Zero Bank Loans: How I Bought My First Investment Property
Hey gang, this is Mike with Mr. No Fluff. Today, I'm going to share how I bought my first investment property without using a bank. Back during the last crash in 2006-2007, I secured my first investment property without using my own credit, begging a bank for a loan, or having 20% down. Let’s dive into how you can achieve the same through owner finance, seller finance, and subject-to investing.
Breaking the Myths of Real Estate Investing
Many people believe they can’t get into real estate investing because they lack credit or purchasing power. I’m here to dispel these myths and explain how I managed to buy my first investment property without traditional financing. The traditional path involves going to school, getting a job, and then getting a mortgage. But there’s an alternative, untraditional path that can lead to greater success.
The Untraditional Way: Directly Working with Homeowners
The key to my strategy was focusing on working directly with homeowners, particularly motivated sellers. Motivated sellers are individuals who need to sell their home quickly due to financial or emotional reasons, such as job loss, divorce, or other personal circumstances. By targeting these sellers, I could create win-win situations without involving banks.
The Pawnshop of Real Estate
I coined the term “pawnshop of real estate” to describe my approach. Just like a pawnshop provides quick cash to people who need it urgently, I provide quick solutions to homeowners who must sell their property. My strategy involves becoming a problem solver, focusing on the seller’s needs rather than the property’s market value.
The Strategy: Subject-To and Owner Financing
Subject-To Investing (Subto)
This method involves taking over the existing mortgage payments of the seller. Here’s how it works:
- Identify Motivated Sellers: Use marketing to find sellers who need to sell quickly.
- Take Over Payments: Step into the seller’s shoes and take over their mortgage payments without assuming the loan.
- No Credit or Large Down Payment Needed: You don’t need to qualify for a new loan or have a large down payment.
Owner Financing
If the seller owns the property free and clear, they can become your bank:
- Seller Becomes the Lender: The seller finances the property for you, and you make payments to them instead of a bank.
- Negotiate Terms: Create a win-win situation by negotiating terms that benefit both parties.
My First Investment Property: A Real-Life Example
In 2006, during the market meltdown, I bought my first investment property as my personal home using the subject-to method. The property was owned by a married couple going through a divorce. They were behind on payments and needed to sell quickly. Here’s what I did:
- Took Over Payments: I took over their mortgage payments, catching up on the two months they were behind.
- No Bank Loan: I didn’t need to get a bank loan or use my credit.
- Government Incentive: I also took advantage of a $10,000 tax credit for first-time homebuyers, which was available at that time.
After living in the property for a while, I turned it into a rental property, creating passive income. This approach allowed me to acquire my first investment property without traditional financing.
Key Takeaways
- Find Motivated Sellers: Focus your marketing efforts on finding homeowners who need to sell quickly.
- Use Creative Financing: Leverage subject-to investing and owner financing to acquire properties without using your own credit or large down payments.
- Negotiate Win-Win Deals: Build rapport with sellers and negotiate terms that benefit both parties
- .
Join My Coaching Program
If you want to learn more about finding motivated sellers, structuring deals, and negotiating successfully, join my coaching program at Mr. No Fluff. We meet every Saturday, and I provide hands-on guidance to help you close deals. This performance-based program ensures that I only get paid when you do, aligning our interests for mutual success.
Remember, traditional thinking leads to traditional results. Embrace creativity and imagination in your real estate investing journey. Happy investing!
If you have any questions or need further guidance, feel free to reach out. This is Mike with Mr. No Fluff. Have a great day, gang!
Thanks for clicking the LIKE and Subscriber button. Thanks for watching!!
