How To Buy Real Estate with No Money Down

Buying real estate can be challenging in this market. Actually it can be challenging in any market. What if I could show you how you could buy a property without any money out of your pocket and without having to qualify for a bank loan? Do I have your attention? I will show you how you can buy property with no money down and not even a look at your FICO score. Is it easy? The end product is easy but the prep is a must. Lets be clear up front, a “No Money Down” deal does require money just not your money. Here are the steps you will need to do and follow in order to close a del with no money down. Preparation and homework are keys to buying a house with “No Money Down”.

1. Marketing: You must do marketing. Identify the type of property you want to buy. Research that type of property and where it exists and then you will need the names of the owners in that area. Do these sellers want to sell? You don’t know until you contact them. That is what your marketing is going to reveal. Your marketing should take the form of direct mail. It is the most effective and direct form of marketing you can do. You must research sellers in a particular neighborhood and mail postcards to them asking if they want to sell their property. The chance of you sending a postcard to them at the right moment the seller wants to sell is pretty small. That is why 1) you send many postcards (500 to 1500) and 2) you must send multiple times. You are in this for the long term so establish a marketing budget and monitor the results of each mailing. You should be willing to send postcards for at least 6 months to test your campaign.

2. Calls: After your marketing mailings have gone out, you will get sellers calling you. Most will be people who will wonder what you will offer. They are not serious. You need to identify these types of sellers or non-sellers immediately. Do not waste your time. A small percentage will be serious about selling their home; collect information about their property so you can start to put together an offer for them. The point of the call is to gather information and make an appointment. The appointment is made but is not confirmed. Confirmation requires research.

3. Research: This is a critical aspect of the real estate business. You are trying to establish the worth of a property that you will buy from past data. You need to establish the estimated repairs, carrying costs, resell costs and how you will sell the property. Research will give you these answers. It becomes a little easier after you have done it a few times. But having people on your Power Team will make the job easier. A Power Team is a group of individuals that work in the real estate industry and can support you. A realtor is a critical person. You can get information on sales, pending and listings in a particular area; a title company can confirm ownership of the property and a contractor can help with estimate of repairs. All this research will help you establish After Repair Value and an exit strategy. This will confirm if you go to the appointment or not.

4. Appointment: The appointment starts the buying process. You build rapport with the seller, review the condition of the property and present your offers for the property.

This is the preliminary work that is done to present a “No Money Down” offer. You are looking for a motivated seller (they must sell and quickly at a discount) or a seller with a property that is free and clear, they owe nothing on their property. I know that may be a foreign concept to you but they do exist. I have given you the outline of how to buy a property and it is the same in all cases. A no-money down deal is no different. You just have to be ready. Here is how we did it.

We had sent postcards to a particular group of homeowners – months ago. One of those sellers called us and told us that their tenant moved out of a house they owned and they did not want to be landlords any more. That is a great group of sellers – Absentee Owners that are tired of be landlord. We researched the property and found out that the seller owned the property free and clear. They had no loans on the property. This type of property gives us the most flexibility. Also the seller is use to receiving monthly income in the form rent and tenant problems and complaints. We structure our deals so the seller would continue to receive the payments but not the problems. We eliminate that problem.

Here are the offers we made to the seller, always make multiple offers. Offer #1) Purchase price: $130,000 with no money down and $500 principle only payment per month for 15 years; Offer #2) Purchase price $75,000 cash; Offer #3) Purchase price: $121,000 with $10,000 down and $275 per month principle only payments. The property was worth $130,000. Giving the seller full asking price and monthly payments was very appealing to them. Since the payments are principle only we are paying the principle down each month and lowers our risk on the deal. We pay $6,000 on the principle each year. This allows us to offer the property to a buyer for only a small mark-up and still make a good profit on the deal while maintaining cash flow. The seller took offer #1 and we put a small private money loan in the first position on the property to pull money out of the deal to pay closing costs, holding costs and repair costs.

“No Money Down” deals are out there. You find them by marketing to sellers with high equity and asking for the deals. We get a large percentage of NOs on these deals. We know that and are prepared for that. That is why you must have a follow-up campaign because sellers change their minds and what is a NO today may be a YES in the future.