Many Main Line real estate investors are under the mistaken assumption that money will make or break a real estate deal—but that’s simply not the case anymore.
No-money-down home loans are a valuable tool for investors and buyers, because a lack of funding doesn’t necessarily prevent you from making a purchase.
If the deal is right, the funding can fall right into place.
So what no-money-down options do you have?
Assume the Existing Mortgage
In many cases, purchasers can use a “Subject to” contract. That means the buyer uses the seller’s existing financing for part of the purchase price. If the current loan has a low interest rate, it’s a particularly enticing option.
The buyer receives the title to a property in return for picking up the remaining payments on the seller’s mortgage. While some loans have what’s known as a “due-on-sale” clause, which prohibits a new buyer from assuming the mortgage, it may be a viable option for you.
Lease with Option to Buy
Some property owners are interested in leasing their properties to tenants and then offering those tenants the option to purchase it. Under the terms of an agreement such as this, the buyer and seller negotiate an amount that needs to be paid at regular intervals (like rent).
The agreement lets the lessor, or renter, to buy the property while living in it.
Some sellers are willing to forego a down payment in exchange for higher monthly payments. Others may even make the buyer’s down payment in order to sell the home faster.
Negotiate the Down Payment
Nearly everything in a real estate contract is negotiable, including the down payment. A buyer can ask the seller to pay it or to give the buyer credit at closing. The buyer can also ask to make the down payment in installments.
Trade Personal Property
Some people find that trading personal property is as good, or better, than cash down payments. You may choose to trade anything that could be more useful to the seller than money. Cars, boats, campers and several other assets (even other pieces of property) are all acceptable replacements for a cash down payment.
Exchange Your Skills
If you possess a skill that’s valuable to the seller, you may be able to trade your services as part or all of the down payment. Attorneys, physicians, contractors… many people have “tradable” skills that could be used in lieu of a cash down payment.
Take on a Partner
If you’re inclined to share, you may be able to find a cash buyer. In return for your partner’s financing, you can obligate yourself to handle the responsibilities of setting up the deal, managing the real estate investment, and handling other important duties.
Pick up the Seller’s Debts
Some sellers need cash to pay off other debts. In cases such as those, you can offer to pay those debts in exchange for a down payment.
Offer a Higher Price or Better Terms
Again, everything is negotiable. You might be able to offer the seller higher monthly payments in order to skip the down payment.
If you already own property, you may be able to combine the new mortgage with your old one in order to provide the seller with cash at closing. You could also let the seller know he or she could place a second mortgage on top of the first and keep the cash, while you assume both loans.