How to Buy Real Estate Without a Down Payment in Any Market Insider Secrets from the Experts Who Do It Every Day

27

Chapter 3: Organize Your Finances

39

Chapter 4: Choose a Property You Like

49

Chapter 5: Locating Properties for Sale

57

Chapter 6: Choosing a Property You Not Only Like but Can Afford

67

Chapter 7: Take a Second Look at Your Finances 79

Chapter 8: Creative Financing Through Mortgages

85

Option One: Owner Financing Offered by the Seller ...............................86

Option Two: Owner Carries a Second Mortgage .....................................90

Option Three: Assumable Mortgages ....................................................93

Option Four: Private-Lender Financing .................................................97

Option Five: Wraparound Mortgages .....................................................98

Option Six: Overlapping Mortgage ......................................................102

Option Seven: Equity Sharing .............................................................104

Chapter 9: Creative Financing Through Leases

109

Lease with Option to Buy ....................................................................110

Rent to Own .......................................................................................115

And There’s Another Little Option. ......................................................118

Chapter 10: Creative Home Ownership with No Money Down

121

Food for Thought ................................................................................122

Owner Financing ................................................................................125

Second Mortgages ..............................................................................129

Assumable Mortgages ........................................................................132

Private Lenders ..................................................................................134

Wraparound Mortgages ......................................................................136

Overlapping Mortgages ......................................................................137

Equity Sharing ...................................................................................138

Lease with Option to Buy ....................................................................139

Rent to Own ........................................................................................141

Real Estate Options ............................................................................144

Real Estate Options for Realtors .........................................................147

There’s More .......................................................................................148

Chapter 11: Achieving Personal Wealth with Creative Financing

151

Chapter 12: The Conventional Way of Doing Things 157

Chapter 13: FHA and VA Loans

161

Chapter 14: Foreclosures

167

Chapter 15: Time-Saving Information About Taxes and Insurance

173

Chapter 16: Negotiating with Sellers: Motivating the Sale

177

Chapter 17: Why Real Estate Agents Save You Time and Money

185

Did You Know? ....................................................................................187

Chapter 18: Take the Deal to the Closing Table

193

Chapter 19: What’s After the Sale?

199

Conclusion

207

Appendix

211

Buyer’s Final Inspection of Real Estate ...............................................211

Checklist of Items You May Want to Include in an Offer to Purchase ...212

Sample Classified Ads for Renting Your New Property .........................216

Interview with a Potential Real Estate Agent ......................................218

Tips, Hints, and Reminders for Real Estate Transactions ....................220

What Do I Know About This House? .....................................................233

Steps to Take in Buying a Home with No Money Down .........................234

Enhance Your Credit Within 6 Months .................................................237

Bibliography

239

Glossary

241

Index

315

About the Author

318

FIACBI Forms

319

E

CAF

P ER Preface

P

Several years ago, I sold real estate in a thriving residential real estate market. During that time, the paid TV infomercials had just started to run in our area with promises of the accumulation of massive wealth using systems designed to show potential homeowners how to buy real estate with no money down. Of course, many of these systems promised large profits, and a few interested buyers began calling their real estate agents wanting to know more about purchasing real estate without any money down.

I made it my business to learn about this concept quickly because my phone was ringing constantly with potential clients wanting to know about what they saw on TV, and my current clients were growing antsy over paying cash or obtaining traditional financing when there might be a better way.

There was a better way and the better way was something that many wealthy and very smart real estate owners had been well aware of for a great number of years. However,

one of their own was much smarter. Carlton Sheets, who became known as the king of TV infomercials, began giving away secrets that had been closely guarded. He promised buyers they could learn how to purchase real estate with bad credit, no credit, and without a down payment, and this made potential home buyers and many investors very curious.

What I eventually discovered was that these potential buyers were going to need a realtor who was well informed on the particulars of buying property without money or credit, but there was a little problem with that idea. I was afraid I wouldn’t be paid because without money at the closing table, how would realtors secure commissions for their hard work?

