Buying Real Estate with no $ down?

Discussion in 'After Hours Lounge (Off Topic)' started by Van Patton, Mar 31, 2003.

  1. Van Patton

    Van Patton Second Unit

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    I'm currently 18 years old and am going to UTK next year. I have a good friend who is talking all about buying realestate with no money down. He says that there are so many ways to acquire realestate with no money down. He also reads lots of books by guys such as Robert Kiyosaki (Rich Dad) and others. I say he's full of BS and those books are just schemes so the authors can make profit. If it's too good to be true...then it most likely is....Can anybody shed some light on the realestate business so I can (possibly) prove him wrong. My dad is a residentail house appraiser and he has stated that my buddy is full of BS so I want ya'lls opinions. THANKS!
     
  2. Bry_DD

    Bry_DD Second Unit

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    If you are or were in the military service you can get a VA loan with no $ down. Correct me if i'm wrong...
     
  3. Ashley Seymour

    Ashley Seymour Supporting Actor

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    Sure it is possible, but like with anything where you don't have any money to invest you are going to find you have to do a lot of work and may still not be successful.

    You don't say if your friend wants to buy investment property, or a place to live while he and or you are in college.

    A $100,000 house that a seller got a recent mortgage and has no equity will require a payment of $800-$850 per month. It could easily be more. You have to know rental values in your community. If rents are $750-$850 then you are not making any money. Also, you have to budget for repairs, vacancies and losses. Your no money down house may end up costing you $250 per month for a few years till equity and rents increase in your area.

    Or you find that little old couple who has that $100,000 house that they own free and clear. They agree to let you make them monthly payments. At a competitive rate you still have the $800-850 payment. Nothing gained here.

    You find a house that could be worth $100,000 with some fix up work and negotiate a deal for $80,000 with the seller letting you make the payments on his/her mortgage. The place needs $10,000 fix up to get the value up or for youto live in. You have no cash to put down so you also have no cash to fix up.

    The more desperate the seller, but better the deal, but also likely to be a distressed property that takes a lot fix up. There really no free rides.

    Some of these "canned" programs tell of buying the house and turning around and getting a loan for 110% of the purchase price. I think your state has lotteries that may offer the same odds.

    If you wait a couple of years and build up some credit you may qualify for a mortgage of your own. Then if you find that fixer upper, FHA will make you the loan for home with a down payment of 3% plus add the repair costs into the loan. That $80,000 house with 3% down is $76,400 plus the $10,000 in repairs added to the loan for a total of $86,400 (plus a mortgage insurance premium of 1.5% added in). Now you have a single mortgage and the money to do the repairs. You can do the work yourself or hire out contractors to do it. Good sweat equity prospect here, but you will have to live in it for at least a year and probably more.

    While in college you may try to find a place to buy with a Lease with an Option to Purchase. Agree to a four year contract and get a loan then to pay off the sellers loan. You and a roomate might agree to pay $500 per month each in rent. You will want an attorney to draw up this agreement.

    In the end your dad is about 99.9% right for someone in your age bracked and 99% for anyone else.
     
  4. NickSo

    NickSo Producer

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    Your dad is right, kinda... I've also read RichDad Poor Dad...

    The thing with getting real estate as Ashley has said before, usually when you get all those 'great deals' on properties, they're 'great deals' for a reason. Either the location is horrible, the property is in horrible shape or whatever. The thing is, either its a fixer upper, you'd have to dedicate alot of your time and money to fix it up to sell it for a profit, or its just at a location where it wont sell. Why do you think the seller is so desperate to sell? Only very rarely will you find the 'perfect situation' where the seller is willing to sell the property for little, and you can straight out buy for very high value like the examples in RichDadPoorDad.

    If it were that simple, everybody would be rich...

    I've been noticing some of your posts, they all seem like you wanna find an effective 'get rich quick' scheme... well, the thing is, its nothing is that simple unfortuneately.

    If you really wanna get some assets in, start small. Alot of teenagers use vending machines, candy machines, etc. I know one teenager i met online from the 'RDPD' forums, he and his buddy buys KRISPY KREME donuts from seattle, and sells them up here at his school (there are no KK's in Canada [​IMG] ). Sure its not huge money, but its a start. But think about it, you start small making some small $. once you get enough, you expand... Get another vending machine, or find a partner. As you expand more and more, maybe you can find some people who would work for you. You start paying them. Then the money keeps flowing... After awhile, you have a bunch of employees doing what you did in the beginning, but 100 times more efficient. And you can just sit back and watch the $$$ roll in.

