHA loan are very low. You only have to have, I think
you can actually have a 500 credit score. If you have a 500 credit score, I think you have to put
10% down, but I think you have to have a minimum of a 580 credit score and then you only have
to put down 3.5%, get that as a gift, and then potentially just negotiate with the seller.
Now VA loans is 0% down. However, there is, I think it's about a 2% funding fee. But again,
this something that you can maybe pay a little bit higher price and then tell the seller to pay
X amount in closing costs so that it would basically be a 0% down transaction for you.
In real estate investing, you really have to think of, I think Robert Kiyosaki had a quote where
like, "Don't say you can't afford something, think about how you could potentially afford
something." And that's going to open it up to so many different types of deal possibilities.
And the next no money down deal is called wholesaling. And I've done many of these types of
deals. And I've also purchased from wholesalers. It's basically where you lock a property up for,
let's say, I'll give an example of a deal I just did. The wholesaler had it under contract
for 270 K. It was an off market property, an estate type of sale. He sold it to me for 320.
He basically assigned the rights. So he didn't close on the deal necessarily with wholesale
and you're not closing on the deal usually. You're basically just getting an assignment fee,
development fee, partnership fee, whatever you want to call it,
to sell the rights to another investor. I was ultimately the person that ended up
closing on the deal. The wholesaler made a significant amount and the seller was able
to get the property off their back. And then I was able to get a deal that was basically, my opinion,
about 100 K under market value. So wholesaling can be a great way to do real estate investment deals
with very little risk because you're not putting your own money into the deal. All you're doing
is locking up the property under contract and then assigning the rights to an end buyer.
The next type of no money down deal is what's called cross-collateralization or if you want to
say just a home equity line of credit. Basically I had an apartment building that I really wanted
to buy. It was basically 200 K under market value, under the appraised value. However,
I needed about, I think it was like 100 or 120 K to close this deal. And the way I did it,
because I didn't want to come out of pocket for that because that would be a lot to come out of
pocket. I had another apartment building with a lot of equity. My hard money lender was able to
basically put a second lien on that property and use the equity in that as the debt on payment for
this other one so that I didn't really have to come out of pocket pretty much at all.
Let me know what you think of these strategies below or if you have any questions.
And also if you're looking for the real estate investing resources that I use on a daily basis,
check out the links below. And if you're also looking for mentorship, I do one-on-one real
estate investing mentorships, reach out to me in one of the links below as well and we can have a
quick chat and see if it's for you. Thanks again for watching. I'll see you on the next one.