real estate no money down questions...

How is this possible? to by a house with no money and sell it for profit? can someone please give me a brief explanation on how this works…

And if someone can suggest some books I can read thats about real estate no money or leave the link

I think I did 6 NMD transactions last year. I learned how buy using Carleton Sheets No money down course.

Jeff you had not been around for awhile… I got a question away from this topic alittle since you use Carlton Sheets… did you walk away with money in your pocket at closing also from the seller, other than a closing cost credit? if so how??

The Real story regarding ‘cash at closing’. (According to Jeff)

A lot of the ‘cash at closing’ that Sheets talks about is adjustments for rent and security deposit credits. If you buy a 10 unit bldg NMD on the 3rd of the month you will get 27 days rent times 10 units in cash. Most of your initial expenses won’t be due the for 30 days which can be paid with the following month’s rents. That’s why they call that spendable cash. It’s not wise to spend it, but it is spendable.

I got over 9,000 cash at closing on a 2 condo deal because both condos were appraised at the same price but had different selling prices due to condition. The loans for both units were valued at the condo with the higher selling price.

I have yet to come across a loan company that easily gives thousands in cash at closing. They loan money based on appraisal or selling price, WHCHEVER IS LESS.

The cash at closing I have received or seen received usually includes creative financing, private lenders, selling notes secured by RE, seller cash back for ‘repairs’ , rent credit as explained above and such. … Plus the occasional fee for a contract assignment.

Wish it was easier. Did that answer your question correctly?

Yeah jeff…i wanted to see your answer…I been getting into with 2 guys on this board about the cash back at closing thing… My method is total fraud and they are 100% against it. I get cashback at closing on rehabs to do my repairs and carry house but we do it out of escrow by raising agreed price and have title company cut me a check so its not on the hud…

cash for repairs like me…are you getting actually cash for legit repairs??? and is the money accurate for repairs and being used that way…

BTW…lets not start a fight on this thread guys…i am just asking someone a question who does alot of NMD deals…

I have read that if you get cash back at closing over $1,000 if is illegal. Is what your doing legal? Is it a loophole? I have heard that people have paid some serious fines and some even did some serious jail time.

Over $1,000 cash at closing illegal??? I would like to see that article. Maybe You misinterpreted. Cash back is not a loophole. It is a very common practice.

Plus… even though I walk away from the closing table with a check, everone involved in the trasaction is very pleased. I always take the seller’s needs into consideration. Everyting is on the table. No scamming necessary.

I had to delay a closing once so I paid a month’s rent on the seller’s new apartment. I still got cash at close…just a little less… and the seller granted me the contract extension.

It’s business and it’s legal. My attorney reviews all my contracts and does all my closings.

The people who run into trouble are the greedy ones who want to take a shortcut to quick money…and hurt or scam people along the way. There’s just no need for that in real estate.

I have to say. I get my rehab money buy using zero or low interest credit cards or a note payable to a private lender. Then I get it back when I sell. I understand this option is not available to all.

I was working with a buyer and a seller on a deal where buyer wanted to grab some equity for repairs at closing.
Sad to saythat the deal did not complete but as the deal was presented to our attorney… we were told it was legal because everything was disclosed.

We worked out an agreement with the seller to put a 2nd mortgage to a third party (buyer’s friend and ‘contractor’) to bring the total debt to 80% of appraised value.

The 2nd mortgage gets paid at closing from seller’s proceeds. On the HUD, disclosed and legal. The third party uses some or all of the money for repairs or closing costs on behalf of the buyer.

The seller did not benefit outside of the transaction.
He got a few extra grand for his consideration but that was reflected in the sales price on the HUD.

No one scammed a lender becasue it was all on the HUD.

The hard part… getting the seller to agree to this. Not impossible with the right paperwork.

The other hard part. Making an agreement with your third party friend and contactor. The money is legally his. You might want to contract with then somehow to protect your interest.

Try running this one by your lawyer and let me know what opinion you get.

Jeff. I been arguing alittle lately there are ways to walk away from the table with check in hand for the buyer. But keep getting its illegal and fraud…
I would like to know more about that deal. You stated you were going to be an 2nd on the purchase and the sellers proceeds were going to pay it off at closing. The 2nd was a contractor. Now was this a 2nd put on the closing, or was this a 2nd added to the sellers orginal deed to make it appear more money was owed for the home.
In past…I have added a mechanics lien to a home so it would get satisfied at the close which was cash in my pocket for rehabs.

