How to Buy Houses with No Money Down (5 Ways)

hey everybody i'm tarle yarber with fixated real estate and today i'm going to go over with you how i've been able to buy real estate with little to none of my own money throughout my entire career in fact i've done over 600 single family fix and flips we got a bunch of burrs buy rehab refinance repeat and throughout doing all those deals i've been able to leverage other people's money opm and there's five key ways we've done that i still do this to this day i'm gonna show you how we do it in explicit detail and it's gonna be coming up to you right now [Music] good all right so first let's define some things what is opm other people's money that's exactly what it is it's other people's money which means it's money other than yours now there are three things you absolutely have to have in order to make any real estate transaction work i did a whole video on this in bigger pockets not too long ago check it out it's the three things you need to be successful in real estate and that's time money and expertise now today i'm going to go over you guys step number two which is money in explicit detail now if you have the time and expertise it is a lot easier to get step number two which is the money now for those of you guys just starting out and you're like how do i get deals i see all these people buying property saying no money or load or no money and all that stuff well this video is for you because this is how you actually do it all right so can we go over every single detail of every single thing no so for those of you guys watching this if you have extra questions make sure you put those in the comments of this video the biggerpockets community loves to help answer those questions you can also go to biggerpox.com ask lots of questions there but in the youtube comments of this make sure you guys ask some questions in there and we'll do our best to get to the answers for you so let's go over the first thing and the first way to be able to structure deals using opm number one this is something i've been using since day one in my entire career as my favorite way to do this business until recently and that is joint venture deals jvs so what is a joint venture a joint venture just means that you and another entity or person or group of people join together to do a venture of some sort a business venture whatever in this case we're talking about real estate so let's give an example we take a single family home out there that you find because you have the time and expertise of some sort right this is just an example where you're the one coming in with some sort of value into the deal and you're trying to get somebody else to pay for it right in this scenario now you could be the other way around where you could be the person paying for and blah blah lots of structures but this scenario you're the person that finds the deal and you're going to help manage and run the deal in some capacity but you need somebody to pay for it so you come to an investor like me and you say hey taro i have this awesome deal it's a 20 cash on cash return it's a fix and flip all i'm looking for is somebody to help me invest into the deal if i bring the deal to the group and i run the construction and manage the rehab will you help pay for the deal now there are many investors out there today that are looking for joint ventures to invest in somebody's else's deal i look for that other people invest in that i have tons of friends that do that some of you guys do that now how do you actually pay for a joint venture there's lots of ways the number one most common way is to share equity now what does that mean if you have a hundred percent of a profit split 100 of a profit to give most joint ventures are going to want a percentage of that profit which means you got to execute you got to make sure that the deal makes money blah blah blah blah blah now in a normal typical joint venture a lot of times people will do a 50 50 profit split and in a normal fix and flip that is very common somebody finds the deal manage the rehab other person pays for it they split profits at the end and 50 of something is better than 100 of nothing that said when i first started out back in 2011 2012 when i went full time into real estate after i toyed with it back in 2005 2006 there was a period of time i was giving away 80 of the deal to get 20 back in joint ventures because i had so many deals and i needed to share profits to be able to get the deals to roll because money was really freaking hard to get in 2011 and 2012. some of you guys might remember that easy now i will never do that split again today but harder than so joint ventures so many ways to structure that we're going to circle back on this one a couple times so bear with me the number two way to do it which is my absolute favorite way is private money lenders pml private money lenders now what is a private money lender it's exactly what it is it's a private person with money that lends it right so in this scenario here you have a somebody that has a bunch of liquid capital of some sort it could be even five grand up to five million to ten million it doesn't matter they have money and they want to lend it to you as an individual a private money lender now back in 2014 i found my favorite private money lender i still talk to him to this day i still borrow money from him to this today i have many many other private money lenders that i've built up and found over the years my terms have changed over the years things have i now private money lend to other people and so forth as well but that said what do you pay a private money lender well that's up to you and the pr and the private money letter at one point i was paying two points and ten percent to some private money letters some private money lenders i pay just six percent to with no points it just depends on you and that other person and what you guys can agree upon and negotiate now some things to think about if you're not splitting profits like you would in a joint venture you're guaranteeing an interest rate which when raising capital you can't say guarantee but you're not actually raising capital the scenario you're getting a loan from a private person and paying them an interest rate on that money just like you would a bank it just happens to be a person some ways to structure it legally talk to an attorney for one don't just do this is you give them a first lien or second lien or whatever it is in place on the property that you're investing in let's go to an example i've done lots of single family fix and flips when i use one of my private money lenders to this day i might sit there and go say hey here's a property i'm gonna buy for a hundred grand i'm to put 50 000 into it it's going to be worth 200 000 when i'm done that's the arv