How to Invest In Real Estate with No Money
You may be wondering how possible it is to buy a property with just a few dollars or perhaps no money at all. This is very possible as it is done everyday, not by most people anyway, but some do it once in a while. The would-be buyer only needs a little how-to information and persistence.
The first step in this is to talk to the sellers of the property and most often, not the brokers. Brokers are always there to defend the source of their commission and as such would say to you that their clients would not consider a purchase without a down payment.
This step is important because sellers sometimes are willing to sell on far more liberal terms than their brokers think of. There are different reasons why sellers sell property with the no-down-payment option. Some of them are listed below.
Some sellers do not need cash at the moment, and so they consider their long term needs by selling for no down payment. Some others have let the property run down so badly that only a no-cash buyer usually would be interested. Both types may desperately want to free themselves from the challenges involved in managing the property. They would prefer the steady income and high interest yield from a long-term trust deed or mortgage.
Some distress situations also offer similar opportunity. An owner for instance, who is stuck with the sale of a particular property-the types that does not give the desired profits, or that results in losses, may be concerned with cutting his losses and so he grudgingly opts for the no-down-payment buyer in order to get the problem off his hands. Banks, finance houses and lenders who have had to foreclose on a property they do not want will often rid themselves of it for nothing down and on affordable terms.
Most unfortunate occurrences such as divorces, remarriages, illness, deaths and loss of jobs or job changes can often make people consider secondary the immediate cash inflow. They consider the steady income from payment of the principal and interest on notes which is more attractive than cash that would be heavily taxable in the immediate.
Certain kinds of real estate- desert land and resort properties for example, are often hard to sell at a good price unless the seller is ready to wave most or all of the down payment.
Some FHA programs also enable responsible buyers to arrange a 100 percent financing for the purchase and renovation of low income housing. If you also have reasonable steady income, you may be eligible for a loan guarantee that may enable you buy at least one residential or farm property without a down payment.
As earlier stated, the secret to success in this is being able to engage the owner or sometimes the broker in a lengthy conversation.
The following strategies can be applied when considering real estate investment without money:
(1) You might suggest to the owner that he refinance the property before selling it to you. This would give him the cash he wants, with no immediate liabilities for taxes on any cash he receives. He might then be able to sell the property to you on a contract of sale for the full agreed price without accelerating the due date on the loan. This would let him report his gain in installments and spread its taxability.
(2) Offer him a higher total price on condition that he accept your personal note in lieu of the cash down payment. This would enable him get cash by pledging the note as collateral for the loan. You might write your note for more that the amount if he has specified an amount, to cover the discount that would be charged by the lender, then cover the balance of the purchase price by a contract of sale. This transaction would qualify for tax treatment as an installment sale.
(3) Offer to pay a higher interest rate on the personal note or the installment contract or both.
(4) Offer a faster payoff of either the personal note or the installment contract or both. The best way to get any concession is to offer one yourself.
Real state investment without money may be a great way to generate long term or residual income if the right principles and strategies are applied. The strategies mentioned above work well for most people who have a plan on how to generate great returns from the purchased properties.
The great returns come from the fact that the buyer most times will not have to pay income taxes. The properties also would be appreciating, meaning that the resale price tag on the property keep rising year by year. This will give the buyer more money when the property is sold that when it is bought.
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