No money down real estate investing is VERY different than buying a property without using any of your own money for a down payment.

Let me explain... no money down is where you borrow 100% of the cost of the property. It's incredibly risky because if the value decreases even by 5%, you will find yourself owing more money on the property than it's worth. And if anything goes wrong you will find yourself pinched to pay for it. There are a lot of foreclosures happening all around North America for this very reason!!!

It's also extremely difficult to find a property that will cashflow with 100% financing. And you still need money. Typically you can expect to need about 2-3% of your purchase price to cover the other expenses. It's not a lot, but you have to pay a property inspector, a lawyer, property purchase tax and a few other disbursements depending on where you are buying.

No money down deals are not only MUCH riskier because you have no equity in the property, they are also pretty darn hard to find because they rarely cash flow.

If you have no money for a down payment on your real estate investment, then, in the following order, this is what I suggest:

1. Get control over your finances. Pay down your debt and start saving. You don't need cash, but there probably aren't many people that will partner with you if you are terrible with your money.

2. Look to your home. If you own a home, and have some years left before you were planning on retiring and a reasonable amount of equity in your home (over 25%), consider using a portion of the equity in your home to get started.

3. No money and you are currently a renter or don't have enough equity in your home? Find a great property...one where the rent will cover the costs with as little as 10% down. Get an accepted offer and then find a partner that has the money to invest in the property with you. Be prepared to sell yourself AND the property.

We've bought several properties when we've had very little money ourselves. The no money down deals blew up in our face. Those were hard lessons learned. But, the deals we did with a partner, where we did all of the work finding and purchasing the property, and now oversee the property, have been a great success. Having money for a down payment allows us to buy better properties in better areas, gives us equity in the property from the start, and helps reduce the monthly mortgage costs so the property is more likely to cash flow from day one. The deal we typically make with partners: Our partner puts down the money for the down payment, but we jointly own the property 50-50. If we have to make major repairs, and the property can't cover it, we split the cost evenly. When we sell, our partner will get his down payment out first, then we split the rest of the proceeds.

Published December 8th, 2008
 
 -------------------------------------------------------------------------

Learn the secrets to becoming a millionaire real estate investor...in your spare time. Get the Rev N You with Real Estate Starter Tips Guide free when you sign up for our complimentary Rev N You with Real Estate e-zine.