Category: Real Estate

Real-Estate_resized

Financing Real Estate Investments Using Leverage

How to obtain investment property financing is one of the first things you must figure out as a new
multifamily

investor. Assuming you’re not yet equipped to pay cash, your total acquisition costs boil down to 3 primary components:

The mortgage or loan (traditional bank, mortgage broker, private lender, etc.)
Your down payment (can be out-of-pocket or financed)
Your closing costs (can be out-of-pocket or financed)

THE MORTGAGE
Of course, this is the largest of your investment property financing components, and the specific type of mortgage you get may depend on the nature of the property you are
buying.

For a functional, fully occupied multifamily structure, a standard
property mortgage

will fit the bill.

A
fixer upper,

on the other hand, may require a different funding source, because banks do not like the added risk associated with a rehab job. Additionally, the “non-functional” nature of this type of property makes it difficult to get an accurate
real estate appraisal.

Real-Estate_coin

In fact, most times these appraisals are undervalued, which could result in a bank-mandated reduction of the loan amount, or even a voiding of the deal by the lending bank.

Although I am partial to fixer-upper projects, I did not start out this way. My first few acquisitions were of the more traditional, already-functional type, using regular bank mortgages. And unless you have access to a boatload of cash or to a private lender, you will probably have to start out the same way I did – purchasing currently occupied rental properties.

Although you’ll miss out on the “fixer-upper discount,” an initial focus on fully occupied properties will allow you to learn the ropes before “graduating” to the more advanced fixer-upper stuff. This will also give you time to find a private lender you can trust, which will enable you to execute the rehab strategy.

YOUR DOWN PAYMENT

The largest out of pocket expense associated with investment property financing is usually the down payment. Down payment requirements are more stringent with a traditional bank compared to a private, non-bank lender. For example, many private lenders will finance 100% of the purchase price (not to mention closing & rehab costs), especially if the term of the loan is short (like 6- or 12-months).

But if you need to go with a traditional bank mortgage, a down payment of some sort will almost always be required. The bank’s down payment requirement is defined by the “loan-to-value” ratio (LTV). For example, an 80% LTV loan requires a 20% down payment.

Luckily, the days where lenders required a 20% down payment are long gone. As long as you have good credit, most mortgage brokers can hook you up with a 90% or even 95% LTV mortgage (i.e., you put down 10% or 5%, respectively).

Of course the upside compared to traditional 80% LTV loans is that you put less money down out of your own pocket, which also drives up your cash-on-cash ROI when you sell. However, high LTV mortgages do have downsides:

Interest rates tend to be higher
You may have to pay for points at closing (calculated as 1% of the mortgage amount)
The appraised value must be higher because there is less of an equity cushion
Any down payment that is less than 20% of the purchase price triggers
private mortgage insurance (PMI).

Because of these issues, I would avoid straight-up high-LTV bank mortgages if at all possible. A much better investment property financing alternative is to get an 80% LTV loan, and use a secondary financing source for the 20% down payment. And luckily, you do have a few
zero down options

for the down payment.

Obviously if you cannot find a secondary funding source for the down payment, then you will indeed have to pursue a high LTV loan even though this is not ideal. That said, this can be viable as long as your projected
rental property income

is enough to cover the higher payments. Then, in a few years, you should have enough built-up equity to
refinance investment property

into a standard 80% LTV, 30-year fixed-rate mortgage.

CLOSING COSTS
Unfortunately, closing costs are a necessary evil in terms of investment property financing, even when using a private lender (although bank fees will usually be higher). Click for more info on
closing costs.

FINAL THOUGHTS
The bottom line is that – in most cases – you’ll want to get an 80% LTV fixed-rate loan using a secondary financing source to fund the 20% down payment.

This gives you the best of all worlds…you minimize your out-of-pocket expense while at the same time minimizing your largest go-forward expense item as well as your risk. This maximizes the odds that you will optimize your profit when you
sell

years down the road.

So, investment property financing is not overly difficult, but it does take some time to figure it all out and find the best deal. Just follow the advice on this site and do not waver. Keep moving forward. Yes, you CAN do this!

