What Will Property Sales Be Like In 100 Years?

[Lance Matsuda]

Zero down? Why would someone want to leave closing without having to pay anything? Sure, they wouldn't, which brings us to the most crucial https://diigo.com/0mqjom point to consider about real estate investing without down payment: The seller always needs cash at closing However, it doesn't need to be your cash.

A Zero Down Example

I'm offering a small rental house right now that will require a $400 monthly payment. The buyer has a clean credit report and the down payment of $5,000 covers closing costs and even a foreclosureif needed. So at this point, I'm not concerned about how he gets the downpayment. A $6000 cash advance on credit cards with low interest, for instance, would cost him $135 per month and provide enough money to pay for the downpayment and his closing expenses.

In this case, with rent around $600 per month, the renter would be okay. In some cases, however, that extra $135 might create negative cashflow. Therefore, make sure that however you do it, the numbers are working. For my part I would have set the payment at $350, if the client had askedme, since it's both the price and interest rate that matter for me.

Other Zero Downpayment Methods

While there are sellers (like myself) that are able to provide the lowest downpayment and terms, generally, you must find the means to obtain at 70 percent or more of the price in cash. Imagine how to secure a principal loan, then how to procure the funds to cover the remaining. A couple examples follow.

Some banks will still offer "no doc" loans, in which they do not require verification that you earn a living, have a source for downpayment or proof of downpayment. They typically only loan 70%-80 percent of the value of the property If the seller is willing to get a second loan from you to pay the remaining 20% to 30 percent, you're in with no money down. The seller is paid 70% or 80% in cashand will make payments for years to come. There are two installments in the end, but be sure the numbers work.

You can use the equity in your home or another property to get funds for your downpayment. If you want to borrow money for an "vacation," and leave anything you don't pay back in your checking account for a short period you may use it without breaking bank regulations on the borrowing of money for a downpayment.

Although you may be in a small city there are usually couple of "note buyers." These are investors that buy mortgages, land contracts along with the like. They also purchase other "notes" at a discount. If a seller buys an acquisition money mortgage from you with a value of $100,000 for instance, a note buyer might purchase it for $85,000. What does that mean for both of you?

An exampleis: A seller values his property at $195,000, and expects to sell it for $180,000. You offer $205,000 in the form of a loan for $160,000, and another for $50,000. You've arranged the sale of the first mortgage upon closing for $136,000 to a note buyer. The buyer receives that cash right now, as well as payments from you on the second loan of $50,000. Notice that this adds up to $186,000, which is more than he thought he would get out of the deal.

These are just some of the ways to purchase a home with no money down. Investment in real estate is about making the deal work for all involved. Find a way of getting what you want and get the seller what he needs. This is more important than having a large amount of cash in the bank.