You DO Need $$/ You DON'T Need$$ / Use Other People's $$ / LET'S DO THIS.....
Okay for all of those involved, either posting or just reading through 3 pages on the topic of "Do You or Don't You need Money to do deals in RE", LET'S DO THIS...
How about ALL of those on the YES YOU CAN with NO money advocates, PLEASE start posting actual deal specifics showing HOW, finding motivated sellers, doing the deal, finding the buyers, etc, etc whatever USING none or very little cash. Instead of going back and forth whether it can or can't be done, Let the Newbies LEARN and those that can ---TEACH!! please.
I know I'll read EVERY word! Jackman, can you start ?? I LOVE the PC/online tactics....Kathleen. 
Get a motivated seller. Find out what he/she is in the backs, plus attorneys fees. Get property under contract that is assignable with a 14days walk through period, (your time to get other investors in) and subject to conventional financing not to exceed 7 percent. Once you do this, call all of your investors that you have numbers for, and tell them you have a property that you were going to take on yourself, but your too tied up with other projects. Flip them the property.
[addsig]
Ok here goes.
and he is $200 a month cash positive on his rentals.
My close friend needed money to side his house with a few months ago.
We found a property that was 70% of FMV with two rentals on it (mobile homes). Gave $200 to the Credit Union for filing fees and told them we were not paying a dime more and if there were any additional costs to pull them from the loan. Then we asked for a 80% LTV loan which they granted on a ARM. At closing he was cut a check for $7300 (he sided his house with it
If this isn't a no money down deal then I don't know what is?
ok, i'll give a short short short rendition of my most current deal, a rehab.
i found a bank (ameriquest) that had some properties that they had on thier list of defaults (not yet foreclosed on). i wrote someone there in the general email reply box (which i hate). got an automated response and investigated the site for a name, any name, so i could direct an email to them - and have a real person forward it to the correct person.
then i let the person know i'm interested in purchasing some of thier defaulted stuff. i was sent a list of properties from them to look at. i picked from that list and had them send out a short sale package. was told that i only need a hud1 showing basically their "bottom line" figure, after all closing fees were calculated (estimated). then, they wanted the purchase agreement for what i offered. we haggled back and forth for a few weeks and finally came to a price. now i have it under contract.
i call up my list of cash investors (previously built from free online advertising and word of mouth ... OH, and TCI). one of them agrees that it's a deal and asks me what i offer. i tell them, if they finance the entire project (acquisition costs and rehab), i'd split the profit 50/50. 3 of them jumped on board and the fastest one to cut the check got the deal. i close, i gather the troops and begin rehab. i'll pound the last nail in 2 weeks (max) and it'll be on the market FSBO at first.
no money at all, beyond phone lines and internet access - and after all is said and done the profit should be in the area of 15k for 2-3 months invested time. not a killer deal if you deal with 300k properties, but for a cheap one, not a bad deal for myself or the investor. they make 15k return on 32k investment in a maximum of 3 months.
jackman,
So you stay on board with them through the end, their money, your sweat. Cool. Do you secure the money they put into the deal? If so, how?
JohnCl
john,
in this particular case, a 1st mortgage - i shorted the original mortgage, so as it was, there was no mortgage on it - a cash deal. so yes, i stay with them thru the end (or they stay with me) and like you said: thier cash + my sweat = our equity (profit)!
Guys/Gals, this is great! Let's keep it up! Here are my comments so far...
Birddog1: you said "Get property under contract that is assignable with a 14days walk through period, (your time to get other investors in) and subject to conventional financing
My question: What if you don't find other investors in time? I thought that MOST contracts have a clause that says you MUST make a discernible effort to obtain financing, which we really don't want to do, so how do we get out of the contract without problems if we don't find another investor/buyer in time???
Stockpro: quote "Gave $200 to the Credit Union for filing fees" I agree for this kind of deal I would somehow scrape up $200 to get it back in a few months. HOWEVER, while MOST of us who are really determined would find a way to find the $200, what is MORE difficult for some, would be the CREDIT issue, obviously not an issue for your friend to obtain the loan. And did you find the deal in the paper?? GREAT post though! Have any more where you didn't need credit or much cash?
KEEP IT GOING! WE NEED MORE ACTUAL DEALS AND NUMBERS!!
I think the credti score needed here was in the high 500's. It gets a little harder when you want to do no money and no credit
Actually found the deal through the local version of the MLS. FOund out the owner was an out of stater and upon contact highly motivated.[ Edited by Stockpro99 on Date 03/24/2004 ]
Here's a good example:
You find an extremely motivated seller who just wants debt relief and wants his monthly payment paid.
You both agree on a Lease/Option agreement for his home. He agrees to Lease/Option (with right to sub/lease) the home to you for 1 year (renewable up to 5 more years) with the option to buy at $95,000. He owes 85,000 and the house is worth $125,000. You get the agreement signed and everything verified. His monthly payment is $890. You must start paying that 2 months after the agreement has been made.
