No Money? No Problem

No Money? No Problem

If you are thinking about investing in real estate and your financial situation is an issue, you should consider the many unique financing strategies that are available to you. Having cold hard cash in the bank is not the only way of acquiring property. Buying without cash or credit is very doable, especially during such an economic crisis. Homes are being foreclosed upon left and right, and never has there been a better time to take advantage of this troubled economy.

One option to consider is working with the seller of a property. If the seller has existing financing already in place, chances are that he/she may have equity in the house that can be lent to you. The seller can actually become your bank, even more so when he/she agrees to take a note for a portion or all of the money agreed to from your purchase of the property.

Pursuing purchases where the seller is both motivated and involved is a sure way of obtaining a good deal. Selling a home and allowing for a rent to own basis allows you to collect three to five percent of the purchase price as a non-refundable option payment. If there is owner financing involved you could collect as much as ten to fifteen percent of the down payment. If the deal has the buyer bring in a new first mortgage, you can get all of the money needed to fund a cash purchase from a motivated seller.

Negotiating an all cash price with you paying all of the closing costs sweetens the deal and gives you leverage in the negotiating process. Even though you have negotiated an all cash price, money out of your pocket is not needed as the strategy is to resell the property before you actually close on it with the seller. Putting the property on the market for a greater amount than you originally agreed to with the seller and offering to help the buyer finance the purchase will make the deal more attractive.

This can be done with the incorporation of what is known as a 9-5-5 loan. With this type of loan, the buyer brings in a new loan for ninety percent of the purchase price amount and also puts five percent down. You only need to carry back a five percent amount in the form of a second mortgage.

Investing in HUD repossessions is also an avenue to consider. Typically, little or no money is needed as a down payment. The seller, whether it is the bank or the homeowner is just looking to get rid of the house and that can be used to your advantage. Making an offer to basically clear them of their attachment to the house or property is all you will need. Taking over the payments on the existing loan is usually the best route to take.

Having money in the bank should not be the deciding factor in whether or not you choose to invest in the real estate market. There are so many unique and creative ways to finance these days, that it is such a shame that potential investors are hindered by the idea that investing needs money up front. Incorporating creative financing strategies allows anyone willing to invest, despite his/her financial situation, the ability to make a deal and profit from it.

One way to buy real estate with little or no money down is by taking advantage of lease options. Leasing a home with the option to buy it at a later specified date gives the seller the commitment necessary to secure the deal and also offers the potential for further negotiations regarding the sale of the property.
Finding a deal for another investor is another way to profit without putting your own money down in the transaction. Acting as a "Scout," you can locate a good deal and sell it to an aggressive investor for a finder's fee. Another way to purchase real estate without the use of your own personal cash is through assignments. If you originally put the property under contract between you and the seller and include "and or assigns" in regards to the title of the property, you are able to flip the contract to another investor without even personally closing on the deal.

Making an agreement for the deed for the property with the seller is yet another way to finance your purchase without money down. A mutual agreement between the buyer and the seller can be made where the title of the property is transferred to you as the buyer when all of the necessary payments have been made to the seller or you have accommodated for the said payments via a refinance loan. This type of loan is referred to as a "wrap around loan," as it proceeds to protect the seller throughout the payment installment process and he/she has the security of still owning the property until it is completely paid for.

Simultaneous closing, also known as double closing or back to back closing, is another method of purchasing property where having cold hard cash is not necessary. This seller financing technique requires the creation of a private mortgage note by the seller which is sold simultaneously to a note buyer upon the closing of the deal. The seller is motivated to obtain cash upon closing instead of over time through payments and the buyer is motivated because they will most likely receive more lenient financing from the seller. This type of transaction is usually completed within a few days if not hours from the buyer's purchase to the buyer's sale to the new buyer.

Although the legalities of this type of closing vary from state to state, investing in properties where the sellers are really motivated, such as homes in foreclosure or real estate owned properties, is a great way to make a profit. The laws and requirements of each state are different and always changing. Some states allow these types of transactions, whereas others restrict them.

Simultaneously closing on a deal involves the deal between you and the seller of the property, and also the deal between you and the buyer you will sell to. This process begins buy you making a deal with a seller where the property is put under contract where the seller deeds the property to you. After consulting your buyers list and finding a buyer for the property, you in turn deed the property to your buyer. The new buyer's funds then go into escrow and the transaction is made. Basically the buyer pays you, you pay the seller, and none of your money was needed in the course of the transaction.

Doing a business deal with a staggered closing is yet another way to structure a deal that gives you the advantage of time. By scheduling a prerequisite for payment, whether it is defined by days, weeks, months, or whatever time frame is decided upon, you can close a deal and not have to make an actual payment until a future date.

Subject-to deals have also become a very popular and relatively easy way to make a profit, especially due to the current housing market. A buyer can simply assume the existing loan in place and then pay the seller the difference owed or have the seller hold a note on the house for the balance. When a seller decides to hold a note for the balance amount to be paid in full at a future date, there are no necessary payments to be made so you, as the buyer, receive one hundred percent financing through this process.

Acquiring a hard money loan is also an option to the financially distressed investor. A hard money loan is a specific type of asset based loan where a borrower receives funds secured by the predetermined value of a parcel of real estate. This type of loan is not typically issued by commercial banks but is often attainable through private investors. Receiving funding this way is a good way to have cash available up front but some of the drawbacks include much higher interest rates than if the loan were to be sequestered from a more traditional lender, such as the bank.

Jeff Adams is a full time investor who has done over 350 deals and is a leading expert in the buying and selling of real estate. For more information and to receive your free Foreclosure Profits CD, visit http://www.FreeForeclosureCourse.com or sign up for his free seven day e-course at http://www.RealEstateWebProfits.com

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