After finding a way to take care of my commission by penciling out possible scenarios, I decided to break down and buy a course on how to buy property without cash or credit.

It’s a good thing I did because problem number two quickly presented itself.

Buyers who came to me for real estate purchases because they had heard about how they could become a real estate tycoon without spending one red cent had an even bigger dilemma. They didn’t have the money to buy the course being advertised on television at the time. I quickly realized this whole idea of purchasing real estate with no money down and no credit needed to demonstrate some merit. If not, there would be a lot of very disappointed people out there who had spent several days dreaming of the lifestyle that Sheets and other businessmen were promoting. Furthermore, my time and other realtors’ time would be lost if we couldn’t realize profitable sales from these individuals.

Later, after my course arrived, I spent hours looking over

materials whenever I wasn’t out in the field, and—actually purchased my home at the time with no money down. A few months after we closed on our house, we bought the building lots next door to us. Guess what? We bought those with no money down too!

Prior to my purchase, one of my first no-money-down clients came along. He and his wife were adamant about what they would pay for a home and very quick to tell me they planned to go to the closing table with absolutely none of their own money. Furthermore, if they would be required to dig into their pockets at all, it appeared to me that it would certainly be a deal breaker. They were tough; and to this day, I’m thankful that I was their real estate agent because we all learned so much from one another and became friends along the way.

As a realtor, when you are working with no-money-down clients, you really are looking out not only for the client’s best interests but your own interests too. You still have food to put on the table, so a paycheck is a necessity. The trick is to figure out how you can still be paid, put a client’s best interests first, and make sure everyone leaves the closing table happy. As a client, you need to know that a realtor can save you thousands of dollars later on whether you think you need one right now or not. However, if you begin to collect real estate, you will likely begin to see that you will use real estate agents on some real estate transactions, and on other transactions, you won’t.

Don’t worry; this book is not going to hard-sell you on using a real estate professional. Personally, I believe whether you use a real estate professional or not is irrelevant; but I do believe you need to protect yourself and your interests no matter which side of the closing table you happen to be on at

the time. A real estate agent can help you do that without any hesitation; and without one, you simply need to learn to be just as confident, efficient, and prepared in each one of your real estate transactions.

This book was written in an easy-to-read format in hopes that people from all walks of life would be able to learn from these tips and follow some of the suggestions and recommendations on these pages. However, if you need some quick tips, be sure to check out the Appendix. There you will find tips, hints, and reminders that you can apply to all of your real estate endeavors. It just doesn’t get any easier!

How to Buy Real Estate Without a Down Payment in Any Market: Insider Secrets from the Experts Who Do It Every Day is a book you can use to guide you from your earliest discussions of purchasing real estate until long after closing the deal.

Hopefully, you’ll refer back to it often when you need information. The experiences from real estate investors and real estate agents were relied upon in order to bring you the most current information and, of course, my own experiences from the trenches will follow me onto the pages of this book.

Real estate buyers and sellers were happy to answer quick questions about their transactions and, hopefully, you will find the information we compiled from these individuals very useful.

According to Money Magazine (posted on cnn.com on 5/16/05), over the past five years, home values nationally have risen by 65 percent while the stock market has fallen.

This is reason enough for investors to start looking in their own back yards for safer investments. After all, there are plenty of stock market investments, but there won’t be any

more land made. Real estate is where your money needs to be, and if you can purchase real estate without money, then it’s that much more appealing!

As you begin to embark on your real estate journey, keep this in mind: Donald Trump appeared on a Larry King Live show in March of 2006 talking about all things Trump. He said what real estate investors have known all along, There’s no bigger business in the world.

There is no reason why you can’t become a large shareholder in the biggest business in the world. It will certainly pay handsome dividends for many years to come!

DROW

F ERO Foreword

F

Iremember viewing an infomercial several years ago on late night television. There was a gentleman wearing a bright blue short sleeve Caribbean print shirt, sitting by a pool on his estate with a yacht anchored at the dock. He was having a leisure conversation with a couple who exclaimed that their lives had changed since attending one of his seminars on Purchasing Real Estate without Having Any Money or something to that affect.