Just trying to see how you structure your deals and get good understanding.

The mechanics lien assumes some repairs or improvement was performed on the property and repayment was not satisfied. That gets the job done but is not completely accurate.

A mortgage can be issued to anyone for any reason for any amount so long as the interest % consideration falls within legal guidelines… and of course all parties agree.

Briefly, I would break it down like this
Assuming all parties agree: Assuming the sum of all leins < 80% appraised value or selling price. (no PMI)
Also, we use closing attorneys here, not title companies.

Seller gives buyer’s contractor a 2nd mortgage for 25k.
A 2nd mortgage is put on the property and filed in the public records.
Contractor gives BUYER’S attorney a release of mortgage to be executed and filed under the following conditions:

  1. Satisfaction of mortgage and successful transfer of title.
  2. Sales does not go through.
    This should help seller fell warm and fuzzy.

Buyer obtains a loan for the purchase of the property. 1st and 2nd mortgage get paid.

Contractor gets paid and uses money to rehab. Contractor can ‘hire’ buyer to rehab and pay him all the money received.

1099’s back and forth… yes. But you deduct legitimate rehab expenses and pay taxes on the rest. As you should. It’s still income. Whether you got the 25k through the mortgage repayment or the re-sale of the rehabbed property…you would still pay taxes on the proceeds after expenses.

So its very similar to apply a mechanics lien. I am in Fl and have done that on a rehab. Of course its my GC that files the lien, not me.

So basically in your method, the buyers GC will just place a lien on the property as a 2nd mortgage instead of a mechanics lien prior to closing of course. Then give authorization to accept payment in full and have it funded from sellers proceeds.

Its interesting b/c i find it creative, but many people on this board consider is fraud even when attorneys and title companies are involved doing it. They see it as defrauding the lending insitute out of money since they are providing funds for repairs upfront in a way they normal do not.

Generally, I have always just added an addendumn to the sales contract where the seller will pay me money from closing proceeds and the title company will just hand over a check that date. Title companies in Fl at least, when you goto closing table, have to get all the neccessary checks prior to closing time, so they just hand out all the checks…One to seller and one to me…I like it this way since i get rehab money and my carry cost for 4-6months to cover loan payments. Plus I can recover other related expenses such as appraisal and ins and any downpayment money given…

I just got heavily based on here for doing that.

I am going to run your method by some investor friends of mine locally though and attorney…

The GC can’t put a lein on the property without the sellers consent.

Typically in your mechanincs lein there is a contract for work that has been fulfilled that has not been paid for.

I think the problem some may have is that no work was performed to justify the lein.

Cash back at closing happens everyday! And yes there are legal ways of doing it!

Heres how you can get cash back at closing. have the seller do a land contract with the understanding that you will cash him out in a couple months. Of course you need the property to be below value, you need equity in it. Then you just do a refi on the property incorporate all the costs in the loan, cash out the seller and walk away with the rest of the money plus the property. You dont want to get yourself upside down with a huge negative cash flow but if you are going to pull out a nice chunk of cash 10k or up then you could just breakeven and be in a nice position as long as you put that money back into a nice cash flowing property. Its one of many easy ways to raise money when you are starting out.

If you place the house in a land contract and take possesion of the house that way, and then excute a refi in about 2-6months, will the banks generally ask for some kind of payment proof to justify a refi on the property.

I have actually been trying to find a creatvie way to buy a condo in miami beach area. Can you use a land contract on a condo. Condo worth about 380K-400K but comps will be out of whack since it was a converison 2yrs ago at a low buy-in and now many people are selling units in which alot of them are untouched, plus developer still selling units which are in bad condition for even more. I can get this unit for around 300K, but want to pull out about 30K to do some upgrades. I really plan to live in it. Seller very motivated and bought for 260K and spend about 25K in upgrades, so 300K will be sellers breakeven point.

Key is, 3 condo complexes coming up across street with worse views and units are starting 400K-1.2mil with less amenties and views do not compare. And 400K is a 300sqft studio)…a 2/2 on low floor startes around 600K

Any idea’s… this condo is still classified condo conversion so financing rules change alittle, banks are harder and more limited with 100% financing as I wanted to do going NOO