will you lend 150 000 on this or 100 grand or whatever i need on it and in return i'll give you a first lien a first mortgage or first d to trust whatever you guys call it in your state and i will give you an eight percent interest rate plus two points or whatever it might be and pay you back in the next six to twelve months that would be a standard private money lender term negotiation up to you guys how you do all that stuff but get that attorney in place get make sure you get a note and a deed of trust or mortgage depending on the state you're in and you file and you secure the property so the private money lender feels strong feel secure because here's what they care about most can you guys guess what they care about most are you gonna give me my money back right that's it so how do you find private money lenders one build some experience you can ask family and friends i don't like doing that as much because i don't want my most my family most of my family don't have money to lend to begin with right they call me but at the same time i don't want to take money from somebody that needs it i want them to be an accredited investor preferably that can invest with us and understand the risks super important huge opportunity but don't go taking advantage of people okay do it right third way a very common way is using a hard money lender hml hard money lender now i bring this up here because not very many hard money lenders will in lend a hundred percent financing they're not going to lend you a hundred percent of the deal they're not going to say 100 of the purchase and 100 the rehab some will do like 80 90 percent of purchase and 100 of the rehab uh some will do a combination it just depends but there's very few hard money lenders out there that are going to lend to you the entire deal which means you have to put some skin into the game put some sort of down payment in there and that's very common and the fact is if you can't put money down on a deal then you should also question how many deals could should be doing or even if you should be doing deals in the first place just remember that as you go scalability is an issue it's not guaranteed you're going to make money on these things you got to pay people back remember that but why do i put it up here anyways i still use hard money but i use hard money in a combination of the three so i like to structure my deals using hard money lender as an example and combining a private lender combining a joint venture deal i've done that many times today most of the time i'll use either hard money or use of private money and so forth if it's my own personal deal and i might combine the two to begin with most the time i fall on the pml side but if i do bigger deals right i might join venture with some friends we do some developments some builds that kind of stuff we might do that right or i personally will lend my money out as a joint venture combination of the three now hard money lenders there's tons out there right now you throw a rock you're gonna hit 27 of them there's so many freaking hard money lenders out there to this day and they all have different rates terms and if you're struggling going like how do i find a hard money lender i'm sorry you're just not looking right they're out there right go into networks go meet up google it right trust me you'll get a ton of freaking hard money lenders hitting you up any facebook group with real estate has about 60 of these guys swimming around and swimming around you trying to find a way to give you money they're out there cool they weren't out there for uh that long ago but they're out there a lot right now so combine them so can you do a joint venture with somebody where maybe you get a eighty percent loan to value uh pro loan from a hard money lender and then get a somebody else to put the other 20 down as a joint venture so you're going to pay interest rate to the hard money lender and then you're going to split some profits with the person that puts the 20 down for the hard money lender loan right and so you have a jv with a hard money letter or maybe you do a hard money lender that pays for 80 and you get a private note and put them in a second position for the 20 down that you need for that with a private lender or maybe you do a private money lender with a jv or a jv with a price like there's so many ways you can start you can do all three of these in one deal the key is to get creative in some way figure out what relationships you have and as you get better build a portfolio and you're going to find more pmls more people to do joint ventures with better rates in terms of hard money lenders and you're going to be able to show your expertise time money expertise expertise to be able to reduce your cost in your joint ventures private money lenders hard money lenders all that type of stuff they go down the costs go down as your expertise goes up now you've heard this before i heard this a thousand times when i was brand freaking new i'm like how do i pay for these deals how do i get money right if i'm going out there searching for wholesalers or sorry searching for a wholesale deal it's an assignment i'm driving for dollars but what do i do once i get it how do i pay for it and the answer is always when you hear from guys like me and other people out there they always say hey if you find the deal the money will come now some of you guys may be saying that's i've been looking for i don't i can't find the money right well i'd say you're not looking hard enough but the truth is if you find a great deal if you really do have a great deal and you put it out there to people like me and people like that's on bigger pockets and people that are in your community and say hey who wants to give me money to buy this deal if it's a strong deal somebody's going to want a jv somebody's going to want a pml some and a hard money lender will be next in line here's a trick when i was brand new if i didn't know how to how to underwrite a deal i would send it to my local hard money lender here in the area and if the hard money lender wouldn't lend on it it means it's a bad deal so don't don't buy it so you don't have to be an expert at uh analyzing deals just get your lender to analyze it for you they're like there's nowhere to hell we'll give you money for this there's only two reasons the deal sucks or you suck right but most of the time it's because the deal is not that good to begin with and they're just saying it's not worth the leverage because even if you're still brand new they'll still land on it they just won't give you as much uh money for it they might require you to put 30 down instead of 20 down or 10 down just remember that now before i move on to number four one final thing with this when you are buying your deals and you're going into these properties most