Dave Dinkel's Insights: Greatest Fears #10

My Greatest Fear is  – “I have no money or credit to buy a property, what can I do?” Series #10

One of the most fascinating and highly profitable aspects of real estate investing is the fact that in many deals, the buyer needs little or no money to actually complete a deal.  In addition, investors should never have to apply for a conventional loan or have their credit scrutinized to do a deal.

The average wannabe investor immediately thinks something is impossible when I say you can buy and sell properties with no money but it is completely true.  It I not necessarily possible to do every deal with no money but a little planning can make 99% of all deals possible to complete using none of your personal money.

Obviously you can borrow the money (“private money”) from someone you know and maybe even a bank.  The limit of these funds may be non-existent to start and as you do more and more deals you need more and more money.  More and more money but not necessarily your own or borrowed money!

The most popular way to do non-money deals are to contract with a seller for a price at which you believe you can wholesale the property.  Next, you’ll find a buyer who is willing to take an Assignment of Contract from you to buy and close on the property. This buyer will essentially step into your contract with the seller and bring his money to closing to purchase the property.  You’ll have no money in the deal unless you gave the seller a deposit which your buyer will give back.

Another very popular way to purchase with no money or credit is to have the seller give you a mortgage on his property or so-called owner financing.  The mortgage can be short-term or long-term depending on your objective and what the seller is willing to do. If the seller already has a mortgage on the property, you can take over his mortgage payments in a transaction called a “subject to” transaction.  In this case you are morally but not financially obligated to make the seller’s mortgage payments on time.  Again, you’ll have little or no money in either of these two types of purchases.

There are more than 18 different ways to do deals with very little or no money, no credit and no risk.  Aside from the above ways, a very popular method is a lease-option with the seller.  In this scenario, you contract with the seller to purchase his property via an Option to Purchase Agreement for a specified price for a definite time period.

In addition, you have a lease agreement wherein you can be a tenant in the property while you are waiting to exercise your option to purchase.  If you think this will cost you rent payments, you don’t have to be the tenant – sub-lease the property for more money and make money on the property you don’t own.

This strategy is sometimes referred to as a Butterfly Lease Option and it has the investor on a lease and his tenant on another lease and both have two different strike prices on their options – all of which is designed so the investor makes money without spending any of his own.

In summary, contracting properties to purchase does not mean you have to buy and close on them to make money.  Your contract controls your destiny in the deal and the closing can be worked out if you have an end-buyer.  Focus your energies on getting deals under contract and the methods of funding these deals without your own money will become more obvious as you move forward in real estate investing.

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