Return from Investment Property Financing to Homepage

how-invest-real-estate

Real Estate Investing 101: A Beginner’s Guide To Investing In Real Estate

Investing in real estate is not a groundbreaking or new thing. It is a true, tested and legitimate business that can certainly earn you a great wealth if you play it right. Like any other investment, real estate investing also demands understanding of the basic concepts on your part. When you learn it right, buying property, generating rent and avoiding bankruptcy become as easy as playing monopoly. This article will help you understand the real estate investing basics in the simplest way.

❖ Getting Started In Real estate Investing

Generally, the new investors are more comfortable with real estate investing. It is simple to understand and offers plentiful opportunities to earn good fortune. But before you invest your money into this wealth-building vehicle, it is important that you find out the right properties and understand the real estate community well. Make sure that there is no scope left for making mistakes because if you make them, you will lose everything that you have ever had.

❖ Why Invest in Real Estate?

There are many reasons why real estate investing is considered very fruitful. Here are some of the ways you can benefit from this investment:

➣ Appreciation: Real estate appreciation refers to increase in the value of a property over time. When the land around your property becomes busier or scarcer or if the real estate market changes, your property becomes more valuable. But it is completely unwise to invest in real estate to make money only on the basis of appreciation.

➣ Tax Benefits: You can deduct the operating costs of your property from your income. These costs include:

Repairs and maintenance
Interest on loan
Agent’s fees
Insurance
Rates and taxes
Building depreciation
Travel to and from your property in order to facilitate repairs

invest-real-estate

These deductions can be claimed on your tax return.

➣ Rental Income: Rental income that you get through your property can be a means of positive cash flow. You can rent your property for a specific period of time. When this rental income covers all the expenses like insurance, taxes, mortgage, fees with nothing left over, you become break-even. Positive cash flow is when the rent exceeds the expenses. You can also earn through rent appreciation that is increasing your rental income every year.

➣ Improvement:  You can earn better price and more profit from your property by improving its functionality and appearance. Keep upgrading your property from time to time to help retain its value.

➣ Leverage:  You can use Other People’s Money (OPM) to invest in real estate. You get enough time to pay back the mortgage and you can also structure your deal in such a way that no money is invested from your pocket but the benefits are all yours.

❖ Types of Real Estate Investments

After understanding how beneficial real estate investment is, let’s find out how many ways are there to invest in it:

➣ Commercial Real Estate Investing: These are mainly the office buildings. You can lease out the individual offices in the building to small businesses or companies and collect rent.

➣ Residential Real Estate Investing: These buildings include houses, townhouses, apartment buildings and vacation houses that are rented by a family to live.

➣ Retail Real Estate Investing: Strip malls, shopping malls and other retail stores are included in these types of buildings. Along with getting the base rent on these properties, you can also collect a percentage of sales from the tenant store that is used in maintenance of the property.

➣ Industrial Real Estate Investing: These are the properties that generate sales from the customers, who use the facility for temporary use, for example – car washes and storage units.

➣ Real Estate Investment Trusts (REITs): You can invest in real estate through these trusts also. They own a portfolio of underlying real estate and trade like stocks.

❖ Models of Real Estate Investment

There are 3 different ways through which you can generate money for your real estate investment. You can rent or lease your property to a tenant or can sell it. Here is how these models work:

➣ Leasing and Renting: When you rent a property, you allow a tenant to live in the property. In return, they give you a monthly fee. When you lease a property, you give it to the tenant on rent for a guaranteed amount of time that is decided with a prior contract.

There is just one drawback of this model that in spite of giving it on rent and allowing someone else to live in there, the maintenance of the property is your responsibility. If you have more than one property and you rent all of them, the amount of maintenance can be huge. Also, you may have to get the property completely repaired or maintained before selling or renting it again to get it into good condition.

On the advantageous side, you can earn good fortune through rental income if you have more than one property.

➣ Flipping: This means selling your property to earn net profit. With this model, you buy a low priced property, improve it and then sell it for a profit. Though it yields the most reward, it can be very risky for a beginner investor because you will have to predict which property would be sold for profit in the minimum time.

