Realtors- Can You Really Buy Property With No Money Down? – Real Estate Investing


Joe: Hey, it’s Joe. I’ve got another question.
“Dear Joe, how is it possible to buy with zero down? I know an agent here in Philly
who lost his license and went to jail last year because they were doing zero down deals.
Apparently, they would raise the price of the house and get a kickback at closing to
cover their down payment. They took all of the money and then the houses went into foreclosure.
Can you really buy with no money down or are you teaching the same method this guy was
using?” This one’s from Michelle in Oklahoma Joe: Well, Michelle, what he was doing is
illegal. And he’s committing loan fraud because he’s lying to the lender. He’s raising the
price of the house, which is harder to do these days because there’s a lot more scrutiny
for appraisers. But still, it’s possible, and especially when the markets change, those
types of things can happen. But they’re also getting new loans on the property and then
they’re pulling money back out and creating shadow seconds. So what they’re doing is defrauding
the lender. Obviously you don’t want to do that.
Joe: What we’re doing is perfectly legal, though. Let me give you an example of a zero
down deal so you’ll understand the structure and how it works and maybe a little bit of
some of the ins and outs of this process. I have a hierarchy of structures that I use
from best to worst, depending on the type of deal that it is, what the seller needs,
what they’re trying to accomplish and what you’re going to do with the property after
you get it. The hierarchy is subject-to at the top, then multi-mortgage, then land contract
or contract for deed (it’s the same thing — just different names in different states
— if you’re in a trust deed state its contract for deed, and in a mortgage state its land
contract). Then there’s lease option, and then assignable cash purchases. Those are
the five zero down structures that you can use and I use them in that order, based on
the type of deal that we’re going after. Joe: So let’s take just one of them. Let’s
take subject-to because that’s one that I like the best and that I think is the strongest.
It’s at the top of the hierarchy. It’s very easy to use with no risk, no credit, and no
money down; really a nice process. Basically, what subject-to is — let’s say you’ve got
a property that’s worth $150,000. Let’s say they owe $145,000 on it now. If you were to
sell it for them as an agent, it would cost them $10,000-$15,000 to come to closing, to
be able to pay the commission, for any negotiation, repairs, the title and all of that stuff — it
would cost them that much to sell that property at this time. And they’re not in a position
to do that for one reason or another, or maybe they just don’t want to. They can’t pay a
realtor to sell their property for them. We all know that about 85% of for sale by owners
don’t succeed so the likelihood is that they’re not going to sell it for sale by owner and
save the commission, either. So they don’t have a whole lot of choices. If you go to
them and say, ‘I’d like to buy this property. Here’s how I can structure the deal.’ They
owe $145,000 on it. They’re making payments on it. A lot of these interest rates they’ve
got are still pretty good. They’ve got interest rates of about 6-7%. Some of them have ugly
interest rates and you’ve got to deal with those in a little different way. But most
of these properties out there that people need to sell but can’t sell because they don’t
have the equity — they have decent interest rates. So you can take over this property.
Joe: There’s a lot of different things you can do with it, but the way you’re going to
take it is that you’re going to have them deed you the property. Now, you’re not qualifying
for the loan, you’re not applying for the loan, you’re not pulling your credit, and
you’re not giving them any down payment — you’re going to just start making the payments. Basically,
what I like to do is ask them to make the next 30 day payment. So if their payments
are due on the 1st, I have them pay on the 1st. That gives me 30 days to find a tenant
or a lease option buyer to put into the property before I have to make the next payment. Now,
if you’re brand new at this, and you don’t want to take the risk that you’re going to
have make a payment without having a tenant (and I wouldn’t suggest that you do this if
you’re brand new anyway because until you’re positive that you can fill those properties,
you don’t want to take on that debt) the way you do it instead is to put together a purchase
agreement. I have a purchase agreement for subject-to deals, and basically what it does
is it gives you 90 days to go out and find a buyer that you can assign the deal to. So
you don’t even have to close it. You don’t have to deed it to you at all — you could
have it deeded directly to another person who gives you an assignment fee to buy that
property, or you can buy the property and you can sell it on a lease option. That protects
the seller a little better, and I like that way better, plus it builds your wealth — it
builds your portfolio of properties, which is something that is really important to be
doing if you want to have a good retirement Joe: As an agent, you don’t have a retirement
plan or at least most of you don’t have retirement plans, and when you stop working or when you
stop making commissions, you stop making income, and that’s not a good situation to be in.
You really need to own rental property — every agent should own a bunch of rental property
— at a minimum, 2 to 5 pieces of rental properties; everyone should own that. And I would go so
far as to say that it’s a better investment than the stock market. If you look at the
leverage position, and if you buy good, solid, stable properties that you can rent for the
long term and don’t have negative cash flow, it’s a great way to save for the future. It’s
a great way to leverage your money. And, there’s no tax implications on the money that it’s
making. In fact, it saves you money on depreciation. So you want to keep those properties.
Joe: I’m getting off on a tangent here… Anyway, on subject to deals, you take these
properties, they deed them to you, and you’ve got the property — that’s a zero down deal
— it’s as simple as that. Multi-mortgage gets a little bit more detailed. Land contract
is a little bit different. Lease options are a little bit different. I spend 2 or 3 hours
at my buying events teaching these structures, plus it’s in all of my programs, because this
is the core material of what I teach. Joe: So I hope that helps. Good luck with
it.

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