"Zero down doesn't mean there's no down payment required. Most sellers typically ask for a down payment if they offer financing. Moreover, most banks don't provide 100% financing for real estate purchased as an investment. Zero down simply indicates that the down payment won't come from your own funds. So, where can you obtain it? Is it genuinely possible to profit from real estate without any initial capital?
The answer is a resounding yes. During our recent local investor's meeting, one participant shared how he discovered a fixer-upper but faced challenges arranging financing. His solution? He assigned the contract to another investor for $6,000. In essence, he only invested a $500 "good faith" deposit and his time, yet managed to earn a $6,000 profit – commonly referred to as "flipping."
Notably, he didn't need a down payment and didn't even need to purchase the property to make money. The potential profit from fixing up and selling the house was enticing enough for other investors to eagerly step in. The key to his success was his ability to find promising deals, and his offer allowed for the contract to be assigned to another investor if desired.
Even if he had put the $500 deposit on a credit card, he wouldn't have used any of his own funds, apart from covering gas expenses while exploring properties. Nevertheless, he would have incurred a 3% cash-advance fee and 18% annual interest for a month, reducing his profit by $22.50. Indeed, zero down is both viable and profitable. Additional Ideas for Zero Down
If you wish to complete the purchase, renovation, and sale with zero down – without any personal investment at any stage – there are numerous strategies available. One such approach is finding a partner. In fact, I'll be discussing with an investor tomorrow who's interested in utilizing my funds for a lucrative property renovation. I, too, seek a share of the profits. Trust me, if the deal is promising, there are investors eager to contribute their funds.
Let me provide an example of how you can combine various investing techniques to maintain a zero investment. Imagine you find an owner who's tired of being a landlord. They have a run-down house priced at $80,000. Upon assessment, you realize that with $4,000 allocated for clean-up and repairs, it could sell for $116,000. Considering all costs, approximately $9,000 would be required, leaving a potential profit of $27,000 in the deal. At this point, you have no funds available.
What if you offer the seller more than their asking price? Propose $85,000, using a $500 credit card cash advance as a good faith deposit. The offer, however, stipulates $5,000 down, no payments, but the entire remaining balance to be paid within one year, with 7% interest. Why would the seller accept this offer?
You explain that they will receive more than they originally asked for, potentially even earning a few thousand in interest. Moreover, their collateral will be secure, as you'll be investing money into restoring the property – a significant improvement from their previous tenants who neglected it. This arrangement grants them a first mortgage on a home that will likely appreciate in value, exceeding their owed amount.
If the seller agrees, you can seek an investor with around $15,000 to invest in the deal. This amount covers the down payment, repairs, and other expenses, with a little extra for unforeseen costs. In return, the investor receives their investment back along with half the profits. Successfully completing the house renovations on time and within budget results in over $10,000 for each party.
Ultimately, this approach ensures the seller receives more than their initial asking price, the other investor gains a substantial return, and you generate a $10,000 or higher profit without investing a single penny. Ensuring a win-win scenario for all involved is the most effective way to make a zero-down deal work successfully."
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