of us are so focused on the purchase and maybe even the operations of the deal that we forget about the exit when you're structuring your financing on the front end and how you do your financing on the front end it is so important to think about the exit or the takeout is what the industry would call it on the back end of the project so let's use a bur buy rehab rent refinance repeat as an example you have a deal that you're buying for 100 grand you're going to put 50 000 rehab into it and it's going to be worth 200 000 when you're done that's a great deal right when the way you slice it up right rate of return on that stuff if you do cash on cash the way i do it which is your purchase and rehab which is your cost divided into your profit you're probably gonna get 35 grand out of that deal after all costs right you're looking at a 20 something percent deal right there right good to go all day love it so you have that deal now you're going to go to a bank and you're going to say okay i want to refinance this at a 200 200 000 after repair value or appraised value how much loan can i get you have to think about that because it's going to determine how you structure your front end now if you buy the whole deal cash you're going to need a lender on the back end to then be able to give you a cash out refi after a certain time and most lenders will not give you a cash out refi until you've owned it for six months so let's not forget that if you bought the whole property 150 000 plus rehab for cash you're going to wait a minimum of six months to get your money back on that 200 000 after repair value deal with most lenders some will do it shorter maybe three months but you got to find those lenders that will do it but let's say instead you did a joint venture with somebody and you're 50 50 with them in some capacity and you want to keep it as a birth have you guys discussed what happens if you want to keep the property and the other person wants to sell it how are you going to handle that that's something that should be negotiated in your joint venture and this is not a handshake deal this is a piece of paper that you guys signed i didn't go over that but that's super important talk to an attorney what about your private money lender did they invest in a second position are they going to be do you need them to leave their money in the deal if you're going to do a refinance with a burr and you want to get a 30-year fixed and you need some of the private money lender to leave their money into the deal does this private money lender want to leave their money in there for 30 years probably not they probably want it back what if your what if your deal doesn't appraise correctly what if it praises lower what if it praises for 175 or 160 right how are you going to pay people back right these are things that you should think about when you structure your deals i like to structure mine with private money lenders that pay for everything because we got good deals so i can do what's called a rate refinance on the back end instead of a cash out refi that's a video for another day right but that's the back end takeout side of the burst so when you're buying your deals how you structure your purchase on the front end is going to be really important on how you decide to do your takeout or refinance on the back end no matter what type of property you're working on if you're just flipping it who cares sell them move on right make some money okay i digress now we're gonna i'm gonna put a line here because these are the three most common ways that i do my deals for hundreds and hundreds and hundreds of them it's how we keep most of our money out of the deals i'm gonna go over number four now this is not a common thing for me but it's a very common thing for a lot of people doing bigger deals typically right and that is raising a fund or doing a syndication so you have syndication this is raising capital syndication or raising a fund of some sort a managed fund or whatever it might be there is so much to get into when it comes to syndications and funds so much i'm not going to get into in this video but to give you a very brief overview what that means most people are doing a syndication or a fund when they're doing large deals or a large volume of deals if they're just doing one single family house to flip that 150 000 project i hate to say it but you're freaking idiot if you're syndicating that deal right and leaving a ton of money on the table don't do that now if you're doing a 15 million dollar deal or a 1.5 million deal or a 150 million dollar deal you're probably going to do a syndication or a fund in that scenario and all that is you have general partners and limited partners and you come together and you raise a bunch of capital from typically accredited investors and they invest into the deal in a pool of money as limited partners so watch i'm not going to go into any more detail on that because i also don't want to get in trouble with any kind of sec laws by telling you guys the wrong thing but there's tons of videos out there about syndications and managed funds great tool great way to be able to scale up when you're ready for it one side note on this there's a lot of people and there's a lot of gurus out there that say they'll help you raise money and teach you how to do that stuff and they've written there's people that raise money they get paid for raising money and there's a lot of shady shady stuff out there when it comes to syndication and funds it is so important that you realize that you are taking other people's money and putting in the fund that they're trusting you and you are liable to make sure that you pay them back and you do the right thing with it right so don't just jump into this thing because it sounds cool and also don't be impressed by somebody that owns five percent of a general partnership saying they have a thousand houses just a side note some of you guys watching this you might get this because it's bs at that point they don't really own a thousand thousands they don't sign the deed sorry i digress me and brian burke great guy in bigger pockets we joke about that all the time so moving on great tool usually you're scaling up usually you're doing bigger deals um but don't be impressed by people like that right you can make a lot more money just doing these things if you do it right like i have maybe that's just a biased opinion for myself boom i pissed off some people it happened all right so moving on number five five final creative ways to be able to do financing is exactly that creative so creative financing or deal structure right creative deal structure creative financing that says finance but let's just say it says financing okay cool get over it all right the so five creative finance credit and what does that even mean that