Real Estate Blog

Carleton Sheets, Robert Kiyosaki, Bob Bruss - these guys have one thing in common, they teach about no money down deals in real estate.  Is this possible and are people doing it?  Yes it is possible but not completely likely.  The typical new investor will study a guru course and think that all there is to buying investment properties is to get a discount and they will be able to make a profit.  This is not only not true, but often what gets new investors in the most trouble. 

No money down deals are done by using creative financing and terms to purchase a property with no money out of pocket.  I have had experience in the past with this and know it can be done, however, the stars usually have to line up perfect for this to happen and it certainly does not work on every purchase.  If a investor is hoping to buy properties with no money down every time they get a house under contract, they will be either extremely lucky or about to learn failure first hand.

Typically, if a property is for sale in a slow or distressed market, it is more likely that you may be able to purchase the home with no money down, but in a strong market with a lot of buyers bidding for the property, it is less likely.  The reason is this - sellers are more apt to allow a buyer to roll the closing costs and maybe even their down payment right into the loan.  For example:  Seller A has a house for sale at a list price of $100,000 and Buyer A offers the seller $90,000 for the home and asks the seller to roll the closing costs of $5,000 and give the Buyer A $5,000 toward the down payment as cash at closing - the buyer can essentially go to closing with no out of pocket expenses. 

This could be an example in a distressed market where the home may have been sitting on the market for a few months, which might entice the seller to allow these concessions.  But with this in mind, being able to get a seller to agree to these terms is not usually going to happen in a good market.

Another example is a deal I did many years ago where I found a HUD home that was in pretty good shape and was able to allow me positive cash flow after closing and getting the house rented.  I found a little 3 bedroom, 2 bath house that needed a bit of work, but was great as a rental for the area.  The home was worth about $85,000 and I won the bid for $70,000.  I was working with a realtor at the time that paid back 1% to the buyer at closing, so I negotiated for HUD to pay all my closing costs and I got a 80/20 loan between 2 mortgage companies.

I went to closing with $300.00 out of pocket, but here is the good part - after we closed on the house, my realtor cut a check to me for $700.00, which was the 1% I got back at closing.  I used this to buy the refrigerator, clean up the yard, and pay for advertising.  I was able to get a renter in the home in less than a month.

Not all deals are done this way, but this is just a example of how you can do no money down deals.  Just keep in mind that although many people may teach you that it is common place, this is not the case and is actually an exception.  Happy Hunting!