To get the deal right, it is important that you find out the right property that can be flipped for profit. Then you will have to invest in its repairs and remodeling. For this part, it is important that you have sufficient money in your hand so that the repairing work can be completed in the shortest period of time. Since the property is still owned by you, you will have to make the monthly payment on it. That’s why it is important that you complete the remodeling work in the shortest period of time.

Thus all these approaches work efficiently for generating money from your real estate investment. If you are ready for dedicated and hard work, you can definitely make decent profit through real estate investing 101.

❖ In The End

Though investment in real estate can bring you huge profits but if you are a beginner in this field, you should be very careful when you actually put your money into it. Never enter this world with stock market mentality, which is assuming that the past trends will be repeated in the future. Refrain from buying real estate blindly by following everyone’s advice. Always accumulate cash reserves before investing in real estate, especially if you are renting your property. This will save you from unnecessary pressure of shoddy repairs, accepting unqualified tenants and giving into their demands.

You can do well in this business only if you act rationally and don’t assume that real estate is a way to get-rich-quick. Consider it as a business that will take good amount of time to flourish and only then you will be able to reap the maximum benefits out of it.

house develop

Real Estate Business 6 Deadly Mistakes

Investors in the real estate business can make mistakes when the market is up as well as when the market is down. When the market is down the results of those mistakes tend to be even worse.  Just because you have all cash or plenty of back-up does not mean that you cannot make mistakes.

The investors with the least money tend to “hype it up” when trying to get others into their deal.  Every person that has something to do with the deal needs to have some “skin in the game”.

Here Are 6 of the Most-Common Deadly Mistakes Investors Make

1. Violating the Securities and Exchange Commission laws:  Wanna get in Hot-Water with your real estate business? Many investors get so caught up in trying to make a big profit that they try to get a number of other people involved in their deal.  The SEC violation comes when you promise a Guaranteed Investment yield on real estate.   There are people in jail right now for making this deadly mistake in their real estate business. There are ways to involve others in your Real Estate business financially and one of those ways is to have all parties have some sort of direct ownership in the property. It’s called getting Private Money investors. They’re good for the Real Estate business, but there are certain govt. regulations about how you go about finding them. Read more on Private Money Investors

real-estate-investing

2. Not Doing Adequate Due Diligence: You can lose your shirt by omitting one little piece of real estate business information.  Zoning and Environmental laws can be a big issue, so do not ignore finding out about these potential restrictions, regulations that may affect you as the new owner. Many current owners are ‘grandfathered in’ and so newer laws might not apply to them, but as soon as ownership changes hands, the new laws / regs come into play. Don’t miss this one.  A few years ago I found a property where I wanted to build a small apartment building. Everything seemed to be going well then I found out that there was an endangered bird near the property so I would not be able to build. (of course I sent an angry Tweet to all my investing buddies:) Lesson: If you’re going to get into the Real Estate business, do your proper due diligence and be mindful of these 6 deadly mistakes.

3.Building-Renovating-Or Making Additions Prior to Permit Approval: Many building departments will allow you to start building your structure when you get the site plans approved, even before all the plans for the project are approved.  Don’t expect one department of the government to actually talk to another department.  You may have as little as a 50% chance that everything about your plans will be approved. A contractor friend of mine got a permit to install 150 windows.  In the middle of his project the county changed the requirements and he had to change all the windows he had already installed. Seasoned contractors and investors have all learned that this little part of the real estate business is one to keep a close eye on.

4. Not Getting a Survey Done Before You Buy: Wow, this is a huge problem-area for properties that have not changed hands in a long time, where a ‘good-ole-boy’ hand-shake deals were the norm. These days any easements or special arrangements regarding the property are recorded at the courthouse. But years ago, they weren’t. This is also still true in many small-country-towns have not come into the 21st Century and stuff is still not recorded. Be sure to get a current survey, including all easements, utility crossings, etc.  The real estate business has a way of making the un-prepared lose their shirt. But you can avoid that by getting up to speed.   Here’s How

Property lines is another issue, they need to be established clearly before you purchase. Any possible disputes or problems need to be handled before you take the next step. The former owner may tell you that there is enough land for you to build your mini storage unit complex.  He could be right about the past zoning, but the property laws may have changed since he last checked. The zoning laws may now require a lot more land to build your complex. Sellers are not usually out to take advantage of you but it is not their responsibility to do your due diligence. This is one good way to kill your real estate business permanently, dont’ leave this out.

