12. Issue Stock
Form a corporation and issue stock to sellers for their equity. It solves their management problems and starts a real estate business for you. They get an equity position in the company.
Acquire the property at an agreed price, with the seller's equity to be paid out of future profits as the project is turned around.
When you're investing in multi-family properties, hard money is also called "mezzanine financing". If the loan-to-value ratio is 65% or below, many mezzanine lenders will finance you with no money out of your pocket. Why? Because the value is in the property. If you default, they simply take the property, sell it for 85% of value, and still make money.
Do you have a family member with big bucks? Or a family member that has a lot of equity in a property that they can loan you some money from? Perhaps some family members have a lot of money in a savings account that they would like to get a bigger return on. Whatever the case, go to your family first and see what they will do to help you out. If you're smart, you will make it worth their while: either give them a decent interest rate on the money or (even smarter) give them some equity in the deal... perhaps 5%.
Buy a property with the seller carrying back both a first and second mortgage. Make the closing contingent on locating a buyer for the first at an acceptable discount, with the cash going to the seller as down payment.
Offer to acquire the improved property, subject to finding a purchaser who will buy the land under the building out of escrow, and lease it back to you subject to the existing financing. Cash from the land sale goes to the seller as down payment. You get depreciation on the improvements, and you can also deduct lease payments.
If you have a secure job or future investment income, negotiate with the seller to have your bank deduct a specific amount from your checking account each month until the amount the seller wanted as down payment is made. As additional security, you can give the seller a mortgage on other property to secure your performance under the agreement. You get immediate ownership and the seller eventually gets the down payment.
When you are buying from a seller who is also a property user, offer one year's income in the form of free rental as down payment. The seller gets continued use for one year in lieu of cash down. You get ownership with all its burdens and benefits, but with no outlay of cash.
Used in variations involving cash as well as sometimes without cash, the "performance second" is designed to test the seller's faith in the value placed on the property. Buy at the seller's asking price with payments on the second mortgage subject to the income on the property. If income is less than the seller has represented, then the payments he receives on the second will be less than he would like. But if the net income is greater, the payments increase. The second mortgage amortization is consequently tied directly to property performance.
If you are working with a successful broker, don't count him out as a lending source. Considering that he will receive a commission out of the down payment, there is often the possibility that he might like to make a sound investment at a high interest rate, using in part the cash he receives as commission; that's cash he will not receive if your deal doesn't go through.
Take out a line of credit secured by you personally, your property, another property you own, or—if you own a business—against the business or against your accounts receivable.
As you can see, there are many different ways to structure apartment deals with no money down.
Who is Dario Lorenzo http://www.squidoo.com/dario-lorenzo
Vancouver BC V6Z 3B8
604 688 2521