"Purchasing Property With No Money Down: My Personal Experience"
Have you ever seen those infomercials
about buying houses with “No Money Down?” They are really
well done. They have all kinds of people offering great
testimonials about how they have gotten rich, buying rental
properties, with absolutely no money out of their pocket.
You see this guy, standing on a street corner, talking to
someone, and he says, “I own that one,” pointing to a beautiful
colonial. “I also own that one next to it, and the one two
doors down, and I’ll be closing on the one directly across
the street from it, next week.” He then assures us that
he has purchased 17 homes in the last eight or ten months,
with zero money down on the properties. Plus, in many cases
he’s also paid no closing costs.
And, let’s not forget, this same guy is
grossing tens of thousands of dollars monthly, and his net
worth is nearly one million dollars. So, he says.
Now, all of this looks wonderful, so when the person selling
the course that will teach you how to do this, at a nifty
price of just $297.00, speaks, you are glued to his every
word. “Real estate is the safest and fastest way to make
money, today,” the expert will tell you.
So, can this really be done? Can you purchase houses with
no money down? Can you become a landlord in as little as
one month’s time and start raking in the cash from those
rent payments? The answer is an absolute “Yes.” It can be
done, and I am proof positive, because I’ve done it. The
question you should be asking yourself is not can I buy
real estate with no money down, but should I?
You see, this is a question that the guy selling the No
Money Down course, with all of his people and their great
testimonials hopes you never ask. His advertising and marketing
strategy would collapse, if he gave anyone a chance to ask
this question, because he would be forced to lie if he answered
it.
Rarely is the whole truth anywhere to be found in infomercials,
especially when the advertising is about No Money Down real
estate programs. The infomercial makes the idea and the
program look so easy that any child could handle it. It
makes it seem like every American should be doing it, and
we’d all be millionaires. But every American is not doing
it, and many of the ones who are doing it not only are not
getting rich, they are actually going broke. The infomercial
won’t tell you this. That’s why I’m here.
The Truth
Now, let’s get started with the truth about buying real
estate with no money down and the truth about being a landlord.
The first thing you need to know is that they are both very
bad ideas. Let me illustrate by using my own experience
in these areas. I started buying rental property nearly
10 years ago. The first property I bought was a deal orchestrated
by some real estate con artist, who told me I needed just
$2,000 to take ownership of this home and, in the process,
help out a woman who was about to be foreclosed upon.
In two years, she would clean up her credit, refinance
the loan on the house, and I would make $10,000. Sounded
good to someone who was quick to buy into anything that
returned big dollars in a short time.
This worked for the first year, as the woman paid on time,
and I pocketed an extra $100 monthly. Later, though, things
began to collapse, as the house began to need repairs, all
of which the woman couldn’t afford, so I had to pay for
them. I put nearly $5,000 into the house in a four-year
period. When I was finally able to sell it, I didn’t quite
make back what I had put into it.
Meanwhile, I was eager to overcome this problem by adding
many more. A slick mortgage broker got hooked up with an
even slicker real estate prospector, and the two of them
convinced me that they had a way I could buy houses rapidly,
with absolutely no money out of my pocket. Although my experience
will probably be enough to enlighten you to the pitfalls
of this model and of being a landlord, let me say that I
can’t emphasize enough how dangerous buying property with
no money down is.
In six months time, I had purchased eight houses – many
with loans from the same wholesale lender. These lenders
should have been concerned with all of the debt I was building,
but they kept approving loans, based on my good credit and
rents covering the mortgage payments. One of the biggest
problems, which I was not experienced enough to detect,
was that most of the rents were just $50 to $100 above the
mortgage payment.
“Don’t worry,” the investor/ hustler would say. “You’ll
make all your money on volume. We’ll get you into 30 or
40 houses, and you’ll be pocketing $4,000 to $5,000 every
month.”
As you might imagine, my mind raced. I was making the huge
deposits at that very moment. My bank account was fattening
up at breakneck speed.
The Illusion
This is what people who buy houses, using the No Money
Down plan envision happening. After all, if you can buy
one house with no money down, why not five or ten or fifty?
For some reason – the vision of the dollar sign, most likely
– I failed to seriously consider the maintenance of these
houses, the possibility of missed rent payments, and the
chance that renters might actually stop paying, altogether,
forcing me to evict them – a time-consuming and extremely
costly undertaking.
As you may have already guessed, all of these things happened
to me, after I had amassed 26 rental properties. In fact,
oftentimes, all of these problems happened in the same month.
Now, for awhile (when I had about 10 houses), if one person
failed to pay rent, I could cover it with the nine other
payments. But when two, three and sometimes even five tenants
didn’t pay in the same month, it was devastating to my business.
I had to go to my business account and pay up to $3,000
at a time in mortgage payments, with no income to cover
it. Plus, I had to pay a property management company to
get my tenants to pay or to evict them.
Soon, this became the norm, not the exception. There were
constant problems at my houses. Unhappy tenants led to poor
upkeep of the property and even more maintenance problems.
About one year, after I had amassed 26 houses, I was having
problems with roughly 10-15 houses and/or tenants each week.
I was evicting at least two tenants each month, and approximately
four to seven tenants were either behind on rent or not
paying at all. Promises were made, payment plans arranged
and few, if any, ever followed through.
It didn’t take long for me to realize that this was no
way to make money in real estate. Consequently, I got rid
of these houses as fast as I possibly could. There were
plenty of buyers, willing to take over my headaches, because
they had the ability to make it work, they believed.
In 10 years of being a landlord, I lost thousands of dollars
and likely took some years away from my life with all the
stress I had endured. So, whatever you do, avoid the No
Money Down Trap. There are much better, still inexpensive
ways to make money in real estate.
Learn the best ways at Directlendingsolutions.com
Check out more great loan information
now at Direct
Lending Solutions
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