Great Deals Without Cash or Credit

You’ve found a great property and want to buy it but you’re short on cash and maybe your credit is not so good either.

Sound like you? Do you see other people snap up good properties before you can put together financing? Or have you had to let the opportunity pass because you didn’t have the money or the credit to close on the property first? It happens all of the time.

The old saying, “If you snooze, you lose” has never been truer than when talking about real estate investing. There are a lot of great deals out there and new ones every day. But if you can’t act quickly, many times the opportunity is gone before you can act.

This story is about a man I met who makes a good living in investment properties. His credit stinks, he spends every dime he makes, he has no “real job” and struggles to keep the bank from closing his account, but he makes good money dealing in distressed properties.

He may not have money, but he does have courage. His attitude is that he has absolutely nothing to lose. He doesn’t have a regular job, but he has a great deal of time and he spends that time prospecting in neighborhoods that are being revitalized, in the newspaper, and in the MLS listings.

If he sees a property that is vacant, or run down, but has character, he tries to find out who owns it by going to the courthouse and checking tax records, or asking the neighbors, the mailman, and he either finds the owner or moves on to the next one.

NOTE: The people at the courthouse will walk you through process of looking up the owner of a property so don’t be intimidated by this. Also, while you are there, find out if there are past due taxes as well. If there are past due taxes, you may be able to negotiate a better deal. You can also check for any liens on the property as well.

He also researches the neighborhoods that he is familiar with on MLS. Don’t have access to MLS? Many realtors will give you access if you tell them what you are doing. They may even assist you in your research efforts or refer properties that they know about or find.

Once he has found a property that looks good, he does a general estimate of the costs to fix it. A general estimate, nothing specific. He is not a contractor, not a handyman and doesn’t bother getting estimates from contractors. So, $3500 for a roof, $500 to clean up the yard, $3500 to paint in and out, $5000 to fix the kitchen and bath etc. Remember, if it’s a great deal, you need to act quickly or someone else will.
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Once he has an idea of what he wants to pay for the house, and how much it will cost to repair it and market it, he then adds 10,000 on to the total for surprises and unseen expenses. Then he estimates what the house will be worth on the open market, or has a realtor give him an idea what it will sell for and then figures out how much profit is there.

The price range that he works in is a purchase price between 40k and 120k and a sales price between 90k and 200k, but the numbers work in any price range. Just remember, the higher the price, the more limited the market.

Once he has found a property, he completes the estimating and number crunching in a matter of hours and has an offer sheet or a contract ready to present. (You can use a contract from an office supply store or if you have established a relationship with a realtor you may be able to borrow one from them and make copies. Make sure that if you are purchasing on your own that you white out any reference to the agent or company if you are borrowing a contract.) Also when you write the contract make sure that is an assignable contract.

When he makes an offer it is with as little earnest money as possible. Less than $100 is not very credible, but I have seen contracts as low as $25. I have seen offers with no earnest money, or only $1 but most of the ones I have seen or received from our friend, “the risk taker” are all around $100 or a little more.

Also the contract calls for closing in 60 to 90 days. As much time as he can possibly get. And, as I said earlier, the contract is assignable. He will also ask and usually get permission from the owner to clean the place up to make it more presentable. In many cases the owner is already getting complaints from the city about the condition of the property, so the owner gets the property cleaned up for free.

Once he has a contract in place, he starts calling investors. You can find them the newspapers or from the signs in neighborhoods that say, “Cash for your home” or “we buy property”. He calls his realtor friend and gets her to start marketing the property. If he has any money he will put an ad in the paper. After signing the contract he has 60 to 90 days to sell this property to someone else or assign the contract.

If he sells the property to an investor or an owner occupant, and there is financing involved, the property will have to be fixed before closing, and this is how I met this man.

He will wait until his buyer has loan approval before he starts fixing the property. He has already informed the current owner that the property can’t be financed in the condition it is in and has permission from the owner to make improvements. Once again, the owner s getting free improvements so he is happy.

Of course he doesn’t have the money to pay for the repairs and so when he approached me originally it was to borrow money for the repairs. Asking me to loan him money for repairs on a house that he did not own was not a very attractive proposition, but based on the fact that he would pay me a 50% return on my investment and the buyer’s loan was already approved, I decided to take the risk and it ended out working just like he said it would.

When the repairs were completed and the inspection was done he closed with original seller with a short term note. The attorney did a quick record on the title to put the property in his name and a quick search to establish ownership for the lender and then closed with the end buyer.

The end profit after all expense? Close to $20,000. His investment? $100 for the earnest money. Not a bad deal.

Also, if he is unable to sell the property and he s getting close to the end of his contract he can assign the contract to an investor who will close it out, make the repairs and sell the property for a profit.

Generally his fee for assigning a contract is between $2500 and $5000, which is still a great return for a little work. And, if he is unable to sell or assign the contract he has only lost $100 and the time he took to clean up the property

There are many ways to make money on real estate without credit, income or a work history. The important thing is to get out there and find a property and think outside of the box.

David Fisher is a successful real estate investor with over 20 years experience in real estate sales, mortgage lending and construction. For more about the author please visit;

http://www.MyPropertyFlip.com
http://www.AmericanSeizedRealEstate.com
http://www.RealtySale.org