I laughed and brushed it off as another get rich quick modern day version of the traveling Snake Oil salesman, except CD’s had replaced the miraculous tonic.

It was only after I became a realtor that I realized that this was possible.

Every so often I would hear a colleague in my office responding to someone on the other end of the phone with one such exclamation… You must put a deposit down or the board only allows a certain percentage to be financed, it is in the by-laws or I do not sell foreclosures!

My first encounter was when a first-time homeowner told me that he had been approved for a 100% down payment. He also told me in no uncertain terms that if I could not work with him that he would use another realtor. Well, I soon learned that this was not a unique situation, but it was too late because I lost what would have been a very good customer, the opportunity to sell his acquisitions and several substantial commissions, because he has acquired five (5) properties since then. Ignorance is not really bliss!

The manner in which Susan Alvis has written "How to Buy Real Estate without a Down Payment in Any Market" is quite extraordinary and she has written it in a very impartial manner.

She still believes that the realtor is important to sellers and buyers in various situations. She has covered every aspect of acquiring real estate and it is quite informative for everyone, whether you are a first-time homeowner, if you have purchased before, and even if you are going to use your own money as a down payment. I definitely believe that it will be especially helpful not only to the investor but to those of us in the real estate profession also. It is like the camera for dummy’s…

everyone who uses it gets the results as long as they read the directions carefully. This is a very detailed and thorough book.

EUGENIA C. FOXWORTH

Coldwell Banker Hunt Kennedy

1200 Lexington Ave., New York, NY 10028

212.327.1200, Ext. 263

Fax: 212.327.1231

eugenia.foxworth@cbhk.com

www.eugeniafoxworth.realtor.com

www.cbhk.com

Eugenia Foxworth was elected in 2005 to serve as the President of the New York City Local Council of FIABCI-USA through December

2006. As a Certified Previews Property Specialist, she specializes in exceptional properties in New York City and internationally. She has acquired a reputation with both buyers and sellers as someone who can make a deal happen through her tenacity, knowledge of the market, professionalism and personality. She is licensed with the Real Estate Board of New York and is a member of the Manhattan Association of Realtors, the National Association of Realtors and FIABCI. She is a Coldwell Banker Certified Previews Broker and a Certified International Property Specialist. Eugenia resides in New York and has lived and traveled extensively throughout the world.

SN

IOTA

D ICDE Dedications

D

Thank you doesn’t seem to ever be enough when you really need and want to express your genuine gratitude.

The following people have my sincere appreciation.

Thank you to my husband, Brent Alvis, and my special children, Matthew and Amber. These three people made this book possible and allowed me to finish this book when things couldn’t have been any busier for us as a family. I’m lucky to have the three of you in my corner day in and day out!

Thank you to Atlantic Publishing for allowing me the privilege to work with such a fantastic company and most importantly, thank you to Angela Adams for being a patient editor and great adviser.

Thank you to Kay White and Ben Smith, my mother and brother, for quick reminders to jog my memory pertaining to the real estate industry from an agent’s perspective. Thank you to Cheryl Frazier who answered my questions on her personal real estate transactions.

Thank you to all of my writing clients who made it possible for me to quit my real job for the best job in the world—

writing. Thank you to all of the many real estate investors, buyers, and sellers who helped make this book possible by taking the time to offer input and provide answers.

Finally, thank you to everyone else in my family for their support and time spent listening to my ramblings of how deadlines were approaching, and a special thank you to my brother, Bert, for always believing in me!

EN

Buying Real

ORE Estate Without a

T

1 PAH Down Payment

C

Many people each year continue to throw money

away on rent when they could be enjoying the

benefits of home ownership. Would-be investors

never take the leap of faith and cross over into real estate investments because they simply believe they cannot afford to buy investment properties. While many potential investors and homeowners worry about not being able to afford home ownership, others know that even if they could afford a significant down payment, their credit would not support their dreams of home ownership. So they rent, knowing all the while that they are padding the pockets of landlords.

