Opportunities in Today's Real Estate Market
about 13 days ago.
Updated a long time ago.
On this podcast episode I talk about buying rental properties with no money down.
No money down real estate investing is one of the most overlooked and misunderstood aspects of investing in real estate. I have had real estate agents and mortgage brokers tell me that it is impossible to buy real estate with no money down. Even my own mortgage broker who refinanced my rental properties could not quite grasp the concept of what I was doing.
But the topic is incredibly simple. If you find a wholesale deal at a huge discount to ARV, for example a $100,000 ARV house that can be purchased for $50,000 then you will be able to buy the house with no money down.
Most people get confused and think no money down means no money down. What it really means is none of YOUR money down. In the example on this podcast we talk about how you would need around $37,000 in cash to buy and repair this house with a hard money loan, but after refinancing, you would get back that same $37,000.
So effectively, none of your cash would be in the deal (after you refinanced). But yet you would own the rental property, and have $20,000 of equity in that rental property.
After you get your $37,000 in cash back, you could use the same $37,000 to buy rental property number 2. You could keep doing this until you owned 10 rental properties which is the current Fannie Mae limit. After 10 properties you would need to get creative and start using LLC's or other entities to purchase. The first 10 houses is actually the easiest.
The key is to understand that you have to buy the property at a deep discount to ARV. That is the part that is most challenging for new real estate investors to understand. It is also the most important concept that I recommend that you learn first before you start diving into mailers, web sites and other things. That is why I focus on teaching this at the Wholesaling Real Estate Boot Camp.
The reason I say this is the most important thing is because if you can find deals at huge discounts, you will make a lot of money. You can wholesale them, fix and flip them, or fix and rent them. Everything is predicated on being able to find good deals at huge discounts to market value. Learn that first.
It would be helpful for you to have a notepad and pen in order to follow the examples in this podcast. When I do this exercise at my boot camp, it usually takes the students around 30 minutes of explaining it a few times for them to really understand the concept
Once you understand this concept, then you will realize that you really are just one deal away from financial freedom. Why? Because if the only thing stopping you is that $37,000 then one flip could make you that $37,000. Or 1 or 2 wholesale flips could make you that money.
Once you have the experience of a few fix and flips, or buy, fix and rents under your belt you will find it relatively easy to find private lenders that will lend you money at 10% interest. Many of these lenders will be okay with lending you 100% of the rehab money as well.
In fact even institutional lenders lend 100% of the repair money. So all you really need to get started is 10% down. And that one great deal!
So focus your energy on learning how to find that great deal. It is the first step towards your financial freedom.
Enjoy the podcast!