5. Expecting Someone Else to Do Your Due Diligence:  This is especially a problem when you get involved in an investment in another state or out of your area.  Keep in mind that no one cares as much about your money as you do, its’ YOUR real estate business…treat it as such!

 You may know the laws and problems in your area or state but you may not know the laws in the state you are looking to invest.  If you have a partner who lives in the other state then send him a very long list of things that you want answers to before you take the next step.  Never assume that someone else, even a partner, will get all the answers you need and want.  For larger purchases, I’d want to lay my eyes on the property before closing at some point, even if my team did allot of the pre-work. (Several of the Niche Videos we have cover this in good detail. See Nich Video Series in the right hand column)

view-house

6. Not Properly Analyzing the Local & Regional Economy:  Just because your area population can continue to support an apartment building does not mean that the area where you are looking to invest can continue to support all of the apartment buildings in that local area. Find out about the unemployment rate, other properties that are selling, plans in the county, growth trends in the area and much more.  What good is it to own an apartment building if there are no renters? This can result in a huge drain of money. Notwithstanding  all the other problems that come with a low occupancy rate. Believe me, this is no way to run a real estate business if you actually plan to make money.

You can make the transition from single family investing to commercial (or start with commercial) and many of the same rules apply. However, there are key differences and you need to make yourself aware of them.

You cannot imagine the problems that you can encounter, especially when you are not prepared.  When you go into the real estate business prepared for all

 kinds of things, you will do a lot better, make more money and not have a heart attack in the meantime just because you did not cover all your bases.

The more you get up to speed on how to safely invest in commercial real estate for a profit, the better you will be prepared.  Just because you have all the education, experience, money and experts to help you there is no guarantee that you will not run into problems.

Here are 5 easy steps to making good profits from commercial property. Learn these critical must-dos through our Free 7 step email series. 7 Steps to Profits

The Real Estate Business can be fun and profitable, but as with anything, there are deadly mistakes and it’s important to know how to avoid them

Mortgage

Important Things To Consider While Getting A Mortgage Or Home Equity Loan

Getting a mortgage or finding the best home equity loan is not an easy and simple task and it should not be taken lightly. There are many important things which are to be considered and paid focus on while getting a mortgage. You will have to suffer and pay a lot if you haven’t focused properly on important matters while getting a mortgage. Here are some of the important things to consider while getting a mortgage or home equity loan.

If you are thinking mortgages as commodities then you are totally wrong. Mortgages are not sat all commodities. If you think that it’s all about the rate then you are going to get disappointed from the initial stage only. It’s all about hunting for a trusted partner who will accompany you and guide you navigate a complicated and kind of complex transaction by giving you honest opinion advise and a good and responsive support during the entire process of loan and mortgage. Thus one of the important things to be considered while getting a mortgage or home equity loan is that you should not only focus on the rate of mortgage but others factors are also to be taken into consideration.

mortgage-broker

Buying your clothes online, or music player online or order some books online or bid on some sports equipment’s is really a very simple thing to do and even beneficial as it can save up your time but going for mortgage online is really a big no no for you. Mortgaging over the internet is really very risky thing to do. While getting a mortgage or home equity loan it is advisable to meet the party to mortgage face to face and don’t do transaction over internet. There can be so many variables which can arise throughout the process of getting a mortgage or home equity loan over internet. But this does not mean that you should not use the internet for knowing the rates for getting a mortgage as there are many reputable sites on the internet which can help you to find proper rates for getting a mortgage. Internet can also help to get you to calculate the potential loan and along with that it also provide various other information relating to getting a mortgage. Thus it is totally okay to seek knowledge and information regarding getting a mortgage through internet and also getting the rates through internet but it is not at all appropriate to get the mortgage on internet.

