Zero down? Why would a seller want to walk away from closing with nothing? Well, they wouldn’t, and that brings up the most important point about Parkland real estate investing with no down payment: The seller almost always needs cash at closing, but it doesn’t have to be your cash.
A Zero Down Example
I’m selling a small rental property right now, with payments of $400 a month. The buyer has a good credit report, and the $5,000 down payment covers closing costs and even a foreclosure, if necessary. I don’t care where he gets the down payment. A $6,000 cash advance on a low-interest credit card for example, would cost him about $135 per month, and give him enough for the down payment and his closing costs.
In this case, with rent around $600 per month, he would be okay. In some cases, however, that extra $135 might cause negative cash-flow. So be sure that however you do it, the numbers work. By the way, I would have set the payments at $350, if he had asked because it’s the price and the interest rate that are important to me.
Other Zero Down Payment Methods
While there are sellers that can offer terms and low-down payments, usually you have to find a way to get at least 70% of the price to them in cash. Think in terms of how to get a primary loan, then how to raise the money for the remainder. A couple examples follow.
Some banks still do “no doc” loans, meaning they don’t require verification of income, a source of down payment, etc. They generally loan only 70% to 80% of the property value, but if the seller is willing to take a second mortgage from you for the other 20% to 30%, you are in with no money down. The seller gets 70% or 80% in cash, plus payments for years to come. You’ll have two payments, of course, so be sure the numbers work.
You can borrow against your home or other property to come up with down payment money. If you borrow for a “vacation,” and leave whatever you don’t spend in your checking account for a while, you can use it without violating bankers’ rules about borrowing for a down payment.
For example, a seller prices his home for sale in Parkland or Coral Springs at $195,000, and expects to sell it for $180,000. You offer $205,000 in the form of a mortgage for $160,000, and another for $50,000. You have arranged for the sale of the first mortgage at closing for $136,000 to a note buyer. The seller gets that cash now, plus payments from you on the second loan for $50,000. Notice that this adds up to $186,000, which is more than he expected to get out of the deal.
These are just some of the ways you can buy a Coral Springs/Parkland luxury home with zero down. Real estate investing is about making the deal work for all parties. Find a way to get what you want, and get the seller what he wants. That is more important than having big cash on hand.
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Berkshire Hathaway HomeServices Florida Realty serves 18 counties throughout Florida with over 40 locations and approximately 1,800 Sales Professionals. The full-service brokerage company, founded in 1999, is a subsidiary of Lennar Corporation, a Fortune 500 company and is a franchise member of the Berkshire Hathaway HomeServices’ network, one of the few organizations entrusted to use the world-renowned Berkshire Hathaway name. The company offers residential and commercial services as well as seasonal rentals, property management, REO & Foreclosures, corporate relocations, referral services, title, home service plans, and personal concierge services. Berkshire Hathaway HomeServices Florida Realty ranks in the Top 10 in the network among 43,500 Sales Professionals, 1,300 offices throughout 47 states. The company is the overall No. 1 fundraiser for The Sunshine Kids Foundation, having generated more than $3.37 million since 2001. Visit www.BHHSFloridaRealty.com.
