How to actually buy a house without credit and very little cash!!!
I know if I have said it once, I have said it a thousand times. I was a born entrepreneur. I was always thinking of ways to “start a business.” This brings me to….the fourth grade….
It was the last day of fourth grade and all us kids at R.C. Longan Elementary School had been anxiously awaiting this day. Allow me to digress but only a touch. This was the year that we learned about “accounting” at a nine-year-old level. We learned about money and checks (no such thing as debit cards then). We each had a paper cut-out of something which I do not remember. It might have changed seasonally. For each A we got two hole punches and one for a B. If we had good citizenship all week, a punch. We got punches for basically everything that was not just being a little shit. These punches equated into money. We were earning for the Big Buy on the last day of school.
The school invited all the kids to donate some toys they no longer played with for the fourth grade to ultimately “buy” with our “money” at the end of the year.
We were all given our “check books” with our account balances in them and allowed to shop the donated items. Our parents were advised that we may need a ride home that day as the goal was to clear all of the items out of the gym. We had to buy the items without overdrawing our account of fake money.
I found this to be BRILLIANT!!! I decided that I would do the same thing but with real money. So I bought up a bunch of stuff that I didn’t really want with the intention of reselling it at a yard sale.
On the way home I was hit with an epiphany… raid my existing toys. Hey, why not my siblings’ toys too? Once I was done I came to the realization that there still wasn’t much to sell. Then, I realized that my friends may too have something to sell.
“Hey Michelle, do you have any toys you don’t play with any longer, or any clothes that don’t fit? I am going to collect them and make a big store for all of us kids to shop at with our allowance money.”
See, this seemed cool to my friends at the time who had about zero concept of the lack of profit in the deal for them as this was not on their mind at all. All of them responded with “Sure!!! This will be fun!!” They even said things like “we can dress like adults and pretend we are shopping in a real store.” Heck yes you can!!!!
I went around all week collecting my friend’s “junk” and hauling it back to the house. I made tags and priced each item. I handmade circulars with crayons and markers to hand out to my friends. I set my alarm and woke extra early on Saturday morning. I turned my back yard into an outdoor shopping extravaganza. I had cookies and Kool Aid for them just to say thanks for coming. I even used my sister’s toy cash register that day.
I was extremely pleased by the turnout. Almost all of the kids in the neighborhood came. I was beaming with pride as they rummaged through the neatly organized displays. The first person found an item she wanted. A Strawberry Shortcake vanity set I had priced at $3. Really good deal in retrospect. It had a little desk with a three piece mirror and chair.
Mandy was walking up to the “register” when Shelly yells, “THAT’S MINE!!!!”
“No its not!!! You gave it to me!!!” I retort as the word “donated” was not yet in my vocabulary.
“Well I am taking it back!!!”
Soon this erupted into a backyard brawl where I was the bad guy and was not backing down. Soon my parents rushed to the rescue. My mother, the sweet appeaser, decides that everyone can just trade their old stuff for the new stuff they want. I was not happy!!! What about all of the work I put in??? #MomWhy
This was a sad day for me. #LifeLessons
When we have lived less than 3500 days… Oh how quickly we forget. I was no longer the neighborhood shylock and just a kid again in a matter of days. A couple of months later I was at it again. This time I had saved up for a Polaroid camera selling Merlite Jewelry door to door out of a catalogue.
I collected the goods. Took a pic and hand made the ugliest “catalogue” you have ever seen. I took that bitch door to door and sold my friends stuff to each other. BAM!!! No fight!!!
I discovered that I had not anticipated the level of poverty of a customer base between 7 and 10 years old. This could have thrown a wrench into my plan but alas it did not. I let them give me all of their cash on hand and make payments. I wanted to keep the item until it is paid off but my mother’s “You better get this clutter out of your room, and I mean now, Charity Howard!” motivated me to allow them to get the items beforehand. I kept a journal of what was due to me and weekly asked my friends for money to pay the balance. Eventually I forgot to collect and they forgot to pay; but that is not really the point. The point is that was my first owner financed deal….not a house but , hey, start small. Right?
Now that I have run my mouth for almost one thousand words with zero real content, we can get right into it.
This is an actual house in Henrico, VA that I bought with owner financing in 2009, got $23,000 down in cash, a positive cash flow of about $500, and finally flipped and sold it with a $40,000 profit in 2016.
Owner Finance = The seller agrees to payments over a set term rather than a lump sum payment.
What is owner financing? When a property is purchased via owner financing the seller acts as the bank. The seller agrees to terms that may include a monthly payment, a period of time, and an interest rate. I say may because any of these components could be eliminated. I will elaborate on that soon.
What are the benefits to the investor to buy with owner financing? The benefits to the investor are pretty vast.
Meet Eunice, your new cash cow.
What are the benefits to the seller? The seller has plenty of perks too.
Well, there is one more thing if you are not prepared. There is often a balloon at the end of the term, generally 5 years. If you do not have your exit strategy in place you could be just giving it back.
How do you structure an owner finance deal? You will need to agree on several key components.
How much will it cost? $1500-$3000 generally for closing.
Who is a good candidate for an owner finance? You know what is funny? I had to take a second to think about the answer. After doing this for so long it just comes second nature. So here is the answer…
Any person you owns a home free and clear. You need a person that does not have a mortgage. There you have it folks!!
What are my exit strategies? Many… with this option you have SOOOOOOOO many options and they happen to be the same as the ones in the article from last week on Sub To. Click here to find your options.
How do I find these leads? I will start with the method that cost the most. You can buy a list of homes that have no lien or have been involved in probate. There are several companies that offer this and a simple google search will assist you in this. Simply send these people a letter stating that you would like to buy their home.
This next method is inexpensive but not free. Signs. You’ve seen the “We Buy Houses” signs. Do that.
The rest are free….
Advertise your desire on social media. Put it out on your pages but also join groups and put it on there too. “I buy homes”
Troll social media sites for people trying to sell or rent out their homes without a realtor. Contact them.
Use sites like craigslist.org, Zillow.com, and FSBO.com to contact the owners.
If you see a vacant house, get the address. Look up the owner via the tax records for the jurisdiction. Guess what? Contact the owners.
So, there you have it!!! This is just another one of 5 ways I will break down in full detail over the next few weeks illustrating how to make money in real estate with little or no cash!!!
The last three articles included an overview and in depth detail on Sub To. Click on the title to see the full article; Five Styles of Creative Financing Pt1, Five Styles of Creative Financing Pt2, Sub To-Creative Financing Pt 3.
Remember, I do love to help. If you need a little help or a nudge in the right direction, just ask. If you want serious, one on one help until you have a check in your hand, I do offer mentorship and coaching. Anywhere in the US is ok for either.
Happy Investing My Real Estate Junkies!!!!
I was born an entrepreneur. I am pretty certain that I was peddling passies in the hospital when the nurses left the room.All of the other kids in the neighborhood were riding bikes and playing with dolls I was selling jewelry out of a catalogue and creating a back yard consignment shop. At 21 I became a real estate investor and fell in love. This was/is/ and always will be my passion. I have been madly in love with flipping, holding, and writing offers on real estate that seem crazy for 18 years. Ladies and gents I am willing to share the love of my life with you. Maybe its polyamory maybe its jut because I can’t shut up about it. Either way I will be sharing every mistake I ever made and the lesson that came from it. I love questions. Please ask away!!!