Financial

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THE PRIVATE LENDER

February 2, 2021Private Money LenderTo detail the differences between a private lender, as we understand the definition and a private lender based on what borrowers tend to understand. This will help those newer private lenders understand what many borrowe…Continue Reading

CAN YOU BUY A PROPERTY WITH NOTHING DOWN?

As an investor and broker, I regularly interact with investors who come across articles about somebody who had brought a property with nothing down. Many investors want to buy properties in this manner. I’m going to share if it is possible to buy a property with nothing or very little down? The answer is YES. Is it easy for this to happen? The answer is NO. Here are some ways in which you can buy a property with little down or nothing down.

A Word of Caution:

There are no free lunches. When you bring nothing to the table, it’s because you’re producing something else, which is just as valuable as money. This is usually a skill, the ability to find a buyer, a seller, a strategy on how to help the seller solve a particular problem or something along those lines. You must bring something else to the table instead of money: skills, resources, or network. These are the things that you need, which will act as your share towards the money you would have brought otherwise. But as a layperson who may not have the ability to raise money, fix other property, find a buyer, or seller, then buying a property with nothing down will never happen. Just because you’re not producing money does not mean you are bringing nothing.

**Four Options

  1. Other People’s Money
  2. The BRRRR Method
  3. Wholesaling
  4. House Hacking

Other People’s Money

This option is what most people ask about and is very popular on different platforms. It is essentially a case of using private money, hard money financing, seller financing, or negotiating a second mortgage. It is a version of one of these ideas which allows you to buy a property with little or nothing down. Most of the time, you would need to work with a private lender. A lender that will help lend you the money that is required to buy the property. This is the most simple and straightforward option of buying a property with nothing down.

The BRRRR Method

BRRRR stands for Buy-Rehab-Rent-Refinance-Repeat. With this strategy, you’re looking to buy a distressed home and buy it up to 75 cents on the dollar, rehab it, rent it to a long term tenant, refinance it to pull out most of your initial capital, and then repeat the process. In this particular strategy, you are bringing something down to the table in the beginning. At the end of the refinance, the amount of money that you have left is usually considerably small. In some cases, you can even get paid at the time of the refinance.

Wholesaling

It’s a myth that you can become a wholesaler with nothing down. It takes several years of skill, experience, and several thousand dollars of investments to start getting leads from sellers and start finding buyers for the properties. While it is technically correct that you are doing the transaction with very little money, which is locked in the transaction, it is not possible to be a wholesaler with no money in your pocket and no skills that you possess. It usually takes several years of training for a person to become a wholesaler.

I spoke with a guy named Kevin recently, and he told me that he wanted to buy a property but does not have much money. He read that he can become a wholesaler with no money down. I asked him what skill he would bring to the table if he did not have the money. His answer was, and I quote,” I have no other skill and do not know any buyer or seller.” I told him that he would need to apprentice under someone, learn skills, and only then will he be able to make money as a wholesaler.

House Hacking

This strategy does not work for investors. It is a hybrid between an owner occupant and an investor. For example, you can buy a multi-family property with 3.5% down, and you live in one of the units while renting out the rest. If you have an agent’s license, you can bring very little money to the closing table. If you buy the property correctly and you can get paid to live in the property. The rent that you collect from the tenant would be more than enough to meet the debt obligation and more.

Conclusion

Buying a property with nothing or little down is possible, as long as you have the skills to make it happen.

LOAN SCAMS: BE AWARE OF THESE:

When you need money, and have a poor credit score, it’s easy to accept any offer for a personal loan. But there are scam artists waiting to take advantage of that situation. They might offer personal loans through online website advertisements. They could send a flyer that guarantees a loan, regardless of your circumstance.

Here are some warning signs that are usually experienced by victims of loan scams:

Upfront Fees — The lender might disguise these as application fees or document fees or some other name, but they all mean: “Send me some money before I perform any service.” Think about this: You are being asked to send money in order to be loaned money. That’s a scam. Legitimate lenders must disclose all their fees. Typically, they are rolled into the cost of the loan, not paid for in advance. In some cases, Lenders will require an upfront fee (skin in the game) but do your due diligence. 

Phone Offer — It is illegal to make loan offers over the phone. Any offer must be put in writing. It must prominently mention all associated fees.

Wire Transfers — If the lender wants you to wire money for any fees, it’s a big cause for concern. Never wire money to an individual. Always ask for the lender’s physical address. Then contact the Attorney General or Financial Regulations office in that state to verify it’s a legitimate business.

No Interest in Your Credit History — Legitimate lenders evaluate a person’s creditworthiness BEFORE making a loan. Never listen to claims like “Bad credit? No credit? No problem!’’ There’s very definitely a problem. It’s YOUR problem.

Copycat Name — In an attempt to appear legitimate, clever scam artists will come up with a business name or website that looks or sounds genuine. It’s always advisable to check with the Better Business Bureau to authenticate the address and phone number. If the mailing address is a Post Office Box, be very wary.

Personal Information — Never give out your social security number, date of birth, bank account number or other important personal information unless you are convinced you’re dealing with a responsible lending institution. Personal information can be used for identity theft or stealing from your bank account.

State Registration — Lenders and loan brokers are required to register in the states where they do business. You can check registrations through the Attorney General’s office or Department of Banking or Financial Regulation in your state. That won’t guarantee a perfect experience with the lender, but it could help you identify a crook.

Reviews — Online reviews have become influential when it comes to restaurants, museums and movies. They can also help you pick a reputable lender. You can simply Google the company or person’s name, while also checking Facebook, the Better Business Bureau or other sites that specialize in lending reviews. If there are complaints or bad reviews, take note. If there’s consistency across several locations, with everyone forming an unfavorable impression, that is a warning.

Customer Service — Reputable lenders have a phone number where you can easily call and get your questions answered. If you aren’t comfortable with the customer service, you shouldn’t give the company your business. Don’t settle for the phone robots, either. You should be able to speak with a person.

Red Flags — There are several things that should prompt immediate concern. Be suspicious if email messages contain errors in spelling, capitalization, punctuation and/or grammar. That’s a lack of professionalism. Be wary if you’re offered a free period (like a year with no payments) before the loan must be repaid. Definitely beware if the lender says they don’t use credit checks and will lend money regardless of past financial problems.

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