5 Zero Down Offers You Can Make Today
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Five Zero Down Offers You Can Make Today”
“Five Zero Down Offers You Can Make Today”
Joe: Hey, it’s Joe Crump. Another video in the outrageous claims series. This next one is five zero down offers you can make today. Earlier in the series I’ve been talking about some of these structures. I’m going to try to go into them in very quick detail because I’ve only got a few minutes on these videos.
Joe: We use a thing that I call the zero down hierarchy structure, or I’m sorry, zero down structure hierarchy. And what it does is allows you to decide what type of offer to make on a property depending on what you’re trying to accomplish and what the seller needs.
Joe: So the top of the hierarchy is subject to, taking the property subject to the existing loan. Then there’s multi mortgage. Then there’s land contract, also known as contract for deed. Then there’s lease option and then there’s assignable cash deals, also known as wholesaling. So those are the five zero down structures that you need to worry about if you’re buying the property.
Joe: Then you always want to start at the top of the hierarchy at subject to because that gives you the most control. You have to assume when you buy a property that you’re the most ethical person in the room. That you’re going to do the right thing. So in order to do the right thing you need to be in control. So you take the deed and you get control of that deed when you buy the property.
Joe: Now, when you’re selling a property, you want to give the least control. So the hierarchy reverses and now lease options are at the top of the structure. So if you’re selling a property that you own you want to sell it and give that buyer the least control of the deal. You’re still going to treat them fairly, you’re still going to follow the rules, but you’re going to give them less control. So if they default, if they fall apart on the deal, you’re going to be able to get that property back without too much pain.
Joe: And as you go up the structure from that end, you know, the next one up is land contract, then multi mortgage and subject to. You never sell a property to. You only buy a property subject to. Because subject to takes control away from the seller and gives it to the buyer.
Joe: So you’re going to buy subject to, you’re going to sell lease option, top and bottom part of the structure. Even though I’ve got assignable cash deals on the bottom. That happens less often. You usually don’t keep those properties so I don’t usually don’t include that as the weakest point in the structure because you’re not keeping those properties.
Joe: So, those are the five zero down structures. Subject to is where they deed you the property. They have an existing property, mortgage on the property. Usually it’s pretty close to the value of the property, maybe a little bit of equity in it. So you take that deal and then you turn around and lease that property and that’s how you make money.
Joe: The second one is multi mortgage. Maybe they’ve got a lot of equity in the property. Maybe they own forty thousand dollars on a hundred thousand dollar property and there’s sixty thousand dollars of equity. You could still buy that thing. Let’s say you buy it for eighty, and you’ve got forty on it and you could put a second mortgage on there and now you’ve got eighty thousand dollars that you’re paying to them. Forty thousand dollar note paying to them and forty thousand dollars that you’re paying to the bank on a regular basis. And you make sure you make those fully amortized notes so that you can pay them off and there’s no balloon payments on that. As they say, balloons are for clowns. Don’t do balloons when you’re buying. Only do balloons when you’re selling. Then you can make the decision after that three years or five year balloon, if you’re selling, whether or not to extend that.
Joe: Assuming that the person’s making their payments, then you could extend that balloon if they need to. But you could also encourage them to cash it out by getting a new loan if they’re able to do that. So, that’s the multi mortgage.
Joe: The next one is land contract. Land contract does not transfer the deed. Subject to and multi mortgage do, land contract does not. It’s just a piece of paper that’s in agreement between you and the seller saying you agree to pay X amount of dollars over X period of time at X interest rate, X payment. And when that payment is done, when they’re completely paid off, then the seller transfers the deed over to you and you take the deed to the property after the fact. That gives the seller the right to take it back from you if you default. If you have the deed then you have to be willing to give it back to them. They can’t take it back from you. So, it’s a little weaker structure as far as control goes but if I’m selling a property I wouldn’t mind selling on land contract if I got enough of a down payment. It’s a little harder to get rid of a land contract buyer than it is to get rid of a lease option buyer, so keep that in mind if you ever sell on a land contract.
Joe: But if you’re selling properties on terms and you’ve got a property that’s not in very condition, it’s not habitable, then you want to sell it on a land contract rather than on a lease option because a lease option, they could take it to a judge and say, “Hey, this property is in terrible condition,” you know, “My furnace went out,” and then you’d have to fix it. On a land contract the judge would say, “Yeah, you’re the buyer of this property. You have to take care of that furnace yourself,” and they wouldn’t require you as that landlord to do that.
Joe: All right. The next one in that structure is, so now we’ve got subject to, multi mortgage, land contract, the next one is lease options and we’ve talked about lease options a lot. It’s essentially just leasing a property with the option to buy. You never want to do this personally. But you want to sell it this way, but never buy it this way. Because as the seller it gives you more control if that person defaults so you can get rid of them, usually with just an eviction. There are some complications that can happen, but it doesn’t happen very often. So I’ll just leave it that it’s easier to get rid of a buyer on a lease option than it is to get rid of a buyer some other way who defaults. Of course, if they fulfill their end of the contract you of course will want to fulfill your end as well.
Joe: Then the last structure is assignable cash deals and this is the one that most teachers talk about all the time and it’s wholesaling deals. It’s assignable cash deal. So essentially you’re getting a purchase agreement to buy a property for X amount of dollars, you know, preferably dramatically under market value and then turning around and selling it and charging usually an assignment fee. Let’s say you get a property that’s worth a hundred thousand dollars and you get it for fifty, you add five thousand dollar assignment fee on it, the new buyer gets it for fifty-five thousand dollars cash, they come in and cash you out and you get five thousand. Fifty thousand goes to the seller and the new buyer has a chunk of equity still in that property.
Joe: You won’t be able to sell an assignable cash deal for sale by owner most of the time if you don’t get an extremely good deal. I’m talking forty or fifty percent under market value. So, and maybe even more than that if you’re down in the twenties, thirties, forty thousand dollar price range. And maybe a little less than that if you’re up in the two or three or four or five, six, seven hundred thousand dollar price range. So keep that in mind.
Joe: Remember as an investor, there’s only two ways that you can make money. One is you buy a property on terms at or below market value and two, is that you buy a property substantially under market value. If it doesn’t fit one of those two criteria, you know, run away from it. It won’t make you money.
Joe: So there’s lots of ways to do those types of deals, you know, different zero down structures. You can use cash, there’s other things that you can do. But I would suggest that if you’re new to this that you don’t use any of your cash. You never use a loan. That’s where you make the biggest mistakes and that’s where you’ll lose money and screw up your credit. If you do the zero down structures it might take you a little bit longer to learn how to talk to sellers credibly and intelligently and give them an offer that makes sense. You know, it takes a while to learn that. But we’re talking a few months. And if you’ll learn that it’s something you’ll never forget and it will become much, much easier and you’ll be able to do it into the future and you’ll never want to use loans or cash again until you get so much cash where you just have to invest it and then, of course, when you have a bunch of reserve cash you’ve got to put it into property because that’s going to make more sense to you, and, because you made it doing property, you’re going to know where to invest it.
Joe: They say you need money to make money. I say that’s silly. In fact, if you can’t make money with no money, you probably aren’t going to be able to make money with money. So – did I say that right? If you can’t make money with no money, you can’t, you won’t be able to make money with money.
Joe: Learn how to do it with no money first and that way when you invest real money or real credit you’re going to be able to do it right way and not screw it up and lose those assets.
Joe: All right. Hope that helps.