Actually, VA loans are available to investors when you buy a VA foreclosure. I just bought two in the past 6 months. Also, I did it with “no money down” because VA has less stringent requirements and allowed me to use a credit card (not my money) to pay the down payment and closing costs. My rent covers the credit card debt and all other costs, leaving me with cash flow. By the way, a down payment on a VA foreclosure can range anywhere from 0% to 5% which is excellent for investors…and you don’t pay any PMI (private mortgage insurance) no matter what you get the house for. My latest VA foreclosure was 0% down. Figure on about 3-4% for closing costs regardless of the down payment. Both were bought at about 20% below market and are rented. Bottom line is that VA foreclosures are about the best deal you can make as an investor…and it’s very straightforward process. Buying from owners is good also, but more tricky. I’ve got two of those deals and each was very unique, but both “no money down” deals, where I acquired the properties for 20 below market value. One owner owned the property outright and financed 96% of the deal, but just for one year. I’m currently in the process of refinancing it to pay him. This type of transaction was extremely helpful because I didn’t have to put down 20% as I would have with a conventional mortgage. Since I have about 25% equity now, I put nothing down when refinancing, and that’s because banks treat purchases different than a refinance. With a purchase, a bank requires 20% down (conventional mortgage – and you avoid having to pay PMI) even if you bought it at 20% below market. With a refinance, the bank looks at the loan to value. If you are refinancing an amount that is 80% of the value of the home, then you put nothing down (and don’t pay PMI.
On HUD foreclsures: If you plan to buy a lot of houses to rent (like I do, for the cash flow) then don’t bother HUD foreclosures because they require 25% down for investors( but they do pay closing costs, unlike VA). If you are going to buy, fix up, then sell, then HUD is great cause they typically sell cheaper than VA, and when you sell you get your 25% back, thus turning it into a “no money down” deal. I don’t think it’s worth the effort to put 25% down and then rent a HUD home, primarily because you need to refinance to get your 25% back out, and you can’t do that right away and that ties your money up, preventing you from purchasing more properties. Well, this has been my two cents.
Posted by Tim Conde on November 08, 1999 at 11:00:10:
Why is it impossible? Just because you haven’t done it doesn’t mean it can’t be done. I’ve done way over a hundred deals with zero down. All it takes is a seller who doesn’t want or need the cash up front or an investor willing to front the cash you need to do a deal. One thing the Sheets course stresses (that no one seems to get) is to BE CREATIVE. There’s as many different ways to put together a deal is there are deals. Find sellers that you can work with and you can do zero down deals all day long.
When I was 21 and a full-time college student, I bought a house for zero down (kinda). I had to come up with 1,200 dollars for the closing costs. My dad loaned me the money. My father also co-signed the loan for me. It was a 30 year mortgage, zero down, the payments were 176 dollars per month. I rented it for 400 dollars per month.
It was a HUD house in Detroit. The address was 5734 Hereford Detroit MI. I bought it at a sealed bid auction for 9,651 bucks. I rented it for several years
then moved in and did some remodeling, lived there two years to avoid taxes, then sold it for a 20k net profit.
Posted by Russ Sims on November 02, 1999 at 14:10:01:
I just agreed to pay a $1000 assignment fee for a lease option contract on a pretty little home.This contract also requires that I pay the seller a $1500 option fee. So that’s $2500 out of my pocket, right? Well, no. Because I agreed to pay within 30 days. Tomorrow I should sign with my tenant/buyer for the home who has a $5500 down payment (option fee). After paying my assignment and option fees, I’ll be left with $3000 in my pocket. Additionally, I’ll make nearly $5000 when my tenant buys the property. Sandwiche lease/options are a powerful way to aquire property zero down. Bill Bronchick, Joe Kaiser, Claude Diamond and Ron Legrand all have courses available here that will teach you this.
