CAN YOU REALLY BUY INVESTMENT HOMES WITH LITTLE MONEY DOWN?

Yes you really can, but it ain’t easy (like he seems to say). Its like a job you are looking for houses all day, putting down lots and lots of offers to have a few accepted. Spending most of your time either fixing up the last purchase or looking for the next one.

Still, having said that I think it is a great way to make a living. The money is fantastic (but you do really have to put in alot of hours) and once you know what you are dong and have some money built up it gets easier and easier and you can even do several at the same time. I was flipping about 1 per month a few years ago – now I do other stuff (note I was not buying and resellilng the same house in one months time but if it took about 4-5 months to flip a house I’d have 5 in the works at one time so it averaged about 1 per month).

I think this is a great path to be on but the learning curve is steep and it really is hard work. As to the how, I would suggest just going to the bookstore (or even library) and reading lots of books on real estate investing. Watch the tv show about this too for more info, and join an real estate investment club. Also, I strongly advise getting a realtor license – you never need to buy or sell any houses but your own, but the license gives you access to so much more info and saves so much on commissions that you really need it.

Good luck, fyi I’ve read many, many books on real estate investing over many years. The main reason I stopped was I kept finding so little new info in each consecutive book there was no longer much point in reading more books.

Every once in a while, I get someone fresh off one of these RE seminars hot to put in low ball offers on property with get rich quick stars in their eyes.

The truth is: No one in the US is willing to accept pennies on the dollar. It just isn’t happening. Even the banks with REO properties aren’t selling for what a small fraction of what a home is worth.

Put the $200 in your pocket to invest in RE, not a bogus scheme.

Save your $200.00!

If they were making so much money that easy doing what they are selling why in the world would they take the time to do a commercial to sell the idea to you for $200.00? Its because it is much easier selling an idea to people like you for $200.00 and they make more money doing that.

Real Estate is a catch 22. You can absolutely get 100% financing on property and get the seller to pay up to 6% of the sales price towards closing cost of all your non recurring fees but in those situations you are usually only getting the houses that are selling at a premium. To get the really good deals you need cash to close in 5 to 10 days to persuade a seller to come off a property in a distress sale.

Don’t be discouraged in starting out in real estate though. It is the best investment you could ever invest in. You don’t want to flip property’s and have to pay self employment tax on your deals. Keep them for a few years and make real money for little to no investment.

First go to a lender and see what types of mortgages you would qualify for and for how much and what percent. Try and find a local lender, usually a bank you already deal with, to qualify you for 100% on investment property. Don’t be so rate conscious if you don’t have a lot of cash to put down. You will not be the one paying the note anyway.

Get a good Realtor and find a property with little work required to make it rentable at a reasonable price. Check out how much the principal, interest, taxes and insurance will cost you monthly. If it is less than the average rent for that size property in the area buy it. Rent it for at lease the minimum out of pocket expense.

Now at this time you say I am nuts. Why would you do that and make no money?

But you are making money even though you don’t see it just yet.

The value of the structure is depreciated on your taxes over the next 27.5 years. All the interest paid is written off of the income of your taxes. All the repairs if you keep the receipts on everything is written off.

Even if the property made 12k in the first year, on taxes you might show a 13K loss and you would pay less money on your regular job income tax at filing time.

But that still is not the money you make. If you purchased a 100k house at 100% financing and it cost you 5k out of pocket at the closing and you rented it out for 10 years without the cost of living changing in the 10 years and then decided to sell the house you would be surprised on what happens.

First of all, in 10 years it would be highly unlikely that the rent would not go up and you would have in a couple years be making a couple hundred dollars extra every month.

The real money would come at the time of sale in 10 years.
In 10 years a house on the average would be about double what you purchased at.

You would have paid maybe 12k in principle towards the first 100k and pay a Real Estate agent 12k at the sale of the house. On the average you would make about 100k on a 100k purchase 10 years earlier. Considering you only invested 5k of your own money to get 100k would mean 20 x your original investment.

Now I call that real money. But it gets even better. Since you owned the property for over a year you don’t pay self employment tax on the profit.

But wait. If you live in it for 2 years and owned it for over 5 years you can profit from the sale up to 250k without having to pay income tax at all!

Now why would you want to flip houses?

Don’t spend your money on this training. Find yourself a mentor in the business like myself and ask questions, lots of questions. Buying houses with little money down is misleading. You can, but you are using the equity built up in other property. If you are new and have no property, then the first time you are going to have to have some money to put down, normally 20% for a business. After you get two or three houses and you have either paid down the mortgage or when you purchased it at a low price and has equity, you can get equity loans to purchase you next house. Many times I will find fixer uppers and use equity in another house, fixe it up, finance it, then pay off the equity loan. Then I start the process all over again.