Is it still possible in this market to execute no money down strategies. With the use of “due at sale” clauses and so many foreclosures out there I feel like everything I read in books and what not are outdated when it comes down to the no money down strategy.
It is, but those deals are rarer than ever nowadays due to tight financial markets.
work with private sellers that have held properties for a long time, use owner financing
Subject 2 is alive and well. Not as many people have equity, so its not a strategy that will work with most sellers now.
As for no money down HML’s, they are gone.
actually no money down HML’s are still available. buyer needs to have higher scores, provable income and reserves. you have to know where to look
HML’s are relationship driven…
If it’s your first time out of the shoot, the requirements will be the stiffest. However, once you’ve done two or three deals successfully, without hiccups, you can get better terms, including lower rates, higher LTV’s, and even no down. HML’rs have different sources for cash, and each source of cash has slightly more or less liberal requirements.
It’s not all or nothing. It depends on the track record you’re developing.
That said, if you’ve got no track record, but you’re good at finding deals… you’ll have no problem finding money to do the deals.
---------------------------------- OR
Advertise for partners/lenders without stating it as such.
Advertise:
[color=red]Fixer for sale in Tuscon
$250k 50% of ARV.
Must have cash.
Close in 14 days.
That ad will sift out the curious, and if you leave the ad up continuously, you get the chance to sift through a bunch of trash calls, but then you’ll find several cash buyers looking for your kind of deal, that will be interested in partnering with, or loaning money to, you. Then it’s up to you to actually find a live deal and make some money.
Change the price with a new ad every week and let the older ads expire on their own. You should have four ads maintained one week apart with different headlines on craigslist (and other free classified forums). Why not just put up four ads? You could. Just make sure all the ads don’t show up next to each other.
Don’t get fancy. No pictures, no graphics, no cuteness. Just text.
Put ads in columns: Real Estate For Sale By Owner and Real Estate Wanted sections. Place keywords at bottom of ads; better if you list ONLY the cities/areas that you plan to farm.
Rinse and repeat.
janipa is right on with HML being relationship driven, the first loan they will be more conservative, wanting you to have higher reserves, etc,after you have a track record with the broker and he knows you pay your interest payments on time, you do good quality rehab work and you only do good deals, they will be less worried about you as a borower.
The broker having confidence in you is extremely important, its his reputation that is hurt if you don’t live up to what your suppose to do
No money down absolutely exists but it is different. 100% conventional financing from a bank is as close to non-existent as it gets. Private money is very common as is hard money, lease options, owner financing, subject to, partnering with money partners, etc. I partner with money partners all the time, they put up 100% of the funds and sit back comfortably and collect a check. It works like magic, the key has been that I offer the majority of the profit to my money partners. People tell me I’m crazy but I am on deal 8 in the last 2 months and everyone who calls me crazy is sitting on the sidelines weeping with no money coming in, no track record and experience being built. Best of luck!
moellerryan,
I don’t think you’re crazy!
I tried offering some of your advice, in not so many words, on the “Rambling” forum, and got my head handed to me! :biggrin
Of course using partners is just the best way to start and keep going, when we don’t have cash ourselves. And something really important you mentioned was giving the cash partners a majority of the profits. That really does grease the skids in my experience.
Can I post your comment on my blog?
Thanks for that great post!
Hey Javipa,
Thanks, yes you can post it on your blog. Those people who have your head for suggesting giving the majority of the profit to money partners are probably almost all sitting on the sidelines. Beginners especially should be giving the majority of the profits just to build their track record. Once they have a track record then they can command higher splits. The bottom line is that you must build a business not try to make your entire life income on one deal.
Why would anyone want to give up profits and control to a partner when Hard Money is available without having to split profits? When someone tells me they have closed several deals with no money down that tells me they should have made enough profit to now have cash for a down payment. It will be much easier to finance out of a hard money loan than to refinance to cash out from a free and clear property.
MetroMi,
You don’t have to partner with anyone. If you’ve got the cash and credit then just go for it.
On hard money, you will still need a down payment and credit, until you’ve demonstrated a reliable track record of borrowing and paying back money to the HML itself.
It’s a little naive, if not simplistic to infer that no money down deals automatically mean immediate cash profits that can be used as down payments on future deals. First of all, before I go any further, “no down” doesn’t necessarily mean “no money down.” It may just mean “no money of YOURS down.” :beer
Back at the ranch, as far as the ease of refinancing an encumbered property versus pulling cash from a free and clear property, it all depends on your credit, your appraisal, and your lender. Otherwise, you’re assuming a gross generalization is true for you. What is true is that it’s “generally easier” to refinance a property (without pulling cash), then it is to get a new purchase money mortgage. That is true. FWIW.
Meantime, I think you’re generally correct about partnerships. Partnerships are generally more expensive than private lenders might be. But, in the first year, you can probably expect that hard or private money will still cost you between 15-20% of the sale in interest charged and points paid. It would be less theoretically each year thereafter.
Interesting post.
Getting any conventional loan is often difficult. Good credit and cash may not do it, they want perfect everything. They often want 1 year of ownership seasoning, 6 months seasoned and verified down payment and reserves, and often you can’t go over 4 loans. Even a 2nd loan and they often require you to be able to carry both properties without tenants.
Hard money loans in my area seem to want credit and financials too. They are even more stringent then the banks and charge 6 points and 18 percent returns with unrealistic terms like 6 months. Basically they set it up so they end up so you foreclose and they end up with a rehabbed home worth a heck of a lot more then they put in. Legit hard money lenders are hard to find where I invest, not sure about other areas.
Partnering with a Private lender enable you to buy without having to credit qualify.
Hard money lenders give you more flexiblity, but at a cost. They really dont want to foreclose because then they are stuck with your mess that may take forever to get rid of.
Use the one that is best for your situation and thats available to you