Properties with no available equity?

With so many homeowners stripping their equity by refinancing, second mortgages, or HELOC’s - to pay off credit card, or other large debts, how are investors able to find enough good deals (min 65-70% ARV) when there is no equity left in the property? We have so many over-extended motivated sellers here in the Washington DC metro area.

Do I just walk away from these deals? I buy property to rehab and retail. But I hate to just walk away from any potential deal just because I am to inexperienced to know what to do with it.


Yes Debra, walk away. Don’t fall in love with a property, fall in love with the process. You need to develop a formula that works for you in metro DC. You can use the 70% formula. 70% of APV minus expenses equals your maximum offer.

If the property does not have any equity in it, then you can’t do the deal. Don’t do a deal just to do a deal. You have to set an objective for the deal and stick to it. Remember there is a goal to doing this and that goal should be to make money. If there is no money in the house (taken out in equity) all you are doing is bailing out the seller. That strategy may get you a seat in heaven, but it won’t send you kids to college.

Thanks for the reply BlueMoon, I appreciate your taking the time to write back.

Actually, I would never consider buying any property that didn’t have equity in it. It is just that I have seen ads written that are saying they will buy investment property at 100% value - I was wondering how they were able to do this and wondering if I was missing something. Also, with record numbers of people stripping equity - I was wondering if anyone is noticing whether it is having a significantly adverse affect on the numbers.

I’m guessing that these people are looking at preforeclosure deals where they can work with the seller and bank to negotiate a short sale (i.e. get the banks to accept less than what is owed on the mortgage.) If a bank thinks there is a good chance of a coming foreclosure, they may negotiate their debt down to 80-90% on a first and substantially more than that on 2nds/other mortgages.

Hope that helps.

Short sales work because there is no equity or negative equity. If there is equity in the property, the bank would rather foreclose and sell it as an REO.

The people who are offering to pay 100% of value are probably doing it subject to existing financing, then lease optioning the property to someone else.

Wow Howste.

That is great, you really know your stuff! This was exactly the kind of answer I was looking for. You rock and I’m grateful for the information.


So, if a person doesn’t want to do Subject To deals,
What, if any, other methods can be done w/these types of deals?