Don’t have any money but still want to invest in commercial real estate?
Today, I’m going to show you 5 ways you can buy commercial property with no money.
Yes - you actually still have options. That’s how I got my start in the world of
commercial real estate investing – I bought my first office building without any money
out of pocket. And it was the best thing I could have ever
done for myself. So, if you’re looking to learn how to buy
commercial property with no money, here’s your guide.
If you want to be as successful as possible in commercial real estate, you need to get
creative with your deals. ________________
Do you think out of the box when you look at deals? Or do you simply go by the books?
The best real estate deals you’ll ever find will often come from when you’re thinking
creatively. Figure out how to solve problems that others
can’t or won’t. You Don’t Have To Spend Your Money to buy
real estate. If you’re just starting your investing journey,
money is probably tight. So, don’t spend your money on commercial
properties! Use someone else’s. Raising capital from investors isn’t quite
as hard as it’s often made out to be. It’s not some ancient mystery.
Many investors just don’t have the time to go find deal after deal, which is why they’re
willing to place capital with operators, like you, who do find the deals.
Good Deals + Trustworthy Operators = Investment Opportunity.
Here are my 5 favorite strategies for buying real estate with no money out of pocket.
Number 1 - Get Your Real Estate License Study the materials, take the test, get your
real estate license, and start finding deals. This strategy is my favorite and it’s actually
how I bought my first office building. You can also make some money helping others
buy and sell real estate, too, when you’re looking for opportunities.
While you’re out looking for deals, let your network know that you’re interested
in bringing investors into the deals that you’re finding.
You’ll quickly build up a list of interested parties that will want to see your offerings.
When You go to buy a property, Negotiate Your Commissions.
Now, here’s the best part: since you have your real estate license, you can actually
negotiate to get paid a commission on acquiring the asset.
After all – the seller would pay that to any other real estate agent if they brought
a buyer, right? That 3% commission can turn into 15% equity
if your lender requires you to put 20% down. And you’re not actually coming out of pocket
to pay for the investment. You really just have your time and energy invested into the
deal. The seller is basically giving you the money
to invest in the deal. That’s how having a real estate license
can help you get a quick start on investing. Number 2 - Is to Lease With A Purchase Option
(Or Rent To Own) Is the property currently vacant?
If so, you could approach the landlord with a lease to purchase option.
You’ll lease the property from the landlord and operate your business or sublease to other
tenants in order to make the rent payments. This lease can last for as long as you and
the owner decide and you can actually apply a portion of the rent payments to your purchase
price, which will also vary depending on your negotiations.
Your monthly payments can go towards your purchase of the building, relieving you from
having to fork over a large down payment to acquire the property.
After a set amount of time, the purchase option will expire or come due, at which point you’ll
need to close on the property. Number 3 is Subject To
If the seller has existing financing in place and is in a distressed situation or just looking
to walk away from the property, you could purchase it subject to the current mortgage.
Essentially, you’re assuming the financing that is already on the property and letting
the owner walk away. If you’re considering this method, you’ll
certainly want to review the loan documents to be sure that you agree with the original
terms and rates. Not all properties can be acquired this way,
as some mortgage documents can have “due-on-sale” clauses that trigger the repayment of the
debt upon a transfer of ownership. You’re relieving the property owner of their
liabilities and taking on the property yourself. Number 4 - Seller Financing
Ask if the seller is willing to carry the debt on the property when you buy it.
Instead of having to go through rigorous lender approvals, you may be able to make your monthly
payments to the property owner, instead. Sometimes, the property owner will even accept
little to no downpayment, so you won’t have to fork over any cash whatsoever.
After a few years, the seller’s financing will probably balloon and you’ll have to
refinance to pay them off or they could carry the debt for the life of the property – again,
it just comes down to how you negotiate the deal.
So, why would a seller finance the project? Well, there are actually a few good reasons:
* They want to avoid tax obligations from a sale
* They enjoy having the monthly income * They believe in you and want to help you
out * This strategy could help them get rid of
the property faster * Their returns could be more attractive over
the long run * And so much more
The 5th Strategy - Have the Seller Pay Your Down Payment
Now this is getting really creative. Ask the seller if they’d be willing to pay
your down payment for you. In order to structure a deal like this one,
you’ll likely end up paying well above their asking price, but that shouldn’t be too
big of a deal to you since you won’t have to come out of pocket on the acquisition.
Getting the property to appraise for your new purchase price, however, could be tricky,
so you may have to figure that part out. Here’s an example of how I would see this
type of deal being structured: * Let’s say the seller is asking $500,000
for their property * The bank requires you to put down 15% to
owner-occupy the space * The seller agrees to sell the property for
$600k and gives you the down payment of $90k at closing
* The seller makes an extra $10k for getting creative and you get the property with no
money down Sounds like a win for both parties!
Keep in mind, too, that your loan will be larger in this scenario, so you will have
to make larger monthly payments. But again - you bought the property without
paying for it! At the end of the day, the most successful
real estate investors and developers are also the most creative, so don’t be afraid to
break the mold. Find creative ways to make deals happen, regardless
of any lack of funds, knowledge, or experience. So, there you have it on how 5 ways to buy
commercial property with no money. I’m curious - which of these 5 strategies
are you planning to use? Let me know in the comments below!
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me a comment below and I’ll do my best to get back with you.
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