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Lawrence Taylor

No Money Down

Questions & Answers about the TV ads

Lenders need to lend money.   If you are a good credit risk, they usually want to lend as much of it as you will take, at an interest rate that makes them a profit of 4% or more over their cost of money. However, any lender you visit will tell you that they require 30% down on investment property. There are several reasons why, including government regulation, but the principal reason is to cover the costs of foreclosure and subsequent resale of the property in the event of default. Investors are not particularly loyal to a particular property and when things get tight landlords have been known to waltz away leaving lenders in the lurch.

Even so, there are as many ways to buy real estate with no money down as there are TV info-commercials wanting to sell you expensive books and tapes on how to do it. Most of the real estate get rich quick books, tapes, and seminars do have valuable ideas and the folks they present telling us stories about how they made $10,000 the very first day, may well be true. However, that claim is normally a paper profit and all it really means is that they believe they bought a property for $10,000 below what they think it is really worth. While the statement is true, . sort of ... what would they actually net if they had to sell the property the next day, after paying a 6 or 7% real estate commission, document preparation, title insurance, taxes and transfer costs?

What if the property they bought turned out to have serious lead, asbestos, mold or other problems that required many thousands of dollars to correct before it can be sold or even legally rented. There are numerous other "what ifs" that must be considered if one is to make a profit or even avoid serious problems. Those folks usually run out of TV time before they have a chance to fill you in on all the facts of life, but we have as much time as you have ... and we will continue to add up-dated data and ideas to this site almost every day.

Finally, have you not wondered why the people pushing "no money down" books, tapes, and seminars are spending their time doing so rather than out buying a lot of properties using their recommended techniques to make millions for themselves. Surely you didn't think that they were trying to help the "little guy" make a lot of money.  The real answer is simple.  They can make much more money selling their products to the unsuspecting public than from buying and selling properties themselves and do so with a lot less hassle and risk.

Sadly, only a very small minority of those who bought the books or tapes or attended the seminars will be successful over the long-term.  Even more unfortunate will be the possible larger minority who will get themselves into serious financial trouble because they found themselves with unsustainable negative cash flows and ended up not only losing the "no money down" property in foreclosure, but also losing (1) lots of cash that they put into fixing it up and/or trying to save it, (2) their good credit rating, (3) even their total net worth.

Although you can sometimes buy property for thousands below its value, and you can sometimes buy it with no money down, it is important to understand, that it does not necessarily mean that the seller doesn't receive any cash money at closing. Rather it means that there is little or no money out of your pocket to make the deal.
There are an infinite variety of ways in which a no money down purchase can be attempted. Some work sometimes, others work other times, and some don't really work anytime. Most no money down purchases actually utilize more than one technique.  Below are some of the following ways to buy with no money down;
  • Using you for the down payment

  • Business loan

  • Buy below value

  • Use one property to help buy another

  • Take in a partner

  • FHA Loans 

  • VA Loans

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