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"There's no such thing as a free lunch." - Milton Friedman Milton Friedman is not a real estate guru, but he is worth understanding, only because he knows more about markets than anybody since Adam Smith, in our humble opinion. And Real Estate is a market. Investors can and do buy properties every day with no-money down. Many of them are great deals. Finding these deals is hard work - and that is the cost in Milton Friedman's eyes. And that is the job of the real-estate investor - looking for great deals. "Great No-Money down deals" is a subclass of the set of "great deals", but they are the only set available to you, if you have no-money. Looking for them is harder than just looking for the set of all good deals. So how are all these people making money with no money down? GURU-OSITY Now, that we have your attention, would you like to attend our $5,000 seminar? That's not what we do. The Gurus and their 'Guru-osity', such as Robert Allen, who can be partially credited for the spread and success of no-money down marketing, actually teach people about no-money down deals. Throughout our news service, we will show you what we think you need to know, without paying for a seminar, and put you into position to decide whether to pay $5,000 or to search for other resources, such as a local networking group or investment association. NO MONEY DOWN DEAL TYPES AND BRIEF INSIGHTS So, here are overviews of the typical No-Money down tactics, taught in much greater detail at seminars and in books. More importantly, practiced daily by investors in Houston.
2) Wholesaling - a/k/a Flipping, or "assignment of contract". Put it under contract, find someone else who will pay more. You make the money in the middle. No money down. 3) Options - A wholesaling strategy. You attain an option to purchase the property. (By the way, getting an option is part of nearly every real estte transaction in Texas.) Identify a buyer who will pay more. Exercise the option that you have at the low price and sell it to someone else at the high price. 4) Owner Finance/Seller Finance - You take the deed and offer to pay the owner out over time. You have no money down, but a promise to pay in the future. 5) Subject To - Similar to owner financing, but instead of taking the property subject to paying the owner in the future, you take the property subject to paying off other obligations, such as back-taxes or the seller's mortgage. 6) Lease Option - Similar to Option as discussed above except that you actually have access to live in, or even sublet the property while finding a buyer. Seller agrees to lease you the property and grants you an option to purchase the property at a fixed price. Maybe you rent it out to someone else, maybe you just pay month to month until you find a buyer who will pay more than the price at which you have an option to purchase. Then, exercise your option to purchase and sell it to your buyer to earn the difference. 7) Leverage - Using Hard money is one example of using 100% financing to purchase property with No Money down. However, as explained in the Leverage lesson, Leverage is not risk-free. The beauty of using this kind of financing is that you can pitch that you are a Cash investor, when in fact, you are not putting any money down at all. 8) Buying something for nothing - Prove Milton Friedman wrong? We have a sneaking suspicion that the Texas legislature and TREC may begin to look down unfavorably on some of these tactics in the future. ARE NO-MONEY DOWN DEALS RIGHT FOR YOU? In the tradition of answering a question with a question:
The less you have, the less you can do. There is no such thing as a free lunch. If you have money, you will be able to do more and better deals. You will close more deals - money tends to grease the squeeky wheel. Our parent's experience suggests that "cash is king." Money makes finding and closing deals so much easier. If you have questions and would like more dedicated and one-on-one/small group education, we can set up live in-person or on-the-job learning sessions - upon request or at a regularly scheduled time. Related Articles -BASIC EDUCATION OVERVIEW - Basic Investing ARV - After Repair Value Birddogging Contract for Deed Dealing with Contractors Estimating Profits Evictions - A Primer Executory Contract Foreclosure Overview Foreclosure Types Overview Hard Money Loans - a/k/a Asset Based Lending* Lease Options Leverage MAO - Maximum Allowable Offer Multi-Family Investing Basics as Presented by David Lindahl on March 4, 2006 No-Money Down Real Estate Investing Options Part-Time v Full-time Passive Investing For Beginners Pre-Foreclosure Profit Calculation Remodeling for Beginners Rent vs Buy Is Really Rent vs Sell Seller Financing as Investor Buying Tool Skiptracing Subject To Wholesaling Return to Listing Return to Investor Education |
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