You find a qualified tenant to whom you sub lease/option the property to with the following terms: (you can be pretty creative)
$6250 non-refundable down payment/security deposit
$995 monthly payment
2 year lease with the option to purchase @ $125,000
You make $6250 up front.
$105 per month.
$30,000 at closing at end of the lease/option.
Total profit for deal: $38770
You would most likely spend some money advertising on the newspaper to find a tenant/buyer and checking the title of the house... That's about it.
jackman
I do not understand. If it is a preforeclosure, then the house is still owned by the homeowners, not the lender. So only the homeowners can sign a P&S. The lender must bid at the auction to get the house back.
Brenda
Pino -
I know the EXAMPLE sounds good, but we'd like details! For instance - why wouldn't the person just sell the house for $95 - and get his $10K up front instead of waiting one year for you to pay him AND putting his house and credit AT RISK. Surely he could sell a $125K house on the market at $95K, if you could find a buyer at $125 LO.
What we're looking for here are ACTUAL deals, so that we hear the REASONS and the situation that would create such a deal to begin with. Why would this person do this, and how was the actual deal found???? If this was a real deal for you, can you provide more details?? Thanks for the post!
actual deal (i have a list of investors i deal with and i know what they're looking for beforehand) couple in preforclosure, i go and meet with them and i chat with husband..we talk for an hour or so, gets to the point where he just wants out. i tell him I'll give my investors a call, which i do and they give me green light, i call homeowner and tell him i'll have my investors out there to do paperwork, they go out there and close the deal I get money for birddogging deal and since they ended up being tenants in one of my investor's other properties, i get another little bonus for them being tenants...
They had a first which was 70% of FMV and a second that was 25% of FMV. So they didn't have too much equity so they were a bit motivated...we were able to help them, win win all round
brenda, you're right. the owner still sells the home and signs the purch aggr. they even show up to closing. the bank just liaisons the sale, b/c in my case, the owner says to the bank "hey, i can't afford the home, i know you're foreclosing, so if you can find a buyer and settle before the sale, i'll sign off on anything so that no more attorneys fees accumulate."
everyone's happy, i get a cheap home, the owner gets no foreclosure on thier record and the bank gets this home off thier books (albeit at a nice hit).
Ok, so here's my current deal (not actually done but well on its way). I put a comercial property under contract for $260k (used to be a junk yard) the property had a 10,000 sq ft building that the seller used for auto repair but he wants to move to AK to be closer to his kid. The property had been on the market a long time with no interest. I had a 90 day mortgage contingency which I eventually extended another 90 days.
During the mortgage contingency period I leased the property to a budy of mine for his business at $4,00 per month (with a clause in the lease that it was subject to my actually completing my purchase of the property). Now I turn around and sell the property to an investor for $400,000 because its got income and therefore more valuable. The investor puts 25% down for a conventional commercial loan. Back-to-back closes put cash in my pocket at the closing and I;m never actually in title.
[ Edited by mark2616 on Date 03/25/2004 ]
Mark, so contract for $260, selling for $400, profit of $140,000 ???? AWESOME! And so it took you approximately 6 months to complete?? 90 days +90 days?
Now did you have to have the original owner do a sublease authorization for your buddy??
How did you accomplish that?
And did you have this buddy idea when you put the contract on the property, or what was your initial plan?
And let me understand, basically, at closing there is a lease agreement somewhere that gets signed off by the new buyer, hence his cash flow.
What a great deal - a neat twist to think about when running across this kind of property... Thanks! Kathleen
Hi Kathleen,
Sorry to be so long getting back to you on your questions, I got banned for huslting for suggesting somebody contact me off-board (oops) and it took me a while to get around to setting up a secret identity (which is, of course now completely blown).
So, yes, from one point of view I made $140,000 on this transaction. But there is a big difference from a $140,000 flip where you just buy something and sell the same thing. I ADDED VALUE by leasing the property. This is what makes me a developer and not just an investor. In the end, I believe, the real profits are to be made by adding value not by finding bargans and flipping them. You add value by changing uses, finding users, renovating, changing zoning, or a host of other methods. Very few of them involve finding distressed sellers or bargain hunting.
No, the original owner is completely unaware of the lease to the elevator company. My lease is subject to my actually acquiring the property and the tenant does not take possession until I close.
Well, sorta I had the elevator company in mind. I have spent a good bit of time learning how to lease properties of this sort. So even though it had been on the market unsuccessfully for a long time I was pretty sure I could find a tenant in 90 days. Normally I would have asked for longer (I'm doing another deal like this where I'm asking for 6 months) and insisted on the right to show and market. The mechanism whereby I got this time was a 90 day mortgage contingency. Guess what, if there's no tenant my bank won't give me a mortagage.
However the real key here was knowing that in that particular market there are more people wanting to rent than there are people who think of themselves as able to buy.
So, returning to the original question, no you do not have to have money. But if you don't have money you have to have certain knowledge, how to structure a deal, where to find a tenant.
Hope that was helpful.
mark