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SHOW NOTES FOR EPISODE 084–10 BEST WAYS TO BUY A PROPERTY WITH LITTLE OR NO MONEY DOWN
Sometimes, the toughest part of real estate investing is just getting started. Making that first purchase. All too often we find it so much easier to just keep putting it off. Making excuses.
- Well, I haven’t found the right property.
- I don’t know enough. Maybe after this seminar or boot camp I will
- Analysis paralysis – over analyzing
- I don’t have enough money
- And the excuse list just goes on and on
We need to start putting these excuses to rest and get ready for the big move. In this podcast, I would like to help you dismantle one of our most popular excuses – “I don’t have enough money.”
This excuse can be pretty effective “action stopper.” I mean, what else can you do without money. Well, actually, you can do more than you think!
There are many ways to buy a property, even if you have little or no money to put down. Here are 10 ideas that can make acquiring your first property – even without the money – that much more feasible:
1. Sweat Equity
Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down payment or for purchase later. This is a great technique if you are handy with tools, yard-work, and paint.
Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling and the owner is ready for just about any offer. You will find these houses ranging from just needing a little “cosmetic” work like landscaping or painting, to totally trashed out houses in need of some serious renovation. If you are into repairs, this is a great way to get a home for a good deal.
If you are not skilled at repairs and renovation, be careful about fixer-upper homes. They could end up costing you quite a large amount of money to pay others to fix.
I also recommend getting a home inspection so that you know what exactly you are in for before you begin.
2. Seller Carry-Back
Look for a home with an assumable loan or an owner willing to carry back a loan. Instead of buying out the owner’s equity, ask the seller to carry back a second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, you can get the home for no money down.
3. Offer an Object for the Down Payment
Offer something other than cash (land, a car, a boat, or valuable collectibles) to the seller instead of a cash down payment. This is why it is important to listen to sellers. Find out what they want and need. Maybe you have (or can get) just what they need. For instance maybe they wanted to use the down-payment to buy an RV and it turns out that you just happen to have one you don’t need. Offer that vehicle as a down-payment, and it saves you from coming up with the cash.
4. Offer Services for the Down Payment
Offer your services or expertise to the seller in lieu of a down payment. Some examples include $10,000 worth of auto services if you’re a mechanic, dental work if you’re a dentist, desktop publishing services if you’re a designer, artwork if you’re an artist or legal work if you’re an attorney.
5. Foreclosures
Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will let you buy a foreclosure with no down payment if your credit is good and they’re anxious to have the home occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home’s value. Distressed properties – assume with little or no down to save foreclosure.
6. VA or Other No Money Down Loans
Look for conventional loan programs such as VA or FHA that require little or nothing down. VA loans have helps countless veterans get into their homes. There are often programs available to first time buyers or people who are distressed (such as with Hurricane Katrina) that will help people get into a home with little money down. You usually will have to qualify for the loan with the bank, though.
7. Find an Investment Partner for Equity Sharing
Look for an investment partner who’ll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.
8. Wrap-Around Financing
Wrap-around financing is where you assume a seller’s VA Loan by doing a new Contract for Deed. Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount, but the rest of the purchase price of the house, letting you get in with little or no money down.
9. Rent-to-Own or Lease-Option
This is really is one of the best ways to get into a home of your own when you can’t get a bank loan. Remember that you may still have to get a loan down the line. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house, so you can use the time to fix your credit, or use other options to purchase the house at that time. You can always try to negotiate another 5-year lease-option if you need more time
10. Government and Community Down-Payment Programs
Did you know that there are many community and non-profit organization programs out there to help people get into homes of their own? Many of these do not require any money down.
There are some organizations and programs that will pay for some or all of the down payment for you. Generally these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.)
If you have been unable to get into a home because you don’t have enough money for a down payment, then maybe one of these programs will be for you.
Below are a couple of organizations that have down payment assistant programs:
AmeriDream Inc.
The Nehemiah Program
http://www.nehemiahprogram.org
Find My Way Home
http://findbuyerassistancefp.clixonit.com/
Affordable Housing Clearinghouse
http://www.affordable-housing.org/
American Dream Downpayment Initiative (ADDI)
https://portal.hud.gov/hudportal/documents/huddoc?id=20604_brochure.pdf
You can just do a Google search on “down payment assistance” or loans and find many more. Also check in your local area, because many communities have similar programs of their own.
OK, so I just gave you 10 reasons that should offset your “I don’t have enough money” excuse. It’s time to put-to-death another excuse that prevents you from getting started.
You know, there are even investors out there that have learned to master the little or no money down approach and try to make every deal they do a little or no money down deal.
A great book you might want to purchase is “The Book on Investing in Real Estate With Little or No Money Down” by Brandon Turner. This book has a ton of creative approaches to help you overcome the “I don’t have enough money excuse.”
Well, that’s it for today
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