No money down real estateIf you’ve ever seen any late night informercials you’ve no doubt seen the one that claims about buying no money down real estate.  But can you really by real property as an investment without using any of your own money?  The answer is a resounding “yes!”.  Anybody equipped with the right training can purchase real estate without using banks or any of their own money but it does require specialized training.  The late night gurus make it sound much easier than it really is.

Buying real estate with no money down can be a great way to help fuel your retirement nest egg.  Once of the best things about investing in real estate is that once it’s set up properly it can operate passively without little involvement from you.  You can even buy property with bad credit although your journey can be a lot smoother if you have good credit although it is completely unnecessary.  Sometimes having access to too much cash is a detriment because when you run into challenges you will throw money at it rather than coming up with creative solutions.

Here’s a quick example of how you can buy your first piece of real estate without using banks, your own money or your credit.

Example: Seller has a property on the market for 90 days for $100,000 and hasn’t been able to sell it.

1.  You approach the seller to find out what their motivation for selling is.  The seller has to be motivated to make this deal work.  Motivation means the seller has a “need to sell” as opposed to a “want to sell.”  They need to sell because they are moving soon, they have double house payments, they’ve just lost their job, they’re going through a divorce, etc.  In other words the seller is in some type of distressed situation that requires outside help or they may end up ruining their credit or losing the house altogether.

2. Once you know there is seller motivation then you can proceed to offer the seller solutions to his problem.  If the seller doesn’t perceive that they have a problem, no amount of talking will make them sell you their house.  You tell the seller that you can buy their house on the day of their choice for what they owe on the property and you’ll cover all of the closing costs. 

We mentioned that the house in question is currently listed for $100,000 but we didn’t tell you that their is an underlying loan balance of $90,000.  You will not be paying off this balance with a new loan.  Instead you will be doing what is referred to as an informal assumption.  This means that the loan will remain in the sellers name, they will deed you the property and in 30 days you will begin making payments on the mortgage on the sellers behalf.

3.  The seller agrees to deed you the property.  You collect all of the necessary documents and take them to a local real estate attorney and have the legal documents to transfer the property drawn up.  You are happy because you got into a property with none of your own money except the money you paid to your attorney which should be less than $1,000 and the seller is happy because they solved a problem and now will have their mortgage paid on time until the property is either sold or refinanced.

4. Since you are now the proud owner of a no money down home you have the right to lease, rent-to-own or owner finance the property.  Owner finance is the most lucrative and sophisticated form of financing.  The first thing you need to do is decide on a selling price for your newly acquired property.  We suggest about 10% above market value since you will be doing creative financing without the use of banks which makes your property more marketable.

Thus the house in question will sell for $110,000 and you will require a 10% down to owner finance this home to a buyer regardless of their past credit.  So the loan to your buyer will be $99,000 ($110,000 sales price – 11,000 down payment).  Remember the loan balance you assumed was $90,000 so you still have $9,000 in equity coming to you when your buyer either sells or refinance his new home.  You also get a little monthly spread from the buyer.  Let’s assume your monthly payment on the $90,000 is $850 and the payment on the $99,000 loan from your buyer is $1,050 you get a $200 monthly spread or $2,400 per year until the loan is paid off.

Since you have not used any of your own money you can repeat this process as many times as you desire and put the income in your retirement account.  Now a few downsides of this process is that if you don’t do careful screening of the buyer they may end up defaulting on the loan and you will have to foreclose.

Depending on the state you live in where it is judicial or non-judicial process this could be an arduous process.  It is a good idea not to spend all the money you get so you can whether the storm in the event of a non-performing loan.  In fact, no matter how well you screen buyers there will be some properties that you will have to take back.  Also, remember that you still have to make the payments on the underlying loan as you told the seller you would so having cash reserves is a must.

With the right training this can be a great passive strategy to look into that will greatly help you increase your retirement nest egg.  No money down real estate is a very creative way to leverage the assets of other people.

Related posts:

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  3. A Debt Free Program Makes Retirement Easier
  4. Debt Consolidation Services Help You Reduce Debt Post Retirement
  5. How To Have A 55 Retirement

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