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Real Estate Investing - Defer the Down Payment with No Mortgage Payment

Written Robert Allen author of “Nothing Down”

Technique No. 7 High Monthly Down Payments

This technique is a variation of Technique No. 4, “Contract or Wrap-Around Mortgage”. Usually a contract sale requires at least a token down payment to substantiate the good faith of the buyer and put a little cash into the pocket of the seller. Sometimes a hefty down is required, in which case funds have to be “cranked” out of the property (Techniques 32 and 33) or a cash partner must be brought in (Techniques 43, 44, and 45).

But what if the buyer has nothing at all to put down except an income that gives him the ability to make monthly payments of several hundred dollars toward the purchase of a piece of property? Perhaps the seller would permit him to purchase the property now and make high monthly payments over a couple of years until a mutually acceptable down payment had been constitute. It never hurts to ask.

Technique No. 8 Defer the Down Payment with No Mortgage Payment

There are endless variations of how seller financing might be set up. Here is one more, which could prove useful under certain circumstances. A seller of a free and clear property who needed cash down only to build trust in his buyer might be induced to forego rental income for a few months while the buyer accumulated enough to put together the required down. It is not a common opportunity. But it has happened in the past and will happen again in the future - perhaps to you.

This technique, together with the other seven described and illustrated in this section, should stimulate creative buyers to take advantage of seller flexibilities in financing. Seller financing after all, is one of the major sources for down payment capital.

cashflow Cindy

P.S.  I am looking for people who want another income stream besides real estate to join our Winner’s Circle.   Watch the short video with Robert Allen. http://winnerscircletraining.com/index.php?

 email me at cindee@dishmail.net to join

 Real Estate Investing - Nothing Down Techniques

Written by Robert Allen author of “Nothing Down”

Technique No. 3 Life Insurance Policy

There is another strategy the buyer can use to persuade the seller to play lender in a transaction. As in the case of the blanket mortgage, the key is building trust. What if you say to the still somewhat incredulous seller, “Since you are permitting me to pay off your equity in cash over a period of time, how would it be if I took out an insurance policy in the amount of the note and made you the beneficiary? That way you will feel secure that the note will be paid off no matter what.”

This technique is not usually necessary. Sill it is an inexpensive way to build trust if the seller cannot quite see it your way and needs just a bit more persuasion.

Robert Allen offers many different real estate strategies.  When I first got involved with real estate investing, I found myself using one strategy.   However, as time progressed, and my knowledge grow, I now use many of these strategies.

The key is to decide on one or two strategies and become an expert.  Once you are an expert on these two strategies then you can build your knowledge.

Remember, pick a couple and take action.  You can learn all of the knowledge in the world however without action the knowledge is useless.

Cashflow Cindy

P.S. Are you interested in joining the Winner’s Circle with us?  Robert Allen and I are looking for individuals who want more out of life.  Is this you?   

http://winnerscircletraining.com/

  All PEARLS email me at cindee@dishmail.net

Real Estate Investing - Nothing Down Techniques

Written by Robert Allen author of “Nothing Down”

Technique No. 2 The Blanket Mortgage

The key to using the seller as lender in a real estate transaction is trust. The seller has to trust us to pay him his equity according to the terms of the agreement we work out with him. The conventional way to “buy” trust is to give the seller a large cash down payment That way he knows that we will not likely walk away from the property. We are going to stay around and take care of our obligations. Otherwise the seller will be able to take back the property, and we will lose not only that big cash down payment but also any appreciated value above the seller’s equity.

But how do we develop trust when there is little or no cash put down on the property? How does the buyer make the seller feel secure in such cases? Often the buyer can develop personal trust with the seller simply on the basis of personal qualities and win/win attitudes. In such cases, the equity of the subject property itself is sufficient to close the deal.

In some instances, however, a little extra is needed to remove lingering suspicions on the part of the seller. That is where the blanket mortgage comes into play. In any mortgage or trust deed arrangement, there are two basic documents that are prepared. One is a note given by the buyer to the seller setting forth the terms for converting the equity to cash, the other is a security agreement in which the buyer says to the seller, in effect, “If I don’t perform according to the terms of the note, then you can take back the property.” In a cashless or near cashless transaction, the security of the subject property may not be enough to satisfy the seller. Therefore, the buyer may choose to secure the note with additional collateral - not only the subject property but also additional property (equity) he may have in his portfolio. The note itself stays the same, but the security agreement is changed to increase the collateral and build trust with the seller. Naturally, the buyer will want to arrange to have the seller release the additional collateral as soon as the subject property appreciates to a predetermined value or as soon as the buyer has proven himself to be dependable and prompt in making his payments.

The blanket mortgage technique is not among the most frequently used in creative finance. The buyer hopes to build trust without having to tie up his other equities. Still when a seller needs that extra bit of persuasion, the blanket mortgage technique can come in handy.

For example, one creative investor we know of recently acquired a nice four-bedroom, three-bath home for $75,000. The investor put a new first on the property (which was nearly free and clear) and had the sellers move their remaining equity ($35,000) to another property owned by the investor. To build trust will the sellers, the buyer granted them a blanket mortgage that also included his equity in another rental property he owned. Although the buyer did not put any of his own money into the deal (the bank provided all that was needed), he was able to persuade the sellers to agree on the basis of his neck being on the line with the blanket mortgage.

