How To Buy a Home With No Money or No Down Payment

When it comes to buying any form of investment. You have to know what you are buying. When it comes to trusting others with my money. I have a hard time with this. I tend to be hands-on as much as I can. My philosophy when it comes to investing is simple.

Learn as much as you can regarding what you are doing. The more knowledge you have on a topic. The better-educated decisions you can make. The less of a risk you are of losing your investment and sadly getting screwed over. I have never been suckered by a slick sales pitch. At least not yet.

I have made numerous real estate purchases in the past. It is partly due to these purchases that I can lead the life I want. Though it's a simple lifestyle, it's the lifestyle I have chosen to live. I have made more money from real estate deals than any other form of investing. This excludes what I am doing now (content repurposing) as what I do now is classified as a regular income, not an investment income. In making these purchases, I have stumbled across several techniques that I have used where you can buy a real estate property with literally no money down.

The method I will explain in detail in this article can be used if you have an average credit score or no down payment. This will give you time to increase your credit score to something better and set aside some funds in case they are needed to close the deal.

I have made numerous real estate purchases in the past. It is partly due to these purchases that I can lead the life I want. Though it's a simple lifestyle, it's the lifestyle I have chosen to live. I have made more money from real estate deals than any other form of investing. This excludes what I am doing now (content repurposing) as what I do now is classified as a regular income, not an investment income. In making these purchases, I have stumbled across several techniques that I have used where you can buy a real estate property with literally no money down.

The method I will explain in detail in this article can be used if you have an average credit score or no down payment. This will give you time to increase your credit score to something better and set aside some funds in case they are needed to close the deal.

How To Educate Yourself For Free in Real Estate

When I decided to start putting together a real estate portfolio. I wanted to educate myself to make the best purchase possible, for me and my situation. Then I decided to live a more stress-free lifestyle and sell everything off. I had a total of 7 rental units.

Starting out. I wanted to know the mechanics of a home. I learned everything I could from watching home improvement shows and YouTube for free. I found several channels by searching the following topics.

• home inspections

• home inspection process

• Home inspection tips

There were many other different search terms that I used. I just wanted to give you an idea. I also did the same to learn how to evaluate a property concerning its value by watching real estate appraisal channels.

The best education was when I found several home inspectors and real estate appraisers who let me shadow them while they performed their duties. The knowledge I received from these professionals was priceless. All it took was several phone calls. I went on approximately 25 home inspections and about 15 appraisals in total. I learned a lot.

When I started. I knew nothing when it came to the mechanics of a home. It took me about a year to become comfortable with my knowledge. By then, I was familiar with electrical systems, plumbing, septic, structure, various insulation types, and everything related to a home and what to look for.

The Rent to Own Conditions

What portion of the rent payment will be deducted from the purchase price at the end of the lease if any

With any upgrades and repairs, who will be responsible for the payment and work

The property is to be taken off the market and is not for sale during the rental term

If at the end of the lease term. I can't purchase the property for whatever reason, the seller can relist the property, and our agreement will switch to a rental agreement only. All the money that I paid will then be classified as a normal rent payment

If the property is listed with an agent. I will pay a non-refundable deposit equal to the rental commission the listing agent will receive. If there is no listing agent, then any deposits will be refundable or used to reduce the purchase price

if the seller takes back the property and breaks the lease to sell the property early, a financial penalty will apply

at the time of closing, we each pay our own legal fees.

I would also inform the sellers of the benefits of selling in this manner. Some examples are:

I would usually give full asking, but depending on the value of the property

No sales commission since the sale will then be done privately

No negotiations for a lower amount

The total dollar amount they will receive in rent plus the sale price

It’s important to have a lawyer and a lender who is familiar and comfortable with what you are doing. Without these individuals in place, You will be unable to do this. It's also important to crunch the numbers to ensure that the amount you are credited by paying rent will exceed the amount of the principle compared to getting a mortgage right from the start.

How To Find a Rent to Own Property

This is the hard part and the most time-consuming. I would find these properties by talking to numerous real estate agents, searching for private sales, and going through the rental section of both online and offline classified sections. I would also place ads in the classifieds. The first time I bought a property with no money down. It took me 3 months of searching and talking to countless homeowners. But it was worth it.

Prequalifying the Seller

For me, I hate wasting people’s time, and I tend to get right to the point with the sellers. I would ask the sellers straight out. I can offer you your full asking price, but I would like to rent the property first for a given period. This will give you XXX amount above your asking price if you are willing to work out an agreement between us. This agreement can be signed by both parties and a lawyer if need be. Either I would get turned down, or they wanted to hear more about this. If they wanted to hear more. I then had a 60% chance of closing the deal and a 100% closing rate after the rental term.

During the leasing term, I would make several cost-effective repairs or upgrades to improve the overall value of the property. Some improvements could be, landscaping, painting, and minor repairs. I would perform these myself to reduce my costs.

6 to 8 weeks before the lease term ends. I would hire a qualified real estate appraiser to appraise the true market value of the property. I did this to finalize my decision to go forward with the purchase. Every time, the appraised value of the property came in significantly more than the selling price. This will provide enough equity room in the property so I had no problems getting financing. While this was going on. I would also be in communication with my lender.

When it came time to purchase the property. I would print a copy of my credit report and take everything to the finance company. In my case, I had a mortgage manager at a bank and a mortgage broker as a backup who would take my information and shop it around. I would include a copy of my credit report to reduce the credit inquiries, which can lower your credit score. When I had a solid confirmation of the financing, the last thing to perform was a credit check. Only then would I authorize them to perform one

The main goal in this situation is to have enough equity between the appraised value and the sales price so that the lender is comfortable doing the deal and recognizes the rent you have paid is, in fact, a form of down payment and will credit it as such.

What Are the Risks Doing a Rent to Own Deal

You are counting on the fact that the property value will increase enough for the lender to feel comfortable doing the deal. I have surrounded myself with a lawyer and a lender who are familiar with what I am doing and comfortable with how I go about doing this. As long as the numbers are legally there for both of them, it’s a done deal. The lender will also do their own appraisal to verify things.

You could run the risk of the seller backing out of the deal at the last minute for several different reasons. This is why it’s so important to lock everything up in a contract and if possible, have a financial penalty in place, if the seller agrees to the penalty.

You can say that the rent you are paying is a form of a down payment. Yes, it can be considered that but the way I viewed it at the time is you have to live somewhere so why not have the rent go towards property ownership at a later date.

In my lifetime. I have purchased 3 properties using the technique. The last time I did this, I turned around 2 years later and leveraged these properties to buy my other rental units. When I liquidated my real estate portfolio. I sold my properties off by renting to own.

Can You Buy a Property with no Money - Yes You Can

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