No Money Down Real Estate Deal Step By Step
Have you ever plan of investing in real estate? There is a lot of money that can be made investing in real estate so long as you have the lawful training. Now this training can come in the manufacture of a training manual or someone you may already know who is a real estate investor. Real estate investing is not a trial and error business one mistake could cost you thousands or hundreds of thousands depending on the deal. So before you get started investing in genuine estate make sure you have a strong understanding of the game of staunch estate. Now that all that has been said let’s get started investing in right estate with NO Money out of your pocket.
There are many ways to skin a cat, so I will show you one of them now. When buying real estate using none of your own money you must be very creative as well as assume outside, inside and all around the box. The first thing you must do is to find a source of money to purchase the property, don’t worry this is the easy allotment. You can do a search on the internet for hard money lenders, they’re every where. Hard money lenders don’t come cheap, They typically charge anywhere from 13% – 18% for the use of their money. You should not be concern with the amount they charge for the use of the money, only how considerable you stand to produce.
Here is what to look for in a hard money lender.
1. 100% financing up to 70% of it’s after repair value (ARV)
2. Lender that will lend the rehab money to repair the property (part of the 70%)
3. Loan with 9-24 month payback terms
4. Lender that will fund multiple deals at the same time is a big plus
Now if your credit rating is not up to par don’t be surprised if the lender tells you “you do not qualify” that is ok. What you can do in this position is to bring in a partner with capable credit and that should solve that predicament. Offer a partner 30% – 50% of the deal or what ever you feel is fare. The beautiful thing about a partner is you can have more than one.
Here is what to look for in a partner.
Partnership investors are typically individuals who are interested in investing in real estate without the responsibility of operating the property themselves. They should have an investment horizon of 12-24 months as these investments are not typically liquidated before the Partnership is dissolved and the underlying property is sold. They should have a minimum credit score of 680, must be able to verify income and must have liquid assets (cash) in excess of $10,000.
After you have located a lender that is willing to work with you, now it’s time for the hard part; finding the buyer. Your probably thinking “what about finding the house”, that comes after finding the buyer. If this fragment of the process was easy we would all be Donald Trumps. You will need to exercise flyers, news papers, online advertising and word of mouth if you are to be successful finding buyers. Setting up a web status to capture buyer information (name, phone, how worthy do you have to save down, how many bedrooms, etc) is a good idea and is a must have.
Here is what to look for in a buyer.
1. Someone who has not had a BK (bankruptcy) in the last 12 months
2. Someone who has 3% – 5% to effect down on a house
3. Someone who has 2 year verifiable income from the same job
4. Someone who may have been turned down by a aged lender
5. Someone who has 2 year verifiable rent history
After you have located a buyer and done your do diligence (background check, verify income, verify down payment, etc) you are ready to start searching for a home for your buyer. When looking for a house for your buyer you need to keep in mind you need to design a profit, so you need to find the right property so it’s a win win situation for both parties. A great plot to find properties is to enlist a realtor who handles bank owned properties (REO). Once you find some properties that meet your buyer’s specifications you’ll present them with the list. The properties on the list will more than likely need to be rehabbed, but that’s not a problem. You will simply tell your buyers that the work will began after they pick the house that is true for them. You will only want to find houses you feel that will take a crew of 6 – 8 workers no more than 3 – 4 weeks to complete.
Once the buyer chooses the house they would like to lease to buy, you need to acquire an estimate on what it will take to rehab the property. After you have a solid estimate it’s time to sit down with the buyer to explain the lease to buy contract in great detail. At the time of explaining the contract you should collect a minimum of $500 – $1000 as good faith or earnest money which is refundable if for some reason you are unable to secure the house. Now you need to contact the hard money lender with the address of the property and to obtain a proof of funds letter to submit with the offer to buy the property. You may need to submit earnest money along with your offer, no problem you have the money your buyers gave you as earnest.
When your offer has been accepted and the closing has been scheduled it’s time to sign the lease to grasp contract with your buyers. At the time of this signing you will need to derive the option fee minus the earnest money the buyer gave you. This next step will make or break you. Inside the lease option agreement is a date that you are to hand over the keys to the property and the buyer takes procession. This is why it is so important that immediately following when you stop with the bank you need to go to work rehabbing the property to meet the deadline. You will use the down payment money to start the first phase of the rehab then the hard money lender will inspect to behold if phase 1 has been complete and if so proceed to chop you your first draw. If done right there should be money left over from the last device.
Your lease to by contract should be no more than 12-24 months, which means you should realize your profit (cash in hand) in 1-2 years. In the mean time enjoy the monthly cash flow.
After you’ve completed the buying and selling of your first real estate transaction you will be on your device to making millions.
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Filed under Home Rehab Loans by on Feb 2nd, 2012. 
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