The single, BEST way to get started with NO money! What's the best way to finance a deal if you have little or no money?
Get a bank loan? Good luck!
Get a home equity loan? I wouldn't advise it because now you're putting your home at risk.
Win the lottery? Fat chance.
So what's the best way to finance a deal?
I was asking myself the same question when I got started investing in real estate. But I was determined to make a better life for myself and my family and I knew real estate investing would give me the opportunity. But how can I invest in a $100,000 or even $500,000 property if I don't have that kind of money to invest?
Well, as determined as I was, I finally found a method that gave me the funding I needed and gave me my start. Best of all, I never had to step foot into a bank or go knocking on doors begging for financing.
The solution? The Seller. That's right.
Discover Seller Financing & Owner Financed Properties
One of the best sources for financing is actually a seller. Always look for seller financing where you can, especially in a down economy and when housing sales are slow because sellers are much more receptive to creative financing arrangements. Very much like our current real estate market in most parts of the country.
In fact, we're finding that seller financing is more available now that it was three, four or five years ago because banks aren't leading as much, particularly on rental income properties and on run down, beat-up properties that we would want to target. If sellers want to sell right now, many times they have to hold the financing, which is good news for you.
Put simply, seller financing means you're borrowing money from the seller instead of a bank. It's also referred to as owner financing or purchase-money mortgage.
How Does Seller Financing Work?
Here's how it works. Let's say a guy owns a property and it's in beat up shape in a low- and moderate-income neighborhood. The seller is asking $100,000. I run my Cash Flow Analysis and I determine that this would be a good investment opportunity. So I offer him $5,000 down and ask him to act as the bank. In other words, he would hold the mortgage on $95,000 and charge me 5% or 6% interest for 30 years.
Why would the seller hold the mortgage? If the property is in run down beat up shape, the bank won't touch it. He may also be interested in getting a monthly check instead of paying taxes on the entire sale. Plus, the seller gets more money back over time.
For example, in the situation I just described, the monthly payment would be $570. I'd then show the seller that in one year, he or she would get $6,840 back. And over 30 years, the seller would get $205,000 back with interest by acting as the bank! Plus, the seller only pays taxes on the money earned each year instead of on the entire sale at once.
Be patient because you'll most likely have to educate sellers about this type of financing arrangement. This may not be the best solution for all sellers. Listen to their long-term plans. Be empathetic. And offer it as a possible solution.