experts: real estate column Wednesday, April 28, 1999


By Ozzie Jurock

The two most important things people care about: How much down? How much per month? But there is something even better yet: Nothing down!

The concept seems mythical, impossible. Something for nothing? It's too good to be true. In most cases - in particular of the late night TV 'get rich quick' variety - it is exactly that. But in real estate investment, sometimes it is possible to beat the myth, to find a property and acquire title with a small or even zero downpayment. But it's not easy...but nothing good ever is.

But 'nothing' doesn't mean free either. Investment abhors a vacuum; if you aren't putting up money, you're going to be putting in something just as valuable - sweat (mental or otherwise) and smarts. For example, one strategy has you act as the 'bird dog' working in tandem with the person with the 'gun' - the hard money. You find the deals, he or she pulls the trigger and drops it, and you both share in the resulting profits. Or perhaps you act as the magnet drawing in a number of small but like-minded investors. Together, you pool resources, snag the big plot or project and then split the eventual profits.

Of course, if you believe in the myth of 'good markets and bad markets' (There are only good and bad deals - the worst deals in fact come in good markets) or the old wisdom of location, location, location (when timing and trend make the real money for investors) you may not be able to walk down the road of that no-downpayment world either.

And no, it isn't easy either. All good deals are created ... nothing down or all cash. You will not read about the great deal BEFORE it is done ... you'll read about it only after someone else did it. Of course - ahem - you may read about a great deal in my newsletter ahead of time, but that is another story.

So, you are willing, clutching your dream and your 'no cash'╔what do you do? You need three things╔
You need a market - a buyer's market
You need a strategy- know thyself
You need guts - Your action

Most people get interested in a low down deal in a 'good sellers' market, because they hear that they should run and buy real estate now. But in reality a sellers market rarely sees a low downpayment deal - the seller doesn't need to be creative to sell. People usually don't shop in a buyers market because they read all the negative press yet╔that is the time when they SHOULD be using the low down techniques (As in BC now).

Understand the basic principles of buying real estate without cash, the differences between Agreement for Sale, seller take backs, abatements, buying cash flowing properties only. Read up in the library (everything sold at late night TV is there - free!).

Most people and in particular the ones buying the TV courses end up with know-how and dreams but not enough guts to go out and make the dozen or so offers it takes. You need to find the one Realtor willing to write no down offers, the one willing seller, the one property situation which gets them what they want and the seller what he wants.

Here are some ways to find cash to buy property with no money down. The presumption is that you qualify for a first mortgage, have a job and didn't just have your TV repossessed:

1. Bet on a relative. Get a high ratio mortgage - get the rest from a benevolent father, mother, uncle╔.

2. Bet on the Seller. a) Get him to take back a second mortgage for the whole balance. b) Ask him to sell by way of an Agreement For Sale An Agreement For Sale operates like a mortgage, with the seller as the lender. Typically, it is used when purchasers want the seller to agree on an amount in excess of any underlying first mortgage. An Agreement for Sale appeals to sellers who may be facing a substantial 'prepayment' penalties on their mortgage if they sell now. c) Get an Abatement. An abatement is just a sum of money the seller gives back or rebates to the purchaser on closing. ( deferred repairs, needed renovations etc.) d) Defer your Down Payment - Some or all of the downpayment is deferred for some months or years after the "completion" date with no payments.

3. Bet on Trade. Many investors have put up cars or boats as the downpayment instead of cash.

4. Bet on the bank a) I know, I know an oxymoron. Banks usually only lend you half of what you already have on deposit. But every once in a while╔ b) Personal Line of Credit and/or Bank Loan c) Credit card financing is easy

5. Bank on the government Check out the Registered Home Ownership Savings Plan. A combination of RRSP and RHOSP can get you back the taxes you already paid to use as a down payment (one time)

6. Bet on a partner.
a) Find one partner with cash. You do all the work, repairs, upkeep, property management. Partner puts up money. You own 50%. (One of our subscribers bought 12.7 million real estate in Edmonton this way in 6 months in 19998)
b) Find several partners with cash. Syndicate them or create a limited partnership with you as general partner. c) Joint Venture between seller, investor and you. The investor puts up the downpayment and closing costs, for 50% the seller may retains a 25-per-cent interest by taking back a second mortgage.. You do the work and retain 25% .
c) Use Realtor's commission to help. Not cutting the commission, but deferring the commission for a while - asking the Realtor to wait a little for some of his or her money. Remember though, Realtors have to share their commission with their company as well. It doesn't always work, but it doesn't hurt to ask.

There are dozens of strategies and techniques. All easily and readily found in dozens of books at the library. But you have to do some learning. Surprise, you have to do some work too. But it is possible, to create a good deal with no money down, it is done every day - not by the late night TV crowd, but by average income people who go out learn the concepts and take action. You can do it too.

Be sure to catch Ozzie live on the Net, Every Thursday, 7-8 pm.

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