Zero Down Real Estate Investing
By Steve Gillman - 2007 - 2015
Buy real estate with zero down? Why would a seller walk away
from closing with nothing? They wouldn't, and that brings us
to an important point about real estate investing with no down
payment: The seller almost always needs to get cash at
closing, but it doesn't have to be your
Here's a Zero Down Example
I'm selling a rental property right now, with payments of
$400/month. The buyer has good credit, and his $5,000 down payment
covers closing costs and even a foreclosure, if necessary. At
this point, I don't care where he gets the down payment. A $6000
cash advance on a credit card for example, would cost him about
$135 per month, and provide enough for the down payment and his
In this case, with rent around $600 per month, he'd be okay.
In many cases, however, the extra $135 would cause negative cash-flow.
However you do it, just be sure the numbers work. By the way,
I would have accepted payments of $350, if he had asked, because
it's the price and the interest rate that are important to me.
More Zero Down Payment Methods
While some sellers (like myself) are able to offer terms and
low down payments, most need or want at least 70% of the price
in cash. This means you need to think in terms of how to get
a primary loan, then how to raise the money for the remainder.
Some examples follow.
Some banks do "no doc" loans, meaning they don't
require verification of your income, source of down payment,
etc. They'll generally loan 70% to 80% of the property value,
so if the seller is willing to take a second mortgage from you
for the other 20% to 30%, you're in with no money down. The seller
gets 70% or 80% now in cash, plus payments for years to come.
You'll have two payments, of course, so be sure that the numbers
You can borrow against your home or other property you own
to come up with down payment money. You can borrow from friends
and family. You can borrow against your car if you owe nothing
on it. If you borrow for a "vacation," and leave whatever
you don't spend in your checking account for a while, you may
be able to use it without violating bankers rules about borrowing
for a down payment. (but check with your lender).
There are usually a few "note buyers" around, even
in smaller towns. These investors buy land contracts, mortgage
loans and other "notes" at a discount. Say a seller
takes a purchase money mortgage from you for $100,000, for example.
A note buyer might pay him $85,000 for it. How does that help
you or him?
Here's an en example...
A seller prices his property at $194,000, but expects to sell
it for about $180,000. You offer $205,000 (making sure you'll
still get cash flow) in the form of a mortgage for $160,000,
and another for $50,000. You arrange for the sale of the first
mortgage at closing for $136,000 to a note buyer. The seller
gets $136,000 cash, plus payments from you on the second loan
Notice this adds up to $186,000, which is more than he expected
to get out of the deal.
These are some of the ways you can buy with zero down. Real
estate investing is about making a deal work for all parties.
Find ways to get what you want, and get the seller what he wants.
That's more important than having large amounts of cash on hand.
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