No Cash Real Estate Investing

​Want to be a real estate investor?  Do you lack the cash for down payments?  Buying and holding or buying and flipping properties is not the only way to make real estate money!  

No Cash Real Estate Investing
By Pierre Mouchette | Real Bits

Many people would love to be real estate investors but lack the cash for down payments.  These people think buying and holding or buying and flipping properties are the only way to make money!  Some of the techniques that will allow you to make money from real estate without having any cash are:

• Bird Dogging – through traveling, research, and investigation, the bird-dog finds homeowners who need to sell and have not been able to, homeowners with mortgage difficulties, or foreclosures before they are listed.  These homeowners want out and are willing to sell at deep discounts for a quick sale.  A bird dog places the homeowner and the investor together.  The bird dog receives a fee, and the investor pays less for the home.  The lower the purchase price, the better the investor's return on investment (ROI) from cash flow and the sooner they will have locked-in equity.

           

• Assignments – a simple process where you lock up a property with the seller by signing a purchase contract indicating "Your Name and/or Assigns."  The caveat in this process is that you have a buyer lined up before locking yourself into the purchase contract.  It allows you to assign the contract to someone else (your buyer) without further consent from the seller.  Your buyer must be a cash buyer, which is typically the case when doing these deals.  The seller is informed that your buyer is now the buyer, and the transaction will proceed according to the purchase contract terms.

Another consideration when assigning deals is the earnest money deposit you give the seller.  This money is deposited with the title company or attorney handling the closing; you will not get that refunded.  So, you will want to keep this amount as low as possible, as there is still some risk that the deal will not close.
           

• Sandwich Leases - are two lease options with the investor in the middle.  That is, you (the investor) want the option to purchase the property at a discount at the end of the lease period.  To make this work, you need to find a tenant/buyer who wants to purchase the home at the end of their lease, matching your lease date with the seller. 

To make this transaction, you locate a highly motivated homeowner (loss of employment, job transfer, etc.) who has not been able to sell their home.  You make a verbal deal like the following:

• Offer to lease their home for three years with lease payments equal to their house payments (principal, interest, taxes, and insurance), PITI.
• You pay them a non-refundable lease option payment to have the right, but not the obligation, to purchase the home at the end of the lease for $XXX,000 (lock in the price).
• With a verbal agreement, you (the investor) use marketing or other methods to locate a tenant for the home who is willing to pay $ XXX/month to lease it.  They will sign a minimum of a one-year lease.
• With this strategy, you have the following: 
  Cash out (to Seller from Investor): refundable option money, first and last month lease payments, and a security deposit.
  Cash in (from Tenant to Investor): non-refundable option money, first month and two months' securities.  You add $XX per month for the monthly rent.
  The Tenant/Buyer has a locked-in purchase price.

 
Conclusion – the above gives you control of the home for three years.  If the tenant does not purchase the home during their tenure, they:

• lose the option money
• are covered for any damage that they do by the security deposit
• have a property that has increased in value

If the tenant purchases the property you:

• have made $XX each month
• you have made money on the increased purchase price

Note:  the above is a basic sandwich lease.  You can expand upon this.