It only seems like yesterday when Robert Allen was showing us all how to do “nothing down’ deals, assumable mortgages and the like. It wasn’t that long after that where we could do sandwich leases. subject-to deals and others using creative buying strategies. Where are the glory days of No Money Down?

The answer for buying single family house REO’s is: “Yes,” no money down is a non-starter for buying bank REO single family houses. Private money, either in the form of private mortgage loans or private equity investors becomes tremendously important here. You might still be able to get a decent deal if you try to purchase with a mortgage – perhaps on an estate sale or short sale – but the all cash REO buyer is going to get a far better deal 9.5 times out of 10.

Now…

For multi-family projects, the answer of whether no money down is dead or not is a bit trickier…

Technically, there are a lot of ways you can get into a multi-family deal with smaller amounts of upfront equity. HUD/FHA loans (221(d)(3), 221(d)(4), 223f, 207, etc.) LIHTC (Low Income Housing Tax Credits) state/community redevelopment incentives and others. Talk to a MAP lender and determine which FHA programs they can offer you for your multi-family project. There are some good ones out there now for as low as 15% down for acquisition financing. (This means on a $1,000,000 purchase, you have to drum up only $150k – better than having to come up with $400k or more with most other commercial loan programs right now…)

But, the thing is there is still that little nagging thing…you still need some equity.

Cash. Dough. Moolah.

On bigger multi-family projects, especially those where you’re getting FHA insured loans, you have up-front money to pay in 3rd party reports and legal fees, as well as additional diligence costs. Unless you own an engineering company, an appraisal company or a law firm, you’re going to need some up-front cash to even get to first base on this type of a deal. It’s nothing to worry about, though. You just need to arm yourself with a little bit of knowledge on how to pull in equity investors

Having private money in the form of equity capital is an absolute necessity with these type of apartment deals. A private mortgage loan will not help you here – it has to be equity capital and you have to have the deal structured the right way.

With commercial deals, such as strip malls, office buildings, mini-storage’s, industrial and mixed use buildings – having cold, hard cash is the only thing that’s going to get you to first base. Any commercial broker worth their morning coffee is not going to take you seriously unless you can show a strong ability to close the deal.

Tweak Your Thinking

The whole thing you should think about with ‘no money down’ real estate is not no money down, but rather: Who’s Money Down? Because if you’re a real estate investor and you bring a deal together and put the private investors in place, you may be able to get into deal with none of your own money  – and this is a key distinction. In today’s market, ‘No money down’ should be thought of as none of your own money down, and set up so that you are using other people’s money in the form of private money lock down huge cash flow deals.

So, as we go back over all three deal types that we’ve discussed in this post; single family houses, multi-family apartment deals and commercial properties, we can see that no money down at all isn’t really feasible in the current market,  none of your own personal money down is a easy to grasp as a reality. In fact, this is the most profitable mindset to have. Once you put some deals together with big time cash flow (and a market upswing in the future), you’ll have plenty of your own money to invest if you want.