As a first-time home buyer, I had little money to put into a down payment. I tried to save, but it seemed emergencies arose every time I even came close to the 20 percent down payment I need for a small home of my own. I was tired of renting and wanted to become a homeowner. I knew I’d paid almost the entire mortgage for the owner of the property I rented. However, I didn’t know how to purchase a home without a down payment.

TE

Knowing how to purchase property without down payments is something kR

everyone investing in real estate needs to know. It’s a crucial fact for the AM

millions of people like me who really want to stop paying rent.

YNA NI T Cheyenne West, Analyst and Writer

NE

Mississippi

MYAP NW Thousands of dollars are thrown away each year on rental OD

property that tenants will never own. Landlords want renters A T

to believe that with the cost of maintenance and repairs as uOH well as taxes and insurance, home ownership isn’t what it’s TIW cracked up to be. Add in the mortgage payments, and owning ETA

a home is quite expensive. The landlord would like his tenants TSE

to believe that if he had the opportunity, he’d almost switch LA

places with his renters for fewer headaches. Almost is a ER

word that holds little meaning when used in sales. Remember, YuB a landlord’s goal is to sell his tenants on the idea that renting OT

is grand and ownership is a headache to be avoided.

WOH

I was too busy to shop around for homes and I didn’t have a lot of cash.

The reason the no-money-down option appealed to me was that I was essentially cash poor. When you are next to broke, have little money, and work for minimum wage, chances are unless you find a person selling a house who wants to be your banker, you’re not ever going to be a homeowner. Fortunately, I found a caring real estate broker who decided to cut me a break. She postponed her commission and convinced a seller to sell to me. I worked two jobs to pay back the down-payment portion of the money, and then the seller carried the entire financing. I guess some people have enough money to do that. However, if I had not run into this guy, I would never have been able to become a homeowner.

Anonymous, new homeowner

18

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Owning property can sometimes bring headaches. However, APT

landlords enjoy a lot of the finer things in life such as several ER

two-week vacations each year as well as vacation homes. Are 1: B

you able to do that as a renter with a regular job working uYI

swing shifts? I don’t think so! What’s more, landlords have NG

long since been recognized as holding their cards pretty REA

close to their chests. After all, if they lose renters, they lose L E

their income. And if they talk up the great income that STAT

many landlords realize, then they end up with a little more E W

competition than they feel comfortable with. What’s the point ITH

in ruining a good thing?

OuT A

Once renters realize that the grass isn’t only greener on the DO

other side, but it looks a whole lot like money, then they can WN

cross over comfortably into home ownership and possibly PAYM

start investing in their own rental properties. You might be EN

thinking to yourself right now, If it’s so easy, then why aren’t T

more people doing it? The real reason is that many people do not have the money for the down payment, so they never even consider home ownership as an option for them. However, after reading this book, you’ll see how anyone with or without money or good credit can easily become a homeowner. All it takes is ambition, a little bit of determination, and the willingness to learn.

Since the idea of real estate ownership without any money down was introduced, there’s been no excuse why anyone with at least a high school education and some common sense can’t move into real estate investments. One of the wealthiest real estate investors I’ve ever known was from the area where I live. He left school after the third grade. He could not read and could barely print his name. He died a millionaire from real estate investments. There’s absolutely no reason why 19

TE

people with the will to own their own homes can’t find a way.

kRA

Home ownership is easy and you will quickly see how easy M Y

it is to get started. Hopefully, if you are about to buy your NA

first property, you won’t stop with just one. After you achieve NI T home ownership for yourself, you should be ready to try out NE

real estate as an investment venture.

