SS246: The Reality of Investing in Real Estate with No Money Down

SS246: The Reality of Investing in Real Estate with No Money Down

In this Strategy Saturday episode, Charles Carillo explores how to invest in real estate with no money down. While “zero down” sounds appealing, it doesn’t mean zero cost. Charles explains three proven methods—seller financing, partnerships, and house hacking—along with subject-to deals and borrowing against existing assets. He highlights the hidden expenses investors must prepare for, the importance of reserve funds, and why credibility matters when negotiating with sellers. Listeners will learn the difference between buying and truly owning property, common risks beginners face, and why persistence is key to success with creative financing strategies.

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Talking Points:

  • Some of the most popular real estate investing search terms on the internet today are centered around buying real estate with no money down. There are several main strategies that investors can utilize to purchase properties with little to no money down, and we will touch on them later; however, I did a previous episode called “Zero Down Doesn’t Mean Zero Dollars,” which was episode SS167, where I laid out some math around no money down real estate deals. In this episode, I want to go a step further and break down the realities of buying a rental property.
  • What are some of the strategies for Buying Real Estate with No Money Down?
    • 1. Seller financing, where the seller also acts as the lender. Depending on the seller’s situation, you might be able to negotiate a no-money-down deal. Furthermore, ask yourself why the seller is open to this. Can they not sell it for the price they want? Are there major repairs that need to be done, or is there another reason?
    • 2. Partnerships, where you are partnering with one or more people who will bring the funds, while you handle other roles in the deal.
    • 3. House Hacking, where you are buying the property with little to no money down (typically while using an FHA or VA mortgage).
    • 4. Subject-to and Assuming a Mortgage are two similar strategies where the buyer leverages the current owner’s financing. Subject-to means the seller actually keeps the mortgage in their name, and when you assume a mortgage, you are taking the mortgage out of the seller’s name.
    • 5. Borrowing the Down Payment. Where you borrow the money by taking a loan against another property, like a home equity loan or a brokerage account.
  • What are the Realities of Buying a Property with Little to No Money Down?
    • When you purchase a property with no money down, you may avoid an upfront investment. Still, you are taking on debt, liability for future repairs and maintenance, and responsibility to the tenants.
    • You will need money even with a 0% down property. There are inspections, repairs, legal fees, and closing costs that still need to be paid.
    • 0% deals are hard to come by. I have never spoken to an investor who bought a 0% down property that was on the MLS. I don’t doubt people have, but most sellers who will entertain creative 0% down financing deals are motivated to sell, distressed, and typically, the investor needs to go out and find them. Cold calling, mailing them, or knocking on doors are some common methods. 
    • What are you providing the seller in place of money? What type of track record, credibility, financial statements, etc., can you provide to show the seller you will follow through on making payments?
    • There is a difference between buying and owning real estate. Most people focus on the down payment and getting the down payment, and then everything else will fall into place. You still need to own and manage the property. This is where having a reserve fund for those unforeseen issues that always happen comes into play. It is February in Maine, and a tenant’s furnace needs to be replaced, or it is August in Florida, and an AC needs to be replaced. You can’t wait days or weeks to get these replaced. Landlords need to be prepared for these situations when they occur.
  • Who Should Avoid Investing in No Money Down Deals?
    • Investors with limited funds may find themselves in a difficult position when repairs are needed and vacancies occur.
    • Investors expecting free passive income.
  • Investing in real estate with little to no money down sounds great, but it typically requires creativity, credibility, perseverance, lots of time, a high-risk tolerance, and strong negotiation skills. When I have spoken to real estate investors who have been successful with little to no money down investing, the one thing they all have in common is that they have been at it for years, having looked at many properties and spoken to many owners before securing their first one.

Transcript:

Charles:
Investing in real estate with no money down. Sounds great. Wells to investors need to consider before purchasing a property with creative financing. Welcome to Strategy Saturday, I’m Charles Carillo and today we’re breaking down the reality of investing in real estate with no money down. I’ll discuss some common creative financing strategies and outline key points that investors need to consider before moving forward. So let’s get started. So some of the most popular real estate investing search terms on the internet today are centered around buying real estate with no money down. There are several main strategies that investors can utilize to purchase properties with little to no money down and we’ll touch on them later. However, I did an episode called Zero Down doesn’t mean a $0, which was episode SS 1 67, that’s SS 1 67 where it laid out some math around no money down real estate deals.

Charles:
And in this episode I wanna go a step further and break down the realities of buying a rental property with little or no money down. So what are some strategies for buying real estate with no money down? So number one is seller financing. And this is where a seller also acts as a lender. Depending on the seller situation, you might be able to negotiate a no money down deal. Furthermore, ask yourself why the seller is open to this. Can they not sell it for the price they want? Are there major repairs that need to be done or is there another reason that maybe you didn’t see right off the surface? Number two are partnerships. So where you are partnering with one or more people who will bring the funds while you handle the other roles in the deal. Number three is house hacking, which I talk a lot about on the show where you are buying the property with little or no money down typically while using an FHA or VA mortgage.