Russ
Posted by Rolfe MN on October 31, 1999 at 21:15:54:
Steve;
All of my projects are renovations - buy, rehab, then refinance or sell. I hire contractors to do most of the work. A few of my properties have been purchased on short term CD’s, where I negotiated a low down payment ($1,000 to $4,000) and paid that down payment on a (gulp) credit account. Of course, I’d rather use cash, but had none available. Renovation was also completed using a (double gulp) line of credit. That’s a big extension of credit, and it’s certainly not for everybody. 6 to 12 months of construction and seasoning later, with renters in the building, I’ll refinance the CD. If I’ve played my cards right, the refinance appraisal will be at least 20% more than I have into the property, i.e. total aquisition plus renovation and development costs. Lenders will do a mortgage on investment property at 70% to 80% of the appraised value, so the refinance mortgage repays most if not all of my costs. Bingo.“No money down”, or at least none of my money down. Certainly, a lot of risk and effort went into the property, but rents cover the mtg payment and expenses, with $100 to $300 left over for me every month. Each year, the cash flow is a little better, and the difference between the mtg balance and the value of the property is a bit greater. After placing the 80% L/V loan, the remaining 20% equity is added to my net worth. Not easy, but a deal nontheless.
Well, Maybe! It Can Be Done… - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on October 31, 1999 at 17:43:16:
Steve,
I have access to money so I’m not someone who has done a “no money down” deal. Let’s face it, it’s just more difficult to find deals that require “no money down”. Nonetheless, they do exist, and there are folks who have done them. Check out the “Success Stories” area on this site. Also, if you buy a property without any of YOUR money, it’s not technically a “no money down” deal, but it has that effect for you, no? Those kinds of deals are completed everyday.
Well, For Sure! It Can Be Done… - Posted by J.P. Vaughan
Posted by J.P. Vaughan on November 03, 1999 at 21:01:09:
Bill, Bill, Bill,
What’s with the “maybe”? We’ve done a bunch of “nothing
down” deals. We’re in escrow right now on one:
Price: $125,000. Get new first mortgage for $50,000
(even a “credit bandit” can get a 40% LTV loan). Seller
carries back a $75,000 second mortgage. Seller gets $50K
cash and the note. We get the house for nothing down.
Posted by Russ Sims on November 03, 1999 at 01:12:17:
Ron,
You would serve yourself well by investing in a course or two. In my humble opinion aquiring property through lease/options is one of the most effective ways to quickly generate cash and set yourself up with a handsome monthly passive cash flow. You can aquire (I use the term “aquire” loosely because you’re really not aquring property but controlling property) all of your houses zero down and you don’t need RE agents or lenders. If you’d like more details or specific course recommendations, please e-mail me.I’ll be happy to help if I can…
Russ
Re: VA loan- Owner Occ. Only? - Posted by Mark (SDCA)
Posted by Mark (SDCA) on November 02, 1999 at 10:13:03:
No, but my point was not to suggest specific financing for a specific deal but just to demonstrate a no money down loan that everyone is familiar with.
“Price: $125,000. Get new first mortgage for $50,000
(even a “credit bandit” can get a 40% LTV loan).
Seller carries back a $75,000 second mortgage. Seller
gets $50K cash and the note. We get the house for
nothing down.”
Sorry if this question sounds like the dumbest one yet
to hit this board, but what does “seller carries
back…a second mortgage” accomplish for the seller?
Also, looking at it from a seller’s perspective: OK,
so I have a house worth 125K that I want to sell. Why
would I settle for 50K cash and take on (the headache
of) a 75K mortgage, when selling it at 125K keeps
things simple and gets me more money all at once?
I think “seller’s motivation” will have a lot to do
with the answer but I’m just guessing. Anyway, if
somebody can explain a little bit more why this type
of a deal is a “win-win”, I’d really appreciate it.
Posted by Bill K. (AZ) on November 04, 1999 at 11:36:23:
JP,
You’re absolutely right! How can I say “maybe” after spending so many months reading this site? Hasn’t anything sunk into my noggin?
Actually, the “maybe” comes from my lack of experience with a true “no money down” deal. I didn’t mean to imply that they “may be” unattainable or pie-in-the-sky. I haven’t even tried one yet. I’m absolutely certain that they can be done. It’s just that I haven’t accomplished one yet myself. Being new to creative purchasing concepts, I find that having a little cash has been a crutch allowing me to avoid other methods of purchasing. However, as anticipated, my cash is running low right now, and I want more properties. I’m addicted! So, it’s time to start using what I’ve learned here. I’ve no doubt that I’ll be able to buy more properties without injecting any more of my own money.
Thanks for slapping me around a little. I am humbled. I intend to provide you with a “no money down” success story of my own within the next few months. By the way, thanks for sharing your latest success in your post. Congratulations!