To purchase a property with no money down might seem like a too-good-to-be-true venture for most beginner real estate investors. There are, however, several methods and ways through which you can purchase a property with no money down.
Depending on your personal situation, there must be at least one method mentioned below that is applicable to you. We are certain that once you’ve read all of them, at least one or two of these options will seem completely plausible for you, allowing you to purchase a property with no money down.
But before we jump into it, it is important to keep in mind that there is much more to a successful real estate deal than to simply purchase a property. Make sure you’ve done your due research and that you’re certain about your choice to invest in a property.
So, if you’re a beginner real estate investor who’s looking to purchase a property but does not have sufficient cash to finance the purchase, here are 10 different ways that you could use to purchase a property with no money down.
1. Purchase a Property with No Money Down Using Borrowed Money
Perhaps the simplest way and the first that comes to mind for any real estate investor is to use borrowed money to purchase a property with no money down. This includes borrowing money from any source, which is especially effective if you manage to find a lender who is willing to lend you the money with no interest rate or with a low-interest rate.
Borrowed money can also be obtained from hard money lenders or from a home equity loan, each of which has its own advantages and disadvantages. However, the best source for borrowed money would be from someone whom you know personally, like a friend or a family member, as it is easier to come to an agreement with someone you personally know on the terms of the loan that you’re obtaining.
Related: How Can You Improve Your Credit Score for Financing Investment Properties?
2. Purchase a Property with No Money Down Using a Lease-Option
A lease-option is an aspect that isn’t very common among real estate investors looking to purchase a property with no money down. The lease-option, however, can be an invaluable strategy when purchasing a property for real estate investors and homebuyers alike.
The lease-option allows you to purchase a property with no money down by renting the property and paying off its price through the rent. This typically results in you having to pay higher rents, but the extra amount that you pay will go towards the purchase of the property without having to pay any money down.
3. Purchase a Property with No Money Down by Assuming an Existing Mortgage
The buyer of a real estate property could negotiate a deal with the seller to assume the seller’s existing mortgage and pay it off instead of a down payment. This method can be very successful and advantageous for the buyer, especially if the mortgage has a low-interest rate.
Keep in mind, however, that not all loan types can be assumed by someone else. Make sure to research the types of loans and mortgages before using this method to make sure that it is viable.
4. Purchase a Property with No Money Down by Swapping Properties
It is also possible to come to an agreement with the seller to purchase a property with no money down by offering the seller something in return other than cash. This could be an asset that you own and don’t need and that you believe might be of greater value to the seller of the property.
5. Purchase a Property with No Money Down by Offering a Skill or a Service
If you’re a real estate investor or a homebuyer who also possesses a certain skill that could prove to be useful for the seller, it is possible to negotiate purchasing the property in exchange for providing the seller with a free service. If you’re a doctor, for example, it is possible to offer the seller free health counseling or services as a replacement for the down payment.
Related: The Top Real Estate Investment Tips on Financing an Investment Property
6. Purchase a Property with No Money Down by Getting the Seller to Finance the Purchase
One of the methods that you can use to purchase a property with no money down is to get the seller to help you finance the purchase. This method is especially effective when dealing with a seller who is desperate to sell the property, or by building trust with the seller to ensure that you will be paying the amount back.
This means that the seller will pay the down payment, and you as the buyer will pay back the amount in monthly or annual payments. It is also common for the seller to set an interest rate on the amount, which makes it similar to obtaining a loan.
7. Purchase a Property with No Money Down by Offering a Higher Price
If you’re serious about your decision to purchase the property, it is possible to offer the seller a deal to purchase the property at a higher price in exchange for skipping the down payment and paying off the price of the property in installments instead.
8. Purchase a Property with No Money Down by Finding a Partner
Partnerships are very common in real estate investing. A real estate investor might not have the necessary funds to purchase a property with no money down, but he/she might possess the skills necessary to manage the investment and make it succeed. In this case, it is possible to find a real estate partner who has sufficient funds to finance the purchase of the property while you manage the different aspects of the investment.
Make sure that the real estate partnership terms are set and agreed upon, and that the allocation of the profits and the responsibilities are fair to all the partners who are involved in the purchase.
9. Purchase a Property with No Money Down by Taking on the Seller’s Debts
If the seller of the property is indebted for a considerable amount of money, it is possible to negotiate a deal that involves you taking on the debts of the seller in exchange for skipping the down payment.
10. Purchase a Property with No Money Down by Exchanging Properties
It is also possible to purchase a property with no money down by exchanging the real estate property with a property of your own. This process requires an accurate assessment of both properties and their values, and the difference in value should be compensated with cash or other means.
Related: Learn About the Myriad of Investment Property Financing Strategies
Bottom Line
It is absolutely possible in real estate to purchase a property with no money down. But just because it is possible, it doesn’t necessarily mean it is a good idea. Make sure that you assess the situation and that your choice of the property is worth the risk that you’re taking. If the property you’re investing in does not generate a positive cash flow or enough profits to cover for its costs and expenses, then you might find yourself in a tough financial situation and struggle to pay your dues.
Have you decided on a way to finance the purchase of an investment property, but are unable to find good investment properties to purchase? Head over to Mashvisor and start searching for properties based on accurate projections and calculations of the property’s returns.