    Sounds easy doesnt it? Well, its not.. takes alot of hard work and dedication ([​IMG] i sound like a dad lol).

    I'm only 17, and only recently started investing. My dad's a financial analyst guy, he knows this stuff. He started a Mutual Fund for me, where i add $50 a month. Starts small, but after 10, 20, 30 years, itll grow hugely.

    So save up your money, go research on investments, and forget the get-rich-quick schemes [​IMG]

    Good luck!
     
  5. Philip_G

    Philip_G Producer

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    man, when I started college I had a decent sized down payment, had I bought a house here with it, I could have rented out a room or two to help cover the payment and not tossed away 600$ a month in rent, perhaps had some equity by now, in a really depressed market however.
    One of the things I kick myself for.
     
  6. Eric Kahn

    Eric Kahn Guest

    zero down payment loans are quite common anymore, I qualified for one from several banks, it became a 5% down payment loan when they found out I was buying a 2 family, could not buy a multiple family unit on the zero down loan
    no points were involved either
     
  7. Eric Samonte

    Eric Samonte Screenwriter

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    Anyone I think with good credit would be able to get a house with no down. We bought our first house without one and this one we currently live in as well....not to mention all our vehicles.
     
  8. Scott Merryfield

    Scott Merryfield Executive Producer
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    If your financial situation is favorable enough, I'm sure you could find a mortgage company willing to provide a loan with no money down. However, I doubt you would be successful in doing so if you were a poor college student with no assets living from paycheck to paycheck.

    In the latter case, you may be able to find a property owner willing to sell under land contract if (1) the property was proving difficult to sell, or (2) the seller wanted to reap the benefits of collecting interest on the land contract instead of getting the entire purchase price upfront.

    FYI, a land contract is where the buyer enters into a loan agreement with the current property owner instead of a third party lending institution. The current property owner holds the property title as collateral (just as a mortgage company does).
     
  9. Micah Cohen

    Micah Cohen Screenwriter

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    When I lived in AZ some years ago, I struggled through getting my real estate license, being a realtor, etc., at the prompting of my dad who convinced me that getting into real estate was the best way to go. (He's right again, dang it!)

    I struggled and struggled. One day, in a realtor class, I met this young guy about my age who was on his bulky old cellular phone talking about some fix-up stuff. I eavesdropped and then said to him, "Hey, do you own rental property?" When he said yep, I said to him: "I have been struggling to find out how to get into rental property and I'm really frustrated. What's the secret?"

    He said, there is no no-money-down deal. There's no buy 'em, fix 'em, flip 'em deal. There's no good "assume the mortgage" deal.

    "The trick," he said, "is getting a leg up, a GIFT, from a relative. Get the initial $10K as a gift from a relative, and you're set with a down payment and you look golden in the bank's eyes. It's a cakewalk from there. Without the gift, you will struggle hard and long, and you will never make it. The secret, is the gift."

    And I'm here to tell you, he's right.

    MC
     
  10. Bill Catherall

    Bill Catherall Screenwriter

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    If you have good credit and can afford the monthly payments, then it is possible to get a no-money-down loan. That's exactly how I bought the house I'm in now.

    It was an FHA first time buyer loan. You get one mortgage for 97% of the sale price, and a second mortgage for 6% of the sale price. The extra 3% goes into paying closing costs. The only money I had to pay out of my pocket was the earnest money deposit required by the seller. It was only about $2000, and we got that money back when we closed (because it got rolled into the closing costs and we were reimbursed).

    So I got into my house without paying a cent. But because we didn't have any equity we had to pay a large PMI every month. But we got rid of that when we refinanced a year ago, got the house appraised at a higher value, and combined the two loans into a conventional loan.

    Over the past 2 years with a few repairs and fixing things up (and the sudden increase in the market), the house has gone up a whopping 60% in value!

    But to even qualify for such a loan you have to have really good credit. And if you have other property then you cannot qualify for a no-money-down loan. In fact, if you're buying a second or third property the banks will require a larger down payment and might even tack on a larger interest rate.
     

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