No Money Down
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“No money down.” What does that mean in the world of real estate buying? How can anyone proclaim that you can buy real estate with no money down? I used to think that these types of programs were nothing more than scams. And, yes, many of the programs out there were scammers beyond belief. But, there were a handful of people who really did know show people how to buy properties with no money down.
Some of the more prominent of the authors who promoted no money down were Robert Kiyosaki, Carlton Sheets, Robert Allen and none other than Mr. Donald Trump himself. The theory behind no money down is to buy a piece of property without putting any money of your own into the purchase. The money can come from a multiple of sources, of course.
What are some of the no money down sources? Many of them are as simple as getting your family or close friends to lend you a down payment. Another idea is to borrow the money from someone. That money does not necessarily show up as “borrowed money.” And, some of the more creative ways to buy a home include getting the seller to grant you a “silent 2nd” or getting grant money for the down payment. In fact many government sponsored programs were created to help low income individuals buy a home. The no money down source then was the granting agency.
Why is no money down such a good idea? Well, the answer, of course, is a buyer can get into a house without risking any of his/her money. Another reason is simply that he/she can actually buy a house. Of course, even with no money down transactions, the borrower(s) still needs to be able to qualify for a loan. Back in the crazy days of deal making, everybody was making these kinds of loans. Some people made out like bandits and others didn’t. But, when you were using other people’s money, you really didn’t have much to lose.
Some of the fundamentals of no money down deals made sense. For those who could afford the monthly payments and had a source of a down payment should be bona fide buyers. The banks and lenders still had to make sure that the numbers worked out, that the buyers did, in fact, have jobs and that the homes were worth the price paid for them.
The trouble started when the real creative financing started. No money down transactions are ok, but if you compound the problem with what was called “stated income,” you have a disaster waiting to happen. In this scenario the borrowers were “incented” to make up how much they made in order to qualify for a loan. Then, when they couldn’t make their payments, all bets were off.
That said, there are still very legitimate ways to buy properties with no money down. A couple of the best and well known teachers of the technique include Robert Allen and Carlton Sheets. Their principles are sound, not just with no money down, but with making money from a multitude of sources. If you follow simple guidelines, don’t over stretch and are diligent in your analysis, you have the chance to win big.
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Looking for a way to invest in real estate with no money down.
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