While you are on the search of getting a mortgage or home equity loan then you will have to find mortgage lenders. While you are searching for mortgage lenders, you will find two types of mortgage lenders, the one who does advertisement on the web and the other who makes advertisement on the newspaper rate table. You might have of some and might be unaware about some and you come across them when you are hunting for getting a mortgage. You will mot a thing that the major and especially well known lenders will generally give higher prices. Now, you might be wondering why it is so. It is because they are having cost structures and The other reason can be they are more reputable and the service provided them is also better and reliable. Thus they charge higher. Now you should compare the rate with service while searching for getting a mortgage.

If you are planning to move in a short period of time or the loan is for short term or it is a construction loan then you should probably avoid the interest only loans while searching for getting a mortgage. If you are opting for only interest loans then you will not be able to build up any kind of ownership or any kind of equity in your home and hence it is not advisable. Thus try to stay away from such kind of loans while getting a mortgage.

Before getting the mortgage find out what exactly it is going to cost you. There are certain fees which have to be paid and they are unavoidable. But on a contrary, there are certain fees which are not that much necessary and can be considered as junk fees or negotiable fees. Before getting a mortgage ask for good faith estimate statement which shows you the total expected fees. There are certain companies which will include all the fess in the rate of interest they offer to you. Here are some of the fees which you should be asking for before getting a mortgage.

paid_off_mortgage

Application fees
Evaluation of credit
Title search
Loan processing fees
Appraisal fees
Documentation fees
Underwriting fees
Escrow fees
Prepayment penalty fees
Fees like amortization schedule fees, financing statement fees, trustee fees, inspection fees, photo inspection fees, warehousing fees, computer fees, administrative fees, credit report review fees, notary fees are some of the junk fess from which you should stay while getting a mortgage.
When you are seeking information about interest rate, don’t forget to ask about the APY as it is generally higher and it is actual amount of interest you have to pay.

Adjustable rate loans can be quite attractive to you as the rate of interest is comparatively lower than the fixed one. They usually avail you with the four options of payment.

Minimum payment
Interest only payment
Fully amortized 15 years old loan
Fully amortized 30 years old loan

Last two options are almost similar to that of traditional loans. The only change is that your interest rate is adjustable. Here are some of the reasons for considering an adjustable rate.

If you are planning to sell the home before the first rate adjustment.
If the ceiling of loan of adjustable rate is lower than the current fixed rate.

Real Estate

Create Value In Your Real Estate Partnerships

I have built my business buying foreclosures and invested millions of dollars in real estate transactions through forming partnerships. Partnerships can be extremely useful tools to enhance your real estate investing portfolio, providing you the means and opportunity to buy foreclosures or other properties you may not have been able to attain by yourself. Follow these simple but important steps to avoid extensive and expensive legal battles and in the end, become the ruin of your real estate business.

Your partnership is going to work best if you and your partners have complimentary skill sets that you each can contribute to the organization.  It’s vital that you bring in a partner who can complete the missing piece of the puzzle, while enhancing the pieces that are already present. For example, you may have the know-how to find and analyze the deal, the ability to finance the purchase but you may lack the construction funding and experience to finish the project. You partner search should fill in those gaps, handling the responsibilities needed to see the deal to a successful completion.  This enables each partner to have clearly defined roles, with little to no overlap. Too often, when too many people are “experts” in the same field, you can get paralysis by analysis, when each side tries to prove their superiority. This can lead to significant and costly delays for you and your project. It’s not about egos here, it’s about money.  If you want to stroke your ego, do it on the golf course.

RealEstate tip

Just like a marriage, real estate partnerships require the right pairing of personalities. While you should marry for love, partnerships should be formed with the goal of profitability. You don’t necessary have to like your real estate partner, although that helps, but you do have to have a mutual respect. If the respect is not there, RUN. Unlike a marriage, where not everyone has a prenuptial agreement, a dissolution agreement in a partnership is an absolute must. You may never need it, but like a good insurance policy, it’s there to save you money. If there comes a time when the partnership goes awry, not having it can potentially cost you thousands of dollars, not to mention the aggravation and stress associated with the breakup of the relationship.

Keep accurate records, no matter what structure you use. Have formal meetings set up with your partners on a monthly basis, and send out formal invitations to attend those meetings. They may think it’s silly, but keep doing it, and keep a record of your attempts and the meetings. This might sound strange, especially if your partner is a friend or close acquaintance, but by treating your real estate business as a business you will earn their appreciation over time and become to be known as a true professional.  More importantly, if something should ever arise that could fracture the partnership, you will have your bases covered because you kept your partners up to date on developments, good or bad.