Robert Allen  has been a mentor of mine since 2006.   His strategies worked when he wrote his book “Nothing Down” in 1980’s and hold true today.   In order for you to be successful in real estate investing you need to be highly creative. 

cashflow Cindy
P.S. Are you interested in joining the winner’s circle with us?  Robert Allen and I are looking for individuals who want more out of life.  Is this you?   

http://winnerscircletraining.com/

  If you feel you meet these qualifications after watching the video, email me at cindee@dishmail.net

Real Estate Investing -  Nothing Down Written by Robert Allen

(out of Robert Allen’s book - Nothing Down)

THE SELLER

Among the nine major sources of down payment funds for property acquisition, the seller is no doubt the most important. If the buyer has done his selection job well he will be dealing with a person who is anxious to sell and therefore flexible with financing arrangements. The seller will need to take on a role that might be new for him - that of lender. But if the buyer is sensitive to the needs of the seller, he will foster trust and see to it that both parties win. (Lending can, after all be a lucrative business with its own slate of benefits, even for property sellers.)

This section reviews eight nothing down techniques involving seller financing.

Technique No. I The Ultimate Paper Out

An investor in Milwaukee was able to acquire a $48,000 triplex from a banker who not only arranged for a new low-interest first mortgage, but also carried back virtually all the remaining equity in the form of second at below-market rates. Another investor in West Palm Beach, Florida, picked up a single family home for$66,500 by putting on a new first and having the anxious seller carry back all the rest of his equity ($36,500) for five years, no payments, no interest. Both of these investors were using the technique known as - “The Ultimate Paper Out”. Here is how it works.

When we are talking about buying or selling a piece of real estate, we are really talking about the problem of defining and dealing with the seller’s equity. Equity as a concept is straightforward enough. Everyone knows that it represents that portion of the value of a property that is not encumbered, that belongs lock, stock, and barrel to the owner. But equity is a fluid concept. It can be specified only in relation to that mysterious and shifting quantity called the “fair market value.” The owner has dreams about an equity of such and such - usually an optimistically high number. But the truth of the matter is that market forces determine his equity by determining how much his property is really worth at any moment in time. The members of the market club - you and I - gang up on the poor old seller and say collectively, “You have a nice little place, but we’ve taken a vote around town, and the best we could come up with is a price of such and such.” At that moment in time, the seller’s equity is defined, and the problem becomes how to transfer to him value equal to the equity involved.

The majority of sellers, of course, will want to hold out for a selling price at the high end of the scale. They want their equity to be overweight. No one can blame them for that but among the army of sellers in the marketplace at any given time, there are always a few - perhaps five percent or less - who say to themselves, “We like our equity and want to preserve it and derive benefit from it, but we are very anxious to sell. So anxious in fact, that we might give up some of that equity in order to get rid of the property quickly.” Alternately, these don’t-want sellers might be thinking - I don’t really feel like discounting my equity for a quick sale, but I would be willing to wait until later for a part or all of my equity to be converted to cash.”

And that is the issue when it comes to “papering out” a deal. After the seller and the buyer have determined what equity is involved, the next step is to decide how soon the equity is to be converted. It all boils down to a matter of patience. The seller with infinite patience (and infinite desperation) will say, “Here’s my equity, take it all and just get me out of this place.” In a case like that the selling price is equal to the liens. But such cases are rare.

The next best situation is the case in which the seller says, “Here’s my equity, pay me for it when you can. Let’s work out the schedule.” That is the technique referred to as - The Ultimate Paper Out”. All of the seller’s equity is converted to paper before it is converted to cash. When the buyer takes over the property, he gives the seller paper for his equity and obligates himself to redeem the paper according to mutually agreeable terms.

Not all sellers will agree to an “Ultimate Paper Out” But creative buyers should always ask. You never know exactly what the seller is thinking or how anxious he really is to sell. Perhaps only one seller in twenty will be willing to enter into a nothing down deal and of these, perhaps only one in ten will agree to an “Ultimate Paper Out” That means that Technique No. I will show up in only one out of every 200 creative deals. But it does happen from time to time - much to the surprise and delight of the creative buyer.

1. cashflow Cindy

Real Estate Investing
My 50 Favorite Nothing Down Techniques

by Robert G. Allen

“Don’t wait to buy real estate. Buy real estate and wait.”

The world of real estate has been governed for years by one dominant strain of thought, i.e., in order to buy and hold property successfully, the average person must have excellent credit, a strong financial statement, good income, lots of money for a substantial down payment, and strong collaborative support from the hard-money lenders.

Those who agreed that income property was the finest investment found they could not hope to participate in owning a larger piece of America under the dominant rules that had obtained hitherto. New patterns were needed if the cash-poor but creative individual was to break into the world of property ownership.

This report outlines my 50 favorite Nothing Down techniques, organized into 10 separate areas:

A. The Seller       B. The Buyer

C. The Realtor    D. The Renters

E. The Property F. Hard-Money Lenders

G. Underlying Mortgages    H. Investors

 I. Partners           J. Options