Transaction engineering for the real estate investor is akin to a carpenter having a well-equipped tool box or a surgeon having all the necessary operating instruments to get the job done correctly, safely, and in a way that everyone involved benefits. In our business it includes acquisition, property management, asset protection, negotiating, and tax planning to name a few. Today I want to introduce 10 no-money-down techniques (note: no-money-down means none of your money) that you can use alone or in a combination because no two real estate deals are alike.
I encourage you as you read this to think “how many techniques, how many tools, can I add to my tool belt that will allow me to deal with every opportunity that comes along?”
Don’t be a one trick pony…
Many investors use the same technique to do every deal that comes along – they are doomed. Only occasionally can they find an opportunity where they can employ the one technique they’ve learned.
When other investors don’t know what to do, you’ll be able to pull a different tool out of your tool belt, a different technique or a combination of techniques, and be successful when they weren’t. And when you master these techniques, you’ll recognize opportunities and complete transactions others can’t!
Build your buying machine…
To begin building your buying machine you need to learn how to generate leads, identify motivated sellers and then buy below market with deep discounts using cash, Private Money, or Hard Money.
Existing Financing is a powerful option…
Another favorite is to use existing financing by acquiring the property “Subject to.” With this technique, you take over the payments on existing debt without originating a new mortgage. Options and Lease Options are another pair of great techniques to control properties without ownership and still generate great profits.
Partnering with the seller…
Seller financing is my all time favorite. Sometimes it even presents an opportunity for creating a Deal After the Deal for increased profits. All of these transaction techniques can be structured as no money down. Consider Split Funding (some money now and some later); With or Without Payments; With or Without a Balloon Payment, or virtually any combination you can negotiate.
Now, sell it creatively…
When it comes to selling properties creativity is again your best strategy. How do you sell in a tough market? What do you do when the banks won’t lend? You become the bank! It is the most powerful way to build a fortune, while helping other people resolve their problems or achieve their dreams. And you won’t do it with adjustable rate mortgages or other exotic forms of financing that got this whole mess started.
Cash or cash flow? Your choice…
We can sell or lease properties to create either cash or cash flow. Lease Options and Rent to Own programs can help more people qualify for home ownership while reducing vacancies. Selling homes with Owner Financing, Wrap Around Mortgages, and Agreements for Deed can help you market properties to a broader buyer base than the traditional buyer who will get a traditional bank mortgage. These creative techniques also help you overcome seasoning issues and maximize cash flow.
Well there you have it, at least 10 creative ways to buy and another 5 ways to sell without using banks. All the traditional avenues remain available but doesn’t it make good sense to have alternatives that work in any market? Using these creative techniques in an ever-changing array of combinations can give you hundreds of possibilities.
If some of the terms above are unfamiliar to you, don’t worry, you’ll have an opportunity to learn about them and put them to good use during our Quick Start Workshop Series.
Join Us on June 16th at the Bohemian Hotel in Celebration from 9:00am – 5:00pm
Creating Your Real Estate Money Machine Workshop
“Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.” Dale Carnegie
To your success…
According to a report released by the National Association of Independent Landlords 82% of the 582 landlords polled would rent to someone who lost a home to foreclosure, assuming that the applicant previously had a good credit history.
Landlords won’t typically rent to applicants with poor credit – and a foreclosure can have a devastating affect on a credit score. The exception appears to be when someone has paid their bills their whole life but either lost a job or could no longer meet their mortgage and had the hand their keys back to the bank according to Tracy Benson, president of The National Association of Independent Landlords.
The poll was conducted between March 21 and March 25, 2011.
Would you rent to someone with a previous foreclosure?
When you lease or rent to own homes, you both rent and purchase the home rather that either just renting or leasing a property or purchasing it. Renting to own a home also allows you to rent it out or sub-lease the property with a purchase option if you have an option to purchase as well. In this instance I would acquire control (rather than buy) using a lease option because that gives me the right to close without the obligation to do so whereas I’d prefer to extend an option to rent to own homes to potential buyers because the buyer has the right to purchase coupled with the obligation to purchase the property. This rent to own technique is known as a sandwich option. I lease without the obligation and then they rent from me, which means they have the obligation. You could also rent or lease the property and sell the property on a wrap. When you sell it on a wrap, you will have to convert your lease into a purchase using your buyers’ cash. This means I’ve used my option to lease purchase the home. So leasing and then renting with a ownership option is a very viable way to acquire control of property. Again, remember you are not necessarily going to own the property in some cases, but you are going to CONTROL the property. With this technique, when you rent a property, you find a motivated seller and tell them, “What if I were to guarantee to make your monthly payments over some period of time, of ($XXX) dollars, that would cover all your costs with the property? And, if I were to agree to take care of all the day to day maintenance, then at some point during this period, I were to completely cash you out, is that something we should talk about?” If the seller says, “yes” then you can work out the numbers based on the length of time you can control the property. You then rent the home to someone else for a two-year lease and sell them the Option to Purchase. Why didn’t the original owner do that, you ask? He’s not a transaction engineer! Unlike you, he doesn’t possess the specialized knowledge of rent to own homes and option contracts. Simply put, when we rent to own a home, we rent the property with an option to buy, which is why we say “Rent to Own Homes.” Then turn around and rent that same property to someone else for more money for a shorter lease period, and sell them an option to buy the property from you at a higher price than it is worth right now. Some of you may be wondering, “Why would anyone rent a home with an option to purchase? Why would someone pay more than I just paid? Why would they rent it from me for more than I am willing to pay on a lease?” Remember, you are dealing with somebody who is highly motivated to sell. They might be in foreclosure (Free List of Foreclosures!) or perhaps they have another problem such as a divorce or job transfer out of the area. Maybe they’re an out of state owner and just don’t want to deal with selling the property long distance. There are many reasons people are willing to sell at lower then market value. This is one of the keys to success for a real estate entrepreneur; you must buy the property below market value! Buying creatively and below market value provides you more options and exit strategies. The more techniques you master, the more tools you can pull out of your tool box to engineer profitable transactions! Every month I go to the mailbox and I find checks from properties that I control. And my name is not on the title so I don’t own the properties, but I do benefit from the control of these properties. YOU DO NOT HAVE TO OWN THE PROPERTY TO MAKE MONEY FROM IT, YOU ONLY NEED TO CONTROL IT! You may be thinking that rent to own homes is too simple and can’t possibly work, but I promise you that all the techniques I discuss are ones that I have personally used and have many clients using with great success. This isn’t brain surgery but you have to know the exit strategies as well as how and when to use each of them.
Check out my video about real estate options.