How To Buy Your First Rental Property Even If You're Broke
Summary
TLDRIn this educational video, Jamelle Gibbs outlines a five-step strategy for acquiring rental properties with minimal capital. He introduces the concept of owner financing, which allows buyers to bypass traditional banks and negotiate directly with property owners. Gibbs provides practical steps, including finding properties, pre-screening sellers, making offers, securing agreements, and finding tenant buyers. His approach emphasizes building wealth through passive income and offers creative solutions for those short on funds or credit.
Takeaways
- 😀 The video teaches a strategy for buying rental properties without significant initial capital, focusing on owner financing as an alternative to traditional bank loans.
- 🏢 Owner financing allows buyers to deal directly with property owners, bypassing banks, and can benefit both parties with tax advantages and passive income.
- 💡 The presenter emphasizes that no significant amount of money is required to start, suggesting that even $10 to $100 could be enough to begin the process.
- 🔍 Finding properties can be done using online platforms like Zillow and Craigslist, focusing on properties listed 'For Sale By Owner' to facilitate direct contact with sellers.
- 📝 Pre-screening sellers involves understanding if they have a mortgage and if they are open to receiving payments over time, using non-threatening language to encourage a positive response.
- 📑 A creative offer formula is suggested, which includes offering close to the asking price, negotiating a small earnest money deposit, and setting a monthly payment based on half the rental comps in the area.
- 🤝 The agreement with the seller typically includes a standard purchase and sale agreement along with a seller financing addendum, which outlines the terms of the deal.
- 👥 Finding a 'tenant buyer' is crucial, who will ultimately take care of the down payment, monthly payments, and balloon payment, enabling the original buyer to profit from the spread.
- 📈 The strategy aims to create passive income through monthly rent collection and potential profits from the back-end sale to the tenant buyer.
- 📊 The presenter suggests increasing the monthly payment by 10-20% based on rental comps and structuring the buyer's payment plan to be shorter than the seller's, creating a no-money-down scenario.
- 🎯 The key to success with this strategy is taking massive action, emphasizing the importance of proactive engagement in the real estate market.
Q & A
What is the main topic of the video?
-The main topic of the video is teaching viewers how to buy their first rental property even if they have limited funds or poor credit, using a strategy called owner financing.
Who is Jamelle Gibbs and what does he teach in his videos?
-Jamelle Gibbs is the presenter of the video and he teaches various investing strategies, with a focus on wholesaling real estate and creative financing methods for acquiring rental properties.
Why is wholesaling real estate considered a high-paying job but not a path to wealth?
-Wholesaling real estate is considered a high-paying job because it can generate significant income quickly. However, it is not a path to wealth because the income is not passive and ceases if one stops working or takes a break from the business.
What is owner financing and how does it benefit both the buyer and the seller?
-Owner financing is a method where the property owner acts as the bank and provides financing directly to the buyer, bypassing traditional banks. Benefits for the buyer include no need for a large down payment or good credit, and for the seller, it offers tax benefits and a steady stream of passive income from a property they no longer own.
How can someone with as little as $100 start buying rental properties using the strategy presented in the video?
-With as little as $100, a person can make an earnest money deposit to secure a property deal using owner financing. The rest of the down payment and the purchase can be structured with the property owner over time, allowing the buyer to get started with minimal upfront capital.
What role does the property's condition play in the owner financing strategy discussed in the video?
-The condition of the property does not play a significant role in the owner financing strategy. Whether the property is in excellent or poor condition, the key is to structure a deal that allows for cash flow and makes sense financially, without the buyer having to invest in rehabbing the property.
How does one find properties suitable for owner financing as described in the video?
-One can find suitable properties by using online platforms like Zillow and Craigslist, focusing on 'For Sale By Owner' listings. The video suggests looking for properties with price cuts or those that have been on the market for a long time as potential candidates for owner financing deals.
What is the importance of pre-screening sellers when attempting to set up an owner financing deal?
-Pre-screening sellers is crucial to determine if they are willing to accept payments over time and if they have an existing mortgage on the property. It helps to ensure that the seller is a good fit for an owner financing arrangement and sets the stage for a successful deal.
Can you explain the 'creative offer formula' mentioned in the video?
-The 'creative offer formula' is a method to structure a deal where the buyer offers the full asking price to the seller but asks for a delayed down payment until closing. The buyer provides a small earnest money deposit and offers monthly payments based on half the rental comps in the area, with a plan for a balloon payment at the end of the agreed term.
What is the purpose of finding a 'tenant buyer' in the context of this real estate strategy?
-The purpose of finding a 'tenant buyer' is to create a situation where the buyer rents the property with an option to purchase, effectively covering the seller's payments and down payment while also providing the original buyer with a profit spread. This allows the original buyer to build capital and generate passive income without significant upfront investment.
How does the video suggest getting the earnest money deposit back after making an offer on a property?
-The earnest money deposit can be returned to the buyer once the tenant buyer provides their down payment on the property. This creates a no-money-out-of-pocket scenario for the original buyer, as the tenant buyer effectively covers the initial earnest money deposit.
Outlines
🏘️ Introduction to Buying Rental Properties with Limited Funds
In this introductory paragraph, Jamelle Gibbs outlines a strategy for purchasing rental properties even without significant funds. The speaker emphasizes that wholesaling real estate, while profitable, does not create long-term wealth due to its transactional nature. The proposed alternative involves owner financing, which allows bypassing traditional banks and negotiating directly with property owners. This method is presented as a way to secure properties with minimal upfront investment, thus enabling passive income and long-term wealth creation.
