Zero Down Real Estate Investing
08/09/2009 - By Brian Jarrett 
Zero Down Real Estate Investing
Zero down Real Estate investing is a thing of the past with conventional mortgages. However, there are still creative financing methods that will allow investors to buy with zero down.
Though Zero Down financing is gone with conventional Mortgages, there are still several options for Real Estate Investors. In today’s tough market, motivated sellers may be willing to do just about anything to be able to sell their property. The more desperate the seller, the more likely it is that you will be able to negotiate favorable terms.
• Wholesaling (Assignment of Contract) is a common investor method where the investor gets the property under contract at an extremely low price, finds another buyer for the property and simply assigns the contract to the new buyer. The investor never closes escrow, so no cash is required.
• Hard Money (Private Money) is an investing method where the loan is based strictly on the value of the property. These are typically short term rehab loans and can even include money for repairs. There are quite a few programs out that will also allow you to roll the points into the loan. The rule of thumb for these loans is that the all inclusive loan can’t exceed 65% of After Repaired Value. One of the benefits of Private Money is that you can tell everyone you are a cash buyer.
• 100% Owner Financing is a tough method to arrange in any market. It is hard enough to find an owner who has their property completely paid off. It would be much more difficult to convince them to do it with no money down. If you are interested in trying this method, you should consider other angles that you can entice the seller with. Plan on paying a higher purchase price and/or higher interest rate. If your intention is to sell the property soon, you could offer a Balloon payment that guarantees you will pay off the loan in a certain amount of time, such as 3 to 5 years.
• Subject To is a method where the investor will take over the existing mortgage “subject to” paying off something such as back taxes and/or mortgage payments in arrears. Typically, this is where a homeowner is falling behind financially and is willing to hand over the property so the investor will bring everything current prior to taking control of the property.
• Option Contract is where the investor has the option to purchase a property. They will then go find another buyer at a higher price. The option to buy or not lies strictly in the buyer. If you can find a desperate buyer and know that you can sell the property quickly, you may be able to convince them to give you an Option Contract with little or no money down. They are more likely to do so with a higher offer or a shorter option period. In a slow market, it would not be too difficult to convince a seller to sign an option contract for a week or two.
As long as there are Real Estate Investors, there will be creative methods for controlling real estate for little or no money down. Done ethically, creative investing methods can create a win/win situation for all parties. The investor is able to control the property for no money out of pocket, and the seller is able to sell the property that they had not been able to until now. For investors with little or no money, these methods will still allow you to invest.
Keep in mind that money down investing deals can be much more time intensive and often results in much thinner profit margins. If you have money for your property investing, you may be more profitable by working some cash into the deal. This will give you more negotiating power and will let you do a higher volume of properties, resulting in higher profits. Weigh your options and go with what works for you!