means like seller financing i love seller financing it's fantastic you're typically not going to get seller financing 100 000 house you might you might be cool most of the time you're going to get seller financing on a little bit bigger deals maybe it's a commercial deal a multi-family duplex whatever maybe somebody that's owned a house for 30 years and they have a portfolio of them and the owner doesn't want to get the money back or whatever you can structure seller financing in so many ways it's a fantastic tool i'll give you a common way that it's used let's say that you're buying a a small commercial building that's been owned by somebody for 20 or 30 years and they know when they sell that commercial building or small multi-family it could be a five plex four plex eight plex whatever they know that they're going to get a large tax uh hit when they go to sell that building to you because maybe they own it free and clear that would be perfect free and clear owners right of a building that they've owned for 20 30 years are amazing owners to find because usually they want to sell it for retirement or something like that and they know when they sell it they're going to get a big capital gains hit a big capital taxation on selling that property because they've appreciated it for 20 30 years talk to a tax attorney or tax accountant to figure that crap out what that actually means but that's the general basis of what might happen so maybe you approach this seller and go like hey i want to buy this thing for you from you for 800 grand right instead you're gonna get a big tax hit potentially right have you ever thought maybe doing a seller financing back to me maybe they put maybe they sell or finance half of it to you four hundred thousand six hundred thousand all of it who knows if they sell our finance back to you which means they just basically lend the money back to you after you buy it some most of the time like i said i'm not in a tax account or anything like that the seller's not going to pay taxes on the money they lend back to you but maybe you give them a four five six percent interest on that money so a good question to ask these people is like hey man you're gonna get 800 grand out of this have you thought about the tax obligation you're gonna hit for that no not really well what what are you gonna do with that money once you receive it well i'm gonna put it in the bank and i'm gonna retire what kind of return do you get on the at the bank and they might say i don't know one percent it's like well what if instead i can get you five percent interest on your money into the one percent from the bank would that interest you that's a good question to ask a seller uh about the capital proceeds that they're they're going to receive from selling their property if they're at interest at at all then maybe you can work out some sort of deal where they sell our finance back and you could pay them five percent interest four percent six percent whatever you guys agree upon instead of them getting one percent of the money just sitting in the bank because they're probably only getting one percent and if they calculate inflation this transitory inflation which is bs but transitory inflation which is like five seven percent right now they're losing money leaving in the bank so can you do a seller financing yes i think it's fantastic a lot of times you could do seller financing with some other kind of lender as well because they might not cover the entire purchase or you have to put some money down but you can get really creative with that lease options subject to those are two things that work amazing that i don't know anything about so i can't really help you with those things to begin with but there's people out there that are fantastic at subject to lease options all that stuff that's another way to set up creative financing i honestly have never done one i've done seller financing i think it's fantastic if you can get it but i've never done a lease option i've never done subject to but there's people out there that specialize in that stuff and they're amazing at it so go watch them but be careful because there are regulations in your area subject to and also lease options that are out there those might even be the same thing for all i know but there are regulations out there about it that you need to be watchful of and make sure you're doing the right thing so that's five things that i i've done over the years except for at least options subject to users i admit to that but there's five creative ways here every single one of these ways you can do without any of your own money right when you go to do an infinite bur and you do a combination of these three and you get all you pay back everybody and you got extra for a cash out refi that's insane that's awesome let's say you flip a property you have no money into it and you go to sell it for a profit pay all the people back and you get a bunch of profit back as well and you didn't invest any money but maybe you invested your time maybe you invested your expertise right but you didn't invest your own money and when you're building this business one of the number one things i get asked all the time is how do you scale your business how do i scale up i'm stuck i'm stuck and if i ask them enough questions one of the reasons why one of the top three reasons why they're stuck on scaling is because they haven't come to grips that they need to do more joint ventures more hard money lending more private money lending some sort of syndication because money is an issue in this business you have to have it in order to invest and it's either going to be your money or other people's money so remember that so get comfortable doing one of these five or a multiple multiple aspects of these fives if you want to scale and grow your business or even reduce your risk depending on how you look at it you might actually increase your risk so watch out so i'm tyler yarber make sure you guys follow me at tarly yarber on instagram check out biggerpocketsmore comment like subscribe this video ask questions in the comments we'll get back to them as soon as we can and we hope to see you guys on the next video coming up soon [Music] you

Channel: BiggerPockets

Views: 51,314

Keywords: biggerpockets, real estate, real estate investing, investing, rentals, rental property, investing in real estate, income property, bigger pockets, passive income, how to buy houses with no money, how to buy houses with no money down, how to buy real estate with no money down, how to buy rental property with no money, no money down investing, other peoples money, other people's money, how to buy property with no money, no money down, creative financing, seller financing

Id: mZ-Pc-kG5kc

Length: 23min 28sec (1408 seconds)

Published: Mon Mar 21 2022