The key to any real estate system is putting yourself in the position where you can choose your partner. When I am buying foreclosures or investing in distressed, mismanaged properties, I am choosing my partners. You should never be so desperate to do a deal that you decide to work with just anyone, or the first person who could come to the table with money.  A perfect example of this in my career was working with this investor named “Mike.” Just so you could understand how much money Mike had available, if you had Mike’s money you would burn all yours. He worked with some other real estate investors I knew and had always asked me to work with him on a deal. I choose to work with him on a project and we all made money, but during the process I got to see firsthand what is was like to deal with him. He would not follow through on payment arrangements, make double or triple the work and got involved in areas that he was not supposed to. I was happy to give him his check at the closing and even happier that I never used his money for any transaction I was involved in again.

Finally, this isn’t just about the “other guy (or gal)”.  Make sure you are a great partner and you will have people lining up and knocking on your door to work with you.  Always respect the other persons time; always follow through on your word; always try to make your partners the most amount of money you can.

Hyman Roth was loved because he always made money for his partners

The skill and knowledge of finding and structuring the right deals, whether I’m buying foreclosures or short sales, mismanaged investment property or estates, has enabled me to be in the position to pick my partners and not the other way around. Pick the right partners, and you will be able to achieve greater profits in real estate than you ever could alone. Most importantly, make sure you are they type of partner that helps your partners achieve the same thing.

Donald Trump

How To Buy Real Estate Like Donald Trump

You Can Learn Tips On Buying Foreclosures From Donald Trump

Love him or hate him, Donald Trump is one of the most recognizable faces in real estate investing. His real estate portfolio that started in New York has grown to a multinational conglomerate that is the envy of most real estate investors across the globe. While you may not be ready to put your name across a skyscraper adjoining the NYC skyline just yet, there are tips and techniques from “The Donald” that you can integrate into your real estate business that will prove beneficial as you start buying foreclosures.

The Most Important Part When Buying Foreclosures

The first thing you should be doing when you are buying foreclosures is drafting a business plan for the property. As George Ross, one of The Donald’s legal advisers, stated in his book, Trump Strategies for Real Estate, this was the first thing Trump would have his staff do as they looked at investment merits of a particular piece of property. What should you focus on when writing out your business plan? Anticipated costs, available financing options, estimates of income, and projected timelines are all good places to start.  After that, design the most important part of your plan when buying foreclosures- your exit strategy.

Trump house

A famous saying that you may have heard is: “People never plan to fail, they only fail to plan.” The truth is, you always have a plan whether you know it or not.  You either design a plan beforehand, or you plan by default, i.e. make one up as you go along.  This is akin to a chicken running around after its head is cut off.  If you treat buying foreclosures as a business and design a plan, you will be able to see the deal from all possible angles, and therefore have a much greater chance of making it work and most importantly, maximizing your profits. Be prepared, and write that business plan before you start any negotiations.

Create Win-Win Situations When Buying Foreclosures

We all know Donald Trump likes to talk about the great deals he makes, but what makes them such great deals? Ask yourself this: would Trump keep getting great deals if people were thinking they were being taken advantage of? Of course not. Trump realizes that to keep getting that “great deal,” you need the other side to think they are getting a “great deal,” too. By creating win-win situations, both sides can think they are involved in a great deal and that gives you the opportunity to make huge profits buying foreclosures.

When you are buying foreclosures, negotiating with homeowners who are in distress, what they may need and what you want may not be aligned. They may just need some extra time to get their affairs in order; maybe they need some help in relocating. We’ve had tremendous success in buying distressed notes, and property owners have been happy to deal with us in selling their deeds for little money as we forgave their debt and gave them a chance to start fresh. When you are buying foreclosures, sometimes your creativity in getting them what they need, will give you what you want.

