Would you sell one of your properties that are worth owning to someone with no money down? Probably not right?
I have never seen it in my 35 plus years that I have been an investor and probably you have not seen it either! however every night there is someone "Guru" selling their real estate program on how to buy real estate with no money down.
They are the only ones with few exceptions that are making a lot of money with their no money down system. They claim their deals were made with absolutely no money and at the closing even got a big check.
I have never seen this work in Omaha NE, nor have I had someone tell me of their success. I would like to challenge these individuals to come to Omaha, NE and take a few of the Realtors in our community that are investment specialists to see their system at work and how many properties they are able to purchase.
My suggestion do not get caught up in the “no money down" strategies because they rarely work or do not exist.
Let me give you a couple examples of how someone may be able to buy a property with no money down ,one that is realistic and the other is not.
1)Someone has a property that it is in poor repair, in an area that may not be so desirable , and the seller has tried everything possible to sell it and just can’t. They may take a chance on someone in hopes that they will follow the term of the contract. Not likely but possible that they will. As the selller you think your property is worth $20,000.
Let’s say you find an inexperienced buyer with no credit, no job, no money and no other options available to them, but the have a lot of enthusiasm but no knowledge as to what your property is really worth, so you may take a chance if they agree to a $40,000 selling price right? in hopes theywill follow the term of the contract.
2)The old fashion way to buy with no money down (end result) may be a scenario like this. A buyer with excellent credit, excellent income, solid financial statement, some experience as an investor purchases a property at 30%-60% below market value and either pays cash, uses a line of credit, does the necessary repairs etc., and refinances the property and pulls all of their initial money invested (purchase price, plus fix up costs).
An example would be: Purchase price of $50, 000 plus $10,000 in repair costs etc.,for a total of $60,000 invested . The property appraises for $90,000-$100,000 and the bank gives you an house-commercial loan amortized over 15-25 years with a 5 year ballon.for the $60,000 you invested or perhaps even up to 75-80% loan to value.
This is a more realistic scenario for ultimately seeing a no money down transaction. This scenario has worked very well for my clients .
In conclusion, most real estate investors, realtors, lenders etc., know there is no such thing as a no money down deal. It seems the only people who don't know it are the real estate "gurus" selling their systems. The best way to invest in real estate is the old fashion way, by being credit worthy and finding a good property you can buy below market value with the best financing you can find, and selling it for a profit at some point in the future.
This has been a solid wealth building strategy for decades and it works today as well.
Lot’s to think about.
Feel free to contact anyone of us on the Omaha Real Estate Investing Team for a confidential consultation: Prudential Ambassador Realtors Fred Tichauer, 402-679-3914 or Shawn Prouse at 402-305-1504 or Keller Williams Greater Omaha Realtor John Van Gelder at 402-871-5596 and you will be happy that you did.
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