MYAP N Believe it or not, all of the following can be purchased with no WOD money down and will enable you to enjoy a lifestyle many can A

only dream about. You can collect a rental income from all of TuO these or you can look into one as your first home purchase: HTIW

• Single residences

ETATSE

• Apartment buildings

LAER

• Duplexes and condos

YuB

• Townhouses and flats

OT WO

• Mobile homes

H

• Mobile home parks

• Strip malls and shopping centers

• Vacation homes, cottages, apartments, sun suites by the sea

• Campgrounds

Even hotels and other businesses can be bought with no money down. It might surprise you to learn what properties are bought and closed with contracts stipulating no-money-down terms. Further, you may be interested to know that many current property owners look for buyers who wish to 20

CH

find properties available for lease or owner financing. These APT

sellers know if they want to make the most amount of money ER

on the property they hold, then they need not only to sell the 1: B

property but also to provide the financing.

uYING

Some property owners are not only satisfied with selling RE

their properties to buyers with no cash at closing, but they AL

prefer selling under those conditions. Depending on the seller ESTA

and what he or she is trying to accomplish, properties may TE

be offered to buyers under a variety of creative options. It is WIT

possible for a seller to entertain the idea of financing the entire HOu

purchase or maybe even to consider entering into a lease or T A

rent-to-own agreement. The possibilities are endless.

DOWN

We’ll discuss later the differences in each, but the most PAY

noticeable difference to buyers who are offered various ME

options is how quick they end up at the closing table. In other NT

words, which option will put them at the closing table with full ownership of the property? A 100 percent owner-financed property, unless there are some more creative aspects to the sales contract, will likely place you at the closing table much faster than any other method. That’s including all options listed in this book, and not just the options offered to you by the owner of the property. A lease with the option to buy or rent to own will likely give you the quickest physical access to the property; but in those scenarios, a closing will come at a much later date.

There are several reasons a seller might want to sell a property to a buyer on the terms and conditions of owner financing and no money down at the closing table. The top five reasons are listed below.

1. Tax advantages. There are numerous tax advantages 21

TE

a seller may realize if he or she decides to finance the kRA

property. The biggest advantage is a tax deferment in M Y

the gains realized on the property. An accountant can NA

go into more detail about capital gains from the sale of NI T

a property and provide insight on what a seller can do NE

to avoid paying the gains all at one time.

MYAP N

2. The seller wants to hide money. Sometimes sellers WOD

will want to hide their assets from a significant other A

or a spouse (usually in a divorce situation), so they will TuO

be looking at all options in order to do this. Though HTI

it may seem shady to you, the only thing you need to W E

worry about is the fact that they are selling to you on a TATS

purchase-money mortgage agreement. Since the seller is E L

selling to you on an installment contract, you are going AER

to have legal matters taken care of by a good real estate Yu

attorney; therefore, you don’t need to worry about the B O

reason the seller wishes to hide his or her assets.

T WOH

3. For income purposes. Sellers occasionally buy properties and pay cash for them with the full intention of turning around and selling the property to an owner who wants to buy on the terms of a no-money-down

agreement. They normally choose these properties

carefully so they can sell quickly to someone who will need creative financing. This enables them the luxury of holding the mortgage as collateral while collecting a nice income off of your investment and their investment. Many of these investors are already prepared with documents and offers to purchase, so be sure to read everything before signing and hire a real estate attorney to close the transaction for you.

22

CH

4. Higher return for their investment dollars. Sellers APT

who provide financing for buyers will make far more ER

money on the property than they will if they just sell 1: B

the property outright. They will also make more money uYI

on their investment than if they are drawing interest on NG

a CD or savings account. The entire concept is a win-REA

win situation for both buyer and seller if the seller is L E

in a position to carry some of the paper (note) on the STAT

property.

E WIT

5. Quick sale with more profitability. The property will HOu

likely close sooner and enable the seller to cash in on T A

an investment that is not only secure but is also pretty DO

much under his control. Furthermore, he can initiate a WN

foreclosure if the buyer defaults on the mortgage, so his PAYM

investment is one of the safest and most secure ways to EN

invest.

T

There are several reasons sellers want