Sell your house for No Money Down?
I’m pretty sure if you’ve been around a while you have heard of buying a house for “no money down.” It sounds crazy, right? After all who would do such a thing as sell your house for no down payment? Why sell something so expensive, especially in Southern California, for low down payment, or no down payment.
Well I’m an investor, or maybe I should say a wanna be real estate investor. Let’s hope one had other goals in mind rather than just selling a house with $2.00, or zero downpayment.
I was a Part-time Real Estate Investor
That was me, a part-time real estate investor back a number of years ago – even now. I have other opportunities I’m working on at the present time. But buying – or selling a house with no money down is always in the back of my mind.
Also if you live in the USA you can thank your Uncle Sam for changing the tax laws. That is those laws regarding one of the big advantages that one could have by selling a house “no money down.” That advantage was the low tax on installment loans.
They capped it at a low $150,000 or thereabouts. That’s so low now since houses are so expensive (at least in California). You’d be hard pressed to find a deal where the house was so low cost. You could not create such a low installment loan from a low or no downpayment house.
Was I nuts to sell a house/townhome for No Money Down?
Let’s examine some reasons why I or anyone might want to sell a house for no down payment. That’s excluding a veteran selling his home for no money down through financing from the VA or Veterans Administration.
Read about my second investment house. It was a round-about deal for me. But possibly a no money down deal for the seller read my article. The person I bought the townhome from might have gotten it for zero downpayment.
It was a repo with a brand new VA loan on it. I made the first payment- and all the remaining payments on the loan. Note that I never lived in the house. I only visited it a few times while I owned it.
Why sell a house for no down payment?
This was back quite some years ago, but it could still be done now, but probably with some changes. The tax laws have changed since then. Plus right now in 2016, the last few years property values have gone up fast making it more difficult to implement. But back to the point. The reasons I wanted to sell a house for no money down were:
- It was an investment property and I wasn’t living there.
- My only interest was in owning a mortgage or Trust Deed on the house.
- By creating an AITD mortgage or Trust Deed on the house it is like creating money out of thin air.
- I wanted a cash flow every month from the mortgage I would create and hold.
- Even selling the house for what I paid could potentially make me a lot of money. I could keep the mortgage until paid off or refinanced.
- There was a tax advantage on that income by owning a mortgage on the property.
There are other reasons too, obvious ones like; it is much easier and faster to sell a house if it requires no downpayment from the buyer.
It’s so easy to sell a house for no downpayment. Wrong!
You would think it would be easy to sell a house or townhome, condominium, etc. for no down payment, but that’s not always the case. Strange as it may sound that’s quite likely not the best way to sell a house if all you want to do is get rid of it, or sell it to buy another house. Take for example my Montclair California townhome I tried to sell that way.
In my case I was acting like an investor because I was not living in the townhome. I actually bought it with the sole purpose of selling it as soon as possible and creating a mortgage on it. My purpose was to hold a mortgage on the property, which I eventually did.
Selling the townhome was not easy like I thought. I had figured lots of people would want such a townhome if they had to put no money down to get it. In addition to zero downpayment all the person had to do to buy my townhome was have a decent credit history.
My Townhome Sold Like an Ice Block in Alaska in the Winter
Boy was I wrong about an easy sell! I immediately put an ad in several papers and waited for the hordes of phone calls. It didn’t happen. However, over a period of several months I did get a few calls and a few people expressed interest, but no takers.
If you read my My Townhome Investment article about this you will see the property was not in a very desirable area. I knew this right from the start, but because the price was very low. The complex it was in it was very nice, and my payment terms quite flexible. I thought that might override some of the area disadvantages. It really didn’t.
Most of the people I interviewed had bad credit, sounded rather flakey, or I got bad vibes from. None of that bothered me. I just kept crossing my fingers that I would find a good buyer for the property.
Investors like a No Downpayment Property
Although it might sound rather suspicious to an uninformed person, a property involving no money out of their pocket could be a good deal. It could be a good deal for all involved, both the buyer and the seller. While I talked to several people about buying my townhome none seemed qualified or reliable enough to risk selling it to them.
