Have you often wanted to buy real estate but did not have enough money? Or maybe you are new to the real estate industry and don’t have good loans, but want to buy real estate. How do you handle this task? One way is to use “no cash money down real estate investing” both a person without the funds or loans can buy real estate.
What do You Need?
First, let us understand what is required to secure a payment other than cash. Yes, I said something other than cash! Remember that this is not cash invested in real estate. Other means can be used to secure a payment in “return” for the payment. They can be anything the seller accepts that has value, i.e. a car, motorcycle, painting, jewelry, silver, etc… or even the promise to pay as for future rental payments.
The promise to pay means that you do not deposit any money at that time, but in the future, if the option is exercised, you will then make payments. This is like the “egg” in a recipe that binds the transaction and makes it a real cashless money to purchase real estate investments.
There are obviously different methods and scenarios that could be used to buy real estate without money. But for this example, I will use a so-called ‘sandwich lease option’. In this scenario, you want to acquire not only the buyer’s payments but also the equity in the property without ever taking the risk of true ownership. To carry out a sandwich leasing option, you need a combination of a purchase option and a leasing contract. Both should be written in your favor so that you can withdraw at any time without recourse to you outside the loss of “consideration”. The purchase contract option binds the property for you by giving you the “revocable right” before the purchase.
Other Things to Consider
Is there a disadvantage if no cash is invested in real estate? Of course, there is. For example, if you do not offer to take the property out of the seller’s name and leave him free and clear of the title, then it can be a difficult task to obtain the purchase option.
Another thing to consider is why does the seller have such a difficult time selling the property? Of course, this can also be a problem for you in the future. And if you are dealing with renting the property because you are not buying it, you need to consider financing problems. What happens if the rental market is below what your payment is? Then you accept a loss! And what if the seller only makes interest payments, later changes to interest and principal payments and increases your payments sharply and puts you in further financial difficulties?
Now knowing that this only begs the question; is there a better option to no cash money investing down real estate? The answer, of course, is yes, there is! That’s if you have a self-directed IRA (preferably Roth) or a good credit and a relatively good income of about $70,000 a year. But we discuss the scenario that you don’t have the funds or good credit to buy real estate in another way. It would also be a topic for another article.
So now that you know the ups and downs of no cash money investing below real estate, the only thing you need to do is ask yourself if this is the carrier for you and if so, how to go about it. There are teams and companies out there for you, just for that purpose.
I would highly recommend giving this a try. If you manage to get real estate without actually spending any money, then you can rent out the place right away and pay it off without ever needing to pay a penny of your own. Of course, you likely will still need to put some effort into it, but at least you won’t need thousands of dollars up front.
Its the perfect means for getting into the real estate business quickly. You can get your first property without needing too much cash, then earn some from it in order to buy up the next! What better way to build a business is there than one that doesn’t require you to have money yet?
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