How To Do a Deal with No Money Down

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Andrey: Hi, I’m Andrey Sokurec. I own the company Homestead Road. And today, I’m going to teach the class, REI Class, how to do no money down deals.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Andrey: Well, probably a lot of you heard about “no money down deals” or “Low money down deals,” and a lot of you are skeptical, right? Yeah, how it’s possible? Well, the truth is it’s possible to do a deal like that and all you need to do is to structure it. As a real estate investor, first of all, we always want to have cash in our pocket because obviously, it’s much easier to offer cash and get the deal done. But also, a lot of people are looking at the opportunity where you can actually do a deal with seller financing. I love to do seller financing and I’ve done deals with no money down, low money down. So let me explain to you the concept.
Because a lot of you, if you’re brand new, you probably cannot write a check for $100,000, or for a half million dollars, or $1 million because you simply don’t have money. So what you need to do is first of all, I want you to know that according to bankrate.com, there are . . . like there is a, like 29 . . . or 29% of all homes in the nation are free and clear. It means that people don’t owe anything. And what you can do, you can structure seller financing.
And this is the script for you when you talk to the sellers. A lot of them will tell you, “Hey, I need all cash.” But in reality, they don’t need cash because if they’re like 60, 70 years old, what are they going to do with the money? So when you talk to those sellers, if somebody tells you that the house is free and clear, for me, it doesn’t really matter how much they’re asking because you can structure a payment plan if you can pay their price if you take your payments.
And because there are no banks involved, you can come up with sweetheart terms, that’s how I call it, sweetheart terms where you can structure any payments you want. And a typical script will be for the seller, so what? First of all, I would recommend you, when you go talk to seller, have a pre-approved letter from a bank or from hard money or from private money so you have an option to pay cash. So your cash option is number one, and you know probably by now how to determine your cash offer. It’s 70% after . . . you multiply after repair value by 70% and minus repairs, and you can always offer cash. But your term option is whatever people ask for.
And this is my script that they call. I tell people, “Hey, Mr. Seller, how much do you want to sell the house for?” Okay. I walk around. I estimate repairs and then I tell them, “Hey, Mr. Seller, what are the lowest price you can do?” It doesn’t really matter what they say. I always follow up with a question, “Is this the best you can do?” Okay. And then I crunch my numbers and they come up with two offers. Offer number one is cash. Offer number two is seller financing option. And I tell people, “Mr. Seller, when you sell your house, what are you going to do with the money?” And a lot of people probably will put money in the bank and I ask, “Do you know how much bank will pay you?” And it’s typically like half percent, 1%. And then I say, “Hey, how about if I can buy your house and pay some interest on your money? How does it sound?”
And a lot of people are actually excited about that opportunity because they don’t need cash. They like to receive supplemental income to their Social Security. And I tell them, “I have two option. Option number one is all cash. It’s like the power ball. Do you know power ball? So you can have all the cash upfront or you can actually get more but the payment will be over time. And the most I can pay you is 250 bucks a month, whatever. That’s my average payment if I can rent a house for 1,000 bucks, after maintenance, repairs, taxes, my fee, that’s the most I can pay.”
And it’s interesting. A lot of people like to take that offer and you’re saying, “I’m paying $250 a month and you don’t need to mention any interest, any down payment. I like to offer down payment to get 0% interest on my money. I like to put substitution of collateral. I like to pay . . . to put an early payout discount.” And with this strategy, you can buy a lot of houses without having the money. And the average down payment to pay is about $5,000 to $10,000. And probably, you can find someone, if you don’t have $5,000 to $10,000, who can borrow you . . . who can lend you the $5,000 to $10,000.
So that’s the no money down deal. And I believe that anyone can do it and you can actually research the actual scripts. Go online and research it. I have a great interview with my mentor who taught me how to do it. His name is Paul Kelly. You can find it on YouTube, just type “The Real Deal in Real Estate, Paul Kelly Interview.” And you can see like 30 minutes of step-by-step process how to structure conversation. Thank you for watching this episode. There was Andrey Sokurec. I’ll see you in the next episode of REI Class.
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