How To Buy Real Estate With No Money
Here’s a technique that I perfected in 2006 when the real estate boom was happening in the U.S. I still remember that people were lining up to buy brand new homes and existing homes would only last for minutes on the market. Houses were climbing at a staggering rate. In some cities like Las Vegas, prices were rising 5% – 10% per MONTH.
Many people took advantage of this situation and made a lot of money including myself. During this time I created a technique that I have never shared before and for the first time, I have decided to share it with the world. I implemented this technique on how to buy real estate with no money on many houses using this one strategy alone and it worked like clockwork closing on average 1 house per month making anywhere from $5,000 – $40,000 per transaction. It was all done with only a $1.00 investment. Yes, you read correctly, ONLY ONE DOLLAR investment.
I did have a partner at the time, so we would split the profits 50/50. Sometimes he would be the “investor” and for some deals I would be the “investor”. Either way, it was still profitable for us both.
I must clarify that I can’t guarantee that this will work for you just because I don’t know if you will implement it properly. This blog post is for education purposes. I am not a lawyer. You must consult with your own lawyer prior to implementing this strategy. Use this information as you wish and I am not liable for the use of it.
How to Buy Real Estate With No Money… Correction, With Only $1.00
In order for this strategy to work, there should be an increase in property values consistently for at least 12 months at a rate no less than 5%. Historically speaking, real estate has climbed 5.6% over the last 70 years. In the last couple years, this strategy would have not worked, however it is getting close to being able to implement this strategy properly since at the time of this post for the last 6 months, real estate has been climbing steadily.
There are a few things that need to happen before this strategy to work:
1.- There must be at least 15% equity in the property for you to acquire it
2.- Seller must be motivated to sell
3.- You must invest $1.00 (Keep in mind that you may lose it)
My assumptions: I’m assuming that you already are familiar with real estate transactions, contracts and lingo.
Ok, now here’s how to structure the deal. I call it “The promissory note deal”. You will not find this in any book, because I created it myself. So are you ready?
First you find seller that is willing to sell at 15% below market value which is relatively
easy to find in a buyers market. Reason is because there are more houses for sale than buyers and houses will remain on the market for longer which will make many sellers desperate to sell and/or drop their prices.
You inform the seller that you are a real estate investor and that you intend to find a buyer for that house. That you are not a realtor and that you will place the property under contract as a buyer. You will have 14 days to try to find a new buyer. That you will not be assisting anybody to buy the house. The end buyer and seller are responsible for such final sale and that you are only going to be paid a finders fee for finding the buyer. Your earnest deposit as the initial buyer is in the amount of $1.00 which is non-refundable if the deal doesn’t go through.
So, why the $1.00 you may ask? Well, in order for a real estate contract to be binding and legal, there must be a monetary value added in the form of an earnest deposit.
Now, during the 14 day period, seller will not be able to sell to anybody else because he has a contract with you. If you find a buyer, you will then ASSIGN the contract to the new seller. To make it appealing to the new buyer, you can structure the deal in different ways.
How To Structure Your Deal With The End Buyer
First of all, I want to mention that the way I found my buyers was simply through Craigslist. I would place an ad selling a home at 10% below market value. That’s it, easy, simple and free.
There are many ways to structure your deal with the end buyer:
Option 1: Sell it to buyer at 10% discount. You will make 5% of the deal and I will show you exactly below how you will get your 5% deposited into your bank account.
Option 2: If buyer is an investor, you can offer to lease the property to you at a guaranteed 24 month lease with payment in full (equal to 10% of the purchase price) at the time of contract.
Option 3: If the buyer was brought to you by a third party, then you can pay that person a finders fee which is equal to the 10%.
These are just some ideas, however it is important that the buyer isn’t paid flat out from the seller just because that would be considered a “cash back” deal which is against the law.
One very important part I almost forgot to mention is that in the contract between you and the seller, you must write your name as the buyer in the following manner:
I, John Doe and/or Assigns….
The “and/or Assigns” will allow you to assign the contract to any other buyer which is legal to do in all 50 States.
Ok, now here’s how to buy real estate with no money down and how you will get paid. In addition to the sales contract between you and the seller, you must have two additional documents added. The first one is basically a Real Estate Investor Disclosure which states that you are an investor and that you intend to find the buyer for a profit of 15% of the value (or whatever amount you negotiated with the seller) and that you have 14 days to find a buyer (or whatever amount of time you negotiated). That you will be paid through a promissory note after sale is completed.
The second document to be signed is the Promissory Note. This is where you state that
the seller promisses to pay you 15% of the deal. So for example on a $500,000.00 sale, the seller promises to pay you $75,000.00 as a FINDERS FEE to be paid ONLY to you if you find a buyer and contract is assigned within 14 days. The promissory note will be null and void if the above does not happen.
The promissory note will only be signed after you have your buyer sign the contract. You do not release the contract nor the deposit from your buyer until after you receive the promissory note from the seller.
After all this is completed and you have the promissory note from seller, plus the signed contract and deposit from buyer, you then open escrow with the escrow company of your choice. You provide the escrow company your bank information.
You can choose to record the promissory note with the county, however I found that it wasn’t necessary since you submit the promissory note to your escrow company with instructions that seller will receive 85% of the final sales price and 15% will be deposited directly to you.
Now, depending on how you structured the deal with the end buyer. You can instruct escrow to pay funds to the finders fee of the buyer or to pay for the lease contract, etc. Those funds will be paid from your funds which is the 15% that the buyer paid you.
Last but not least, the 5% remaining will be deposited directly into your bank account. On a $500,000 deal, you would make $25,000.00 and your only risk was $1.00. Simple, easy and effective.
If you have any questions or comments on how to buy real estate with no money, then feel free to comment below.
P.S. To learn EXACTLY how I’m able to work from home with only 2 hours a day with this blog, CLICK HERE to watch the video on how it’s done.
Until next time,