How to Do Nothing Down Investing
First, what is nothing down investing?
I have heard it a lot over the years where people say they can buy properties with nothing down. Usually what that means is not that you are not putting any money down to purchase a property. Most investments, most purchases require some form of down payment, either 5% or as far as 20 or 25%, depending on what you’re purchasing.
What nothing down really means is you are not putting any of your own money into the deal.
So you are not putting any of your own money down on the purchase of the property.
Now how you do that is through various different ways. I talked about where you can acquire properties without using any of your money.
So nothing down is really buying properties without using any of your money.
One way you do that is through seller financing, which is where the seller will hold back a mortgage or a portion of the mortgage. Or they will “subject to” it to you.
This means they will give you the property subject-to them staying on the mortgage.
Another nothing down option is through a lease option, which I guess maybe it’s NOT “nothing down”. Since you did NOT purchase a property, you can’t really say it’s nothing down.
Another way is through using third-party investors or joint venture partners.
This is where you get a third party to come in and purchase the property.
The reason why you want to do nothing down investments is you don’t want to use any of your money because you want to be able to scale your activities really fast.
Some people resist doing “nothing down” deals because they say, well, I don’t want to give up any of the profit in my deals, If I do that, I’m going to be splitting the profit with these other investors. Well, if you don’t do that, you are not going to be able to get a lot of properties. You might be able to acquire four or five properties over a 10- or 15-year period.
Whereas if you scale, if you bring in joint venture partners, or if you do seller financing, you are going to be able to do 10, 15, or 20 properties a year.
I did a hundred properties over three years using all seller financing and using joint venture partners for my purchases.
So this is what is meant by nothing down. In the old days, there was a way you could do nothing down financing where you would borrow the down payment by using your credit cards or using a line of credit or some other means to be able to do the down payment.
But in those days, you could also buy investment properties for only 5% down. Now you have to put at least 20% down to get an investment property. This means that if you’re buying a $300,000 home, you have to come up with a $60,000.
Sure, there are still some places where you can still buy properties for $50,000. So you only have to come up with $10,000, but it’s still a significant amount of money that you would be putting on your credit card, and is still a bit challenging.
The post How to Do Nothing Down Investing appeared first on Jim Pellerin.