My townhome was not the only property I tried to sell with no money down. Some single family houses I tried to sell that way also gave me big headaches and problems selling. It seems such deals bring out the most unqualified people.
There are definitely exceptions to this, however. Let me bestow good luck on you if you try this.
Selling my Townhouse to a Home Buyer was a Bust
Well let me make a long story short about my townhouse sale. I never got a home buyer that I thought was really qualified to buy it. Everyone I interviewed had some sort of problem. They seemed to be people I didn’t want to trust with making payments every month.
Naturally, being very positive about the whole matter, I was upbeat and knew I would somehow come out ahead. I could have, and maybe should have rented it while trying to sell it. But that would have been very unfair to any renter.
Plus it would make it difficult to show the interior if renters lived there. It especially wouldn’t go over well if the renters expected to stay there more than a few months. It would also be difficult to rent if I told them that I would be trying to sell it.
An Investor wanted to Buy my Townhouse!
Sure enough, after that property sat empty on the market a few months I got an offer from an investor to buy it. That’s the last person I wanted to sell it to. Townhomes are not necessarily good investments for investors. I had thought I would help out an individual get a nice place to live.
But it hadn’t turned out that way at all. So I reluctantly set up an appointment to interview that investor.
I was a contract programmer in Downey California at Los Angeles County Data Processing center at the time. So I set up an interview there with the investor. Before I even saw him I had checked the county records.
An Investor who Owned over 100 Properties!
I discovered he owned over 100 properties in San Bernardino County where my townhome was located. To me that was rather suspicious, but I still wanted to talk with him. We met and had a nice conversation and meeting.
He was rather young, maybe in his late thirties or early forties. He was an investor, like me, but much more advanced and loaded with properties. I got the feeling he was not out to rip me off. I thought all he wanted to do was make a few bucks off my property.
After all, someone with so many properties certainly would not live there, but would either sell it or rent it out. So to my surprise I ended up selling it to him instead of a homebuyer like I wanted to.
I sold it to him “no money down”. But in reality, I set up the terms so he ended up paying most of the closing costs which was $1800. Unfortunately I couldn’t find a homeowner to sell it to that would live in it. But that really wasn’t my fault since it sat for months available to any such person that seemed reliable.
Investors and Quasi “No Money Down” Properties
After this second real estate deal, I joined a real estate investment club. It was in Orange County California, about an hour from my home. That’s an area next to Los Angeles and San Diego County in Southern California. It is more expensive to live there compared to where I live in Riverside County, also next to Orange County.
The investment club was a club that used money from the group to buy property. You also learned how some professionals can buy property with little or no money. While I was in it the club bought some huge apartment complexes in Washington state. The property was in need of repairs and probably run down.
I didn’t participate in any of the investments. I was there to learn what techniques were used to buy expensive properties creatively. That’s what the club was doing. Guess what? The head of the club was an ex car salesman. You know how they can be quite pushy to get you to buy a new car.
Well true to form, his smart talking ended up with expensive properties for the club for pennies on the dollar.
The Investment Club and “No Money Down” Properties
In some deals like the Washington State apartment complex he managed to get the complex for no money up front. The down payment was due in three months (when the needed repairs were completed). Then an existing assumable 2nd mortgage on the property was assumed.
The owner wanted out, so the down payment money was his profit. When repairs were finished the apartment was sold, a big profit was made. Everyone made money from the deal. There was another big deal involving a lot of single family homes in the Phoenix Arizona area.
The club bought many homes with very little money down because the builder had overbuilt. The real estate market had taken a sudden downturn making it almost impossible to sell those houses at a profit for the builder. The club profited nicely from that deal.
Read my article about my Montclair townhome and you’ll see how I eventually profited greatly, over time, from this unlikely sale where I broke all the rules of real estate buying, of location, location, location. Sometimes it doesn’t hurt to break the rules.
I want another house I can buy and sell “no money down” to the buyer. Anyone reading wanting to get out of their house for a quick sale?
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