Can You Buy Rental Properties with Nothing Down in 2016

[JustAskBenWhy]

OK, so a couple of things:

One - in this post I am not arguing the intrinsic value of nothing down. It happens to be how I do things, but I am not saying it's the best or most effective way for everyone. If you have a business which throws off good cash, then the best thing for you is likely to change face-value of that cash by putting it into RE.

Having said this, some of you don't, which doesn't mean that RE is out of the question. With the right skill-set you can do it.

This is a post on my site JustAskBenWhy.com which traces such a transaction. Enjoy!

 

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[passion518]

Great post Ben. I just purchased another property today with "no money down"

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[Sauce]

Great post Ben. I just purchased another property today with "no money down"

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Don't be such a tease, share the details!

 

[TonyStark]

Great content @JustAskBenWhy! I'm currently in this very predicament. I'm trying to buy an investment property and I am looking at creative financing.

 

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[JustAskBenWhy]

Great post Ben. I just purchased another property today with "no money down"

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Good for you!

 

[JustAskBenWhy]

@jasoncuellar123 - creative finance is an interesting world of "anything goes" so long as everyone agrees...

 

[passion518]

Don't be such a tease, share the details!

Haha I'm going to post a thread as soon as I get a minute including all the details! I'll tag you when I get to it.

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[NYCGoblin]

Haha I'm going to post a thread as soon as I get a minute including all the details! I'll tag you when I get to it.

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Drew is the man everyone be on the look out for his thread. Glad to hear everything is going great man!~ Ozzie

 

[Nubiwan]

OK, so a couple of things:

One - in this post I am not arguing the intrinsic value of nothing down. It happens to be how I do things, but I am not saying it's the best or most effective way for everyone. If you have a business which throws off good cash, then the best thing for you is likely to change face-value of that cash by putting it into RE.

Having said this, some of you don't, which doesn't mean that RE is out of the question. With the right skill-set you can do it.

This is a post on my site JustAskBenWhy.com which traces such a transaction. Enjoy!

Here are some things I have considered as a property owner.

I might have a house worth $300k which I bought as a dump for 60k, and reno'd with another 50k. I might have even got the house appraised for say 200k then put an 80% (160k) mortgage on the property, pocketing the 40k difference.

Now, just suppose my house is in an area that won't fetch great rents. In my case, I know my house will rent for $900 a month, but this leaves a pretty skinny if non existent cash flow, when mortgage, insurance and taxes are factored in. Suppose also that I list my house for sale, but get no bites because it's in a rural low traffic area. I am stuck with a house I have rouble renting for decent return.

I might be willing to offer a guy with a good paying job, and decent credit a no money down mortgage on 300k, where he takes over the house, tax and insurance payments. Maybe he just pays me 1500-2000 a month for the place. Basically, what he might pay anyway for a house worth 300k. He pays for 2-3 years, then agrees to buy after that time. I might not even care if he backs out of the deal, as long as it cash flows.

What I have done with a house with similar numbers to this is a rent to own with an option to buy in 36 months. My tenant put 5 k down on the house, pays me 1600 per month, which covers my 1k PITI payments, and cash flows. In 3 years I sell them the house at full appreciated price, with no real estate fees, and tenant gets to live in their home for minimal down, and saves a 5 % down payment whilst renting.

Point is, it is most often an investor, like me, who will entertain non traditional financing in order to satisfy a need.

 

[JustAskBenWhy]

Here are some things I have considered as a property owner.

I might have a house worth $300k which I bought as a dump for 60k, and reno'd with another 50k. I might have even got the house appraised for say 200k then put an 80% (160k) mortgage on the property, pocketing the 40k difference.

Now, just suppose my house is in an area that won't fetch great rents. In my case, I know my house will rent for $900 a month, but this leaves a pretty skinny if non existent cash flow, when mortgage, insurance and taxes are factored in. Suppose also that I list my house for sale, but get no bites because it's in a rural low traffic area. I am stuck with a house I have rouble renting for decent return.

I might be willing to offer a guy with a good paying job, and decent credit a no money down mortgage on 300k, where he takes over the house, tax and insurance payments. Maybe he just pays me 1500-2000 a month for the place. Basically, what he might pay anyway for a house worth 300k. He pays for 2-3 years, then agrees to buy after that time. I might not even care if he backs out of the deal, as long as it cash flows.

What I have done with a house with similar numbers to this is a rent to own with an option to buy in 36 months. My tenant put 5 k down on the house, pays me 1600 per month, which covers my 1k PITI payments, and cash flows. In 3 years I sell them the house at full appreciated price, with no real estate fees, and tenant gets to live in their home for minimal down, and saves a 5 % down payment whilst renting.

Point is, it is most often an investor, like me, who will entertain non traditional financing in order to satisfy a need.

I don't like owner-financing to owner-occupants, personally. Specifically, ever since Dodd/Frank the qualifying guidelines are rather strict. But, I know many people who do well with it - but you better know what the hell you're doing...

 

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[Nubiwan]

I don't like owner-financing to owner-occupants, personally. Specifically, ever since Dodd/Frank the qualifying guidelines are rather strict. But, I know many people who do well with it - but you better know what the hell you're doing...

You are right of course. RTO (rent to own) is not an optimal position - this can be true for both buyer and seller - to find yourself in. I guess the point of my post was that (as a buyer) you never know the position an owner of property is in until you ask the question. The question might take the form of an offer. That offer, as crazy as it might seem, might fill the need of the property owner. Might even be a zero down offer. Might be an offer that covers or takes care of the owners outstanding debt.

My advice to anyone interested in buying a home is to find out who the owner is, call them and ask if they are interested in selling. Nearly everything I bought was because I knocked on the door, and simply asked. Just understand that sometimes, the owner is not home, might not live there, but worth it to keep trying to find them. Asking questions cost nothing, and you might be surprised at the answer.

I drove past a lot on a main road in a nice little town about 6 years ago. There was a private for sale sign with a number on it. Sign was way back from the road and looked like it had been there for years, and forgotten. Lot was treed, and looked a decent size. Single Lots in that area sold for 50-80k. I thought 'what the hell' and called. Guy said he did not live in the area anymore, and was asking 45k. That there was frontage for 3 lots, and water connections were already in place. I nearly fell off my chair. Offered $40k and a quick close, and he accepted. I often wonder just how many people ever bothered to get out of their car, and get their shoes a little dirty to check that number.