Charles:
Number four is subject to and assuming a mortgage. Now these two similar strategies are where the buyer leverages the current owner’s financing. Now, subject two means a seller actually keeps the mortgage in their name. And when you assume a mortgage, you are taking the mortgage out of the seller’s name, okay? And it’s being put into yours. Number five is borrowing the down payment where you borrow the money by taking a loan against another property, like a home equity loan or maybe against a taxable brokerage account. Something like this. So what are the realities of buying a property with little or no money down? So when you purchase a property with no money down, you may avoid an upfront investment. Still you’re taking on dent liability for future repairs and maintenance and responsibility to the tenants. Let’s not forget the tenants because once we take over that property, we’re also assuming those leases, even if they’re verbal leases.

Charles:
And you’ll need money even with a 0% down property, there are inspections, there are repairs, legal fees, closing costs that will need to be paid. 0% deals are hard to come by as well. And I have never spoken to an investor who bought a 0% down property that was on the MLS. I don’t doubt people have, but most sellers will entertain creative 0% down financing deals. They’re motivated to sell, they’re distressed, and typically the investor needs to go out and find them and explain to them this situation that they can do where they’re able to maybe achieve the price that they’re looking for to sell for, but also how what they’ll have to do on the backend. So it will work for that buyer. And you know, when you’re reaching out to these investor or the to these, it’s usually with cold calling, you’re mailing them, you’re knocking on doors.

Charles:
I mean it’s a lot of legwork to find motivated sellers and a lot of these situations and these strategies have worked for years, but it takes a lot of time. It’s not something where you’re just gonna pull up online, Hey, where do I find 0% down deals? Now what are you providing the seller in place of money? So this is a very important thing that people don’t talk about that much, especially if you’re a new investor. And if you’re looking for 0% deals, you probably don’t have that much funding or anything really in place of money that you can offer. So this is where it gets a little tricky and you really have to work with the seller to find out what you can use. What type of track record do you have? Credibility, financial statements. I mean, can you provide to show the seller you’ll follow through on making payments also.

Charles:
I mean, yes, they’re gonna get the property back, but if I’m selling a property to you and you don’t have any skin in the game and something goes wrong, you probably won’t just walk from the property if there’s nothing you can really lose from it. Now I’m the seller. Yes, I’m getting my property back, but it’s in disrepair right now. I have to go through and I have to fix the property and I have to go now go back and probably put it back on the market or find someone else or just go back to owning it as I was before. So these are the hassles that can happen and this is what the seller is thinking about. So you need to find out what you can do to provide the seller to let them know you’re gonna make payments and they’re not gonna get the property back.

Charles:
Now there’s a difference between buying and owning real estate. And this is one of the things that you don’t really see too much online. So most people focus on the down payment and getting the down payment and then everything else will fall into place. This is can be further from the truth. I mean you still need to own and manage the property and this is where reserve Fund for those unforeseen issues that always happen comes into play. They always happen. So it is February and Maine and the 10th furnace needs to be replaced or it’s August and Florida and then AC needs to be replaced. I mean, you can’t wait days or weeks to get them replaced. And trust me, you’re not gonna get a warranty and try to have the warranty company like replace these within like 24 hours. Landlords need to be prepared for these situations when they occur, you have a legal obligation to your tenants and that goes both ways.

Charles:
They paying you on time, but you fixing issues. I mean, not having an AC in Florida in August. I mean it’s not even a habitable apartment anymore. So these are really important things that you have to notice. The amount of liability you’re taking on when you buy rental property that has tenants in there, or when you’re leasing the people, I mean the lease goes both ways. So it’s important that you need to have a reserve fund for these things ’cause you have to rectify them immediately once they occur. Now why should you avoid investing in no money down deals? Well, investors with limited funds may find themselves in a difficult position when repairs are needed and vacancies occur and investors expecting free passive income. These are the first couple things I see when I hear from people and they mention this or this is their situation.

Charles:
This is a completely red flag. No money down deals are great if you’re able to finagle deal with them, but it’s also in many deals that I’ve seen in this situation with low or no money down deals, the investors have been seasoned and they are taking a distressed property and they’re making a deal with it where they can come in and instead of using your money for the down payment, they’re gonna use it to write the property. And that’s still bringing money into the deal. It’s just not going directly into the seller’s pocket. What you’re offering to the seller, you really have to understand and then also what you’re providing to them to show that you’re gonna follow through. Now, investing in real estate with little to no money down sounds great, but it typically requires creativity, credibility, perseverance, and lots of time, a high risk tolerance and a strong negotiation skills.

Charles:
And when I’ve spoken to real estate investors who have been successful with little to no money down investing, you know the one thing they all have in common is that they have been at it for years having looked at many properties and spoken to many owners before securing their first one. So I hope you enjoyed

Links Mentioned In The Episode:

  • SS167: Zero Down Doesn’t Mean Zero Dollars

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