Keep Expenses In Line When Buying Foreclosures

Now that you’ve negotiated your property, and bought your foreclosure, what’s next?  Let’s look again to the man with the famous hair. Donald Trump shot to fame in the 1980’s when he took over Wolman’s ice skating rink in Central Park. New York City had closed the rink for renovations in 1980 that were supposed to be completed in 2 ½ years. By 1986 the job was not complete.  Trump took over the project and completed the major work in 4 months, under budget and opened 1 year ahead of schedule.  How? By keeping his contractors on a timeline and holding them accountable. You need to stay in constant contact with the professionals you brought in at the beginning and make them hold the line on costs and their timeline. Managing your property and project is vital to your business, otherwise, it runs the risk of ruin.

Extra costs in construction or costly delays could mean the difference between huge profits in your foreclosure business or losses that can absolutely be avoided. If you want to be like Donald Trump when you are buying foreclosures, may sure contractors keep to their timeline and stay on budget.

You Don’t Need To Be Born Into The Business Of Buying Foreclosures

We might not all have been born to a father who was a successful builder, with a large network of industry wide contacts, but there are tips and techniques that you can take from Donald Trump that will work whether we are buying a large commercial building in Manhattan or  buying foreclosures in a market like Phoenix, Arizona. Start with an effective plan, negotiate a great deal and keep a close eye on your project’s progress, and you will on your way to running a successful and lucrative business buying foreclosures.

home-finance

No Money Down Real Estate Investing: Is It Really Possible?

A reader, Simone, recently asked:
“Is it really possible to get started with no money down? I want to get started but I have no money. What should I do?”

Let me start by giving you a definitive “yes, it is possible”. I know it’s possible because I’ve done it myself but it’s not necessarily as easy as many of the gurus would have you believe. Let’s examine why and what to do about it.

The first thing we need to discuss in answering this question is the definition of “no money down”. Money is nearly always needed for a real estate transaction to take place so I think most people’s understanding of “no money down” is that you, as an investor, don’t need to contribute any of YOUR OWN money towards the down payment on the property.

Now, there are actually many different ways in which this can be accomplished. Robert Allen has put together a list of FIFTY no money down techniques here which you should definitely check out. But the interesting thing is I guarantee you there are even more techniques than these.

As such, what’s more important than the fifty techniques is the thinking process in creating such a list. Creativity in putting together a deal is an invaluable quality for a real estate investor. So in Robert’s article, I’d suggest that the list of 10 possible sources of money at the top is actually the thing you should focus on.

stocks pen

The lesson here is to start thinking with a problem solving mindset and asking yourself good questions:
– how can I invest with no money down?
– where might I be able to get the down payment?

And Robert Allen has given a pretty thorough answer to that second question:
1. The Seller
2. The Buyer
3. The Realtor
4. The Renters
5. The Property
6. Hard Money Lenders
7. Underlying Mortgages
8. Investors
9. Partners
10. Options

Now, at the beginning of this article I said no money down isn’t necessarily as easy as some people would have you believe and yet some of these techniques are quite simple. So where is the problem? Some of you may not like this but the difficulty lies in your own belief.

For example, my first nothing down deal involved the use of an investor but when you are just starting out it can seem like a super-human feat to convince someone else to give you some money to invest in a property.

So, the trick is to “dumb-down” the process to match your belief levels until your confidence rises to a point that you can apply something more advanced. For instance, my first investor just happened to be my brother – now that’s a little easier for a beginner to believe, right? Convincing your brother to invest isn’t quite as scary as convincing some hot-shot investor.

Okay, for some it will still be too scary and for others they won’t have a brother who can invest. So what else can you do? You must find a technique that you can honestly see yourself doing; that matches your self-belief. At the most basic level you could consider something like bird-dogging.

Bird-dogging is where you find good real estate deals and take them to a seasoned investor and he pays you a finders fee. Some people would say that’s not “no money down investing” but so what – it’s a way to get started earning some money (and experience) in real estate with NOTHING DOWN.

And if you don’t know anyone who will pay you such a finders fee – get creative. Advertise the deal you find online – Yahoo Groups, a classifieds site, or a multitude of other places. See how it’s all about trying things you’ve never done before. Just don’t quit if it doesn’t work out the first time. Try something, learn from it, ask questions of others, and try again.

If you have any questions just add a comment below.

Powered by WordPress & Theme by Anders Norén