There are a lot of so-called “real estate gurus” out there that promote buying a house without using any of your own money, regardless of your credit. Is it a scam? A quick search of the internet will have you thinking it is, quite frankly though, those naysayers have no idea what they are talking about. They have never done it, or maybe they tried once and were not successful. Why would you listen to them? I am here to tell you that not only are those real estate gurus telling the truth, but you also do not have to be a guru to do it!
I can say this because I purchased my latest real estate investment property without a dollar coming out of my own pocket. You can do it too!
I can imagine it now, many of you are thinking, “Ok mister big shot, just _how do you buy a house with no money_?” The answer is creative financing. Creative financing is a method of purchasing property that does not involve a bank. I used a method called _seller financing_. Seller financing is 100% legal; It is a person to person transaction. You can think of the seller as the bank. You receive the title through a deed of trust on the condition you pay an amount agreed to through a promissory note.
It is important to know your numbers before going into any deal, seller financing is no different. It is an incredibly powerful tool and has some great advantages for both the seller and the buyer.
Here is what I looked for:
– Older house, needing some TLC (discount!)
– 0% down payment
– No money out of pocket to close
– Max payment $2,000 per month
– No agents to pay
– The only money changing hands starts with the first mortgage payment
– Prefer houses that can be split into multiple units for streams of income
With that in mind, I went forth and found myself a property that was uninhabited and called up the owner. The house was not on the market however, it was costing the owner quite a bit each month to hold on to. They were happy to discuss a sale. I brought up owner financing, we discussed how it works, and they agreed.
After inspections, and final negotiations, they agreed to all my terms, with the addition of a 5-year balloon payment. The property is on the edge of an aggressively expanding population zone. Within the 5 years, the equity in the property is going to shoot upward. Additionally, the house is two stories. The upper story is at the street level. The backyard is lower, at the level of the backyard. The lower level is the full size of the upper and has never been finished, providing a great opportunity for renovation into its own unit. If property values do not go up as I expect, finishing the lower story alone will add significant value to the property.
It may take longer to find an owner willing to do seller financing, but it is not uncommon. Be patient, they are out there. Look for properties, submit offers, ask the right questions. I am confident that you too can buy a house without a penny from your pocket!
If you are interested in learning this, or other, creative financing methods, I recommend The Book on Investing with No (or Low) Money Down https://www.amazon.com/Book-Investing-Real-Estate-Money-ebook/dp/B00OYIFJFK/. The BiggerPockets https://www.biggerpockets.com forum is also a great place to interact with, and learn from, fellow real estate investors.