🔍 Finding Properties for Owner Financing
The speaker provides a step-by-step guide on how to find properties suitable for owner financing, using Zillow as an example. They explain the importance of looking for properties listed 'by owner' and focusing on those with price cuts or that have been on the market for an extended period. The aim is to identify motivated sellers who may be more open to owner financing deals. The method is described as cost-effective, requiring no financial investment but time and effort to search for potential properties.
📞 Contacting Property Owners and Assessing Their Interest
After identifying potential properties, the speaker discusses the process of contacting property owners directly using platforms like Zillow and Craigslist. They highlight the importance of assessing the property's condition and the seller's willingness to consider owner financing. The speaker also shares a personal script for reaching out to sellers, focusing on the benefits of owner financing for both parties and aiming to pique the seller's interest in a potential deal.
📝 Pre-Screening Sellers for Owner Financing Eligibility
The paragraph delves into the pre-screening process for sellers to determine their eligibility for owner financing. It involves understanding whether the seller has an existing mortgage and their openness to receiving payments over time. The speaker advises on the use of simplified language to make sellers feel comfortable and shares resources like a property information sheet and a seller script review video to assist viewers in this process.
📑 Structuring the Creative Offer and Agreement
This paragraph outlines the process of making an offer to the seller using a 'creative offer formula'. The offer typically involves paying close to the asking price with a delayed down payment, a small earnest money deposit, and monthly payments based on half the rental comps in the area. The speaker also discusses the use of a standard purchase and sale agreement along with a seller financing addendum to formalize the deal, emphasizing the importance of using language that encourages seller comfort and agreement.
👨👩👧👦 Finding Tenant Buyers and Securing the Deal
The final paragraph focuses on finding tenant buyers for the property. The strategy involves advertising the property as an opportunity to buy with minimal down payment and no bank involvement, attracting buyers who are looking for such deals. The speaker explains how to structure the rent-to-own agreement with the tenant buyer, ensuring that the terms are favorable and result in profit for the property owner. The paragraph concludes with the speaker encouraging viewers to take action and apply the strategies discussed to achieve success in real estate investing.
📢 Conclusion and Call to Action
In the concluding paragraph, the speaker summarizes the process of buying a rental property with limited funds and reiterates the importance of taking action. They encourage viewers to like, subscribe, and turn on notifications for more educational content. The speaker also invites feedback and looks forward to engaging with the audience in future videos, emphasizing the value of continuous learning in real estate investment.
Mindmap
Keywords
💡Rental Property
💡Wholesaling Real Estate
💡Passive Income
💡Owner Financing
💡Creative Investing
💡For Sale By Owner (FSBO)
💡Earnest Money Deposit
💡Rental Comps
💡Balloon Payment
💡Tenant Buyer
Highlights
The video shares a strategy for buying rental properties with minimal money, even if you're broke.
Wholesaling real estate is a fast way to make money but doesn't build wealth as it requires continuous hustle.
Wealth is built through passive income, not from hustling for every deal like in wholesaling.
The presenter introduces a strategy combining upfront checks, monthly passive income, and back-end profits.
You can start with as little as $10 to $100, qualifying you to begin the process of buying rental properties.
Traditional methods of buying rental properties involve bank financing and large down payments, but there's an alternative.
Owner financing allows bypassing banks and using the property owner as the bank.
Owner financing benefits both the buyer and seller, providing tax benefits and passive income for the seller.
The video demonstrates how to find properties using Zillow, focusing on properties listed by owners.
Properties with price cuts and longer days on the market are ideal for this strategy.
The presenter shows how to contact property owners directly through Zillow and what message to send them.
The importance of pre-screening sellers to understand their willingness to take payments over time is discussed.
The presenter explains how to make an offer to the seller using a creative offer formula.
The strategy involves offering the full asking price but delaying the down payment until closing.
Finding tenant buyers who can take over the property and payments is crucial for the strategy's success.
The presenter outlines how to close the deal with the tenant buyer, making it a no-money-down deal for the original buyer.
The video concludes with the presenter encouraging viewers to take action and apply the strategies discussed.
Transcripts
in today's video i'm going to share with
you how you can buy your first rental
property
even if you're broke coming up
hey what's up everybody it's jamelle
gibbs welcome to another video
listen on this channel i teach a lot of
different investing strategies
one of them being wholesaling real
estate and the reason why i teach
wholesaling real estate
is primarily because it truly is one of
the fastest ways
to make money in real estate but the
problem with wholesaling real estate is
you're only as good as your last deal
what do i mean by that
well with wholesaling you have to
continue to hustle
in order to find the next check and it
doesn't pay you
over and over and over again which means
if you decide to ever leave the business
go on vacation or you know just
put a pause to your business for quite
some time guess what
you're not going to make any money using
that investment strategy and that's
exactly why i tell people
that wholesaling is a means to an end
yes you can make a lot of money with
wholesaling you can get
rich when you're wholesaling houses but
you never become
wealthy wholesaling houses wealth is
built
when you don't actually have to work for
the money and you receive money every
single month
passively without your personal efforts
or very little
of your personal efforts with
wholesaling you have to continue
hustling in order to make money in
essence it's a high paying job
for yourself so what i want to show you
today is
a simple strategy that you can start
using today
which i feel is just as easy as
wholesaling houses
the difference is you can make some
money up front you can make some money
every month
and you can make some money on the back
end as well
so essentially what you're doing is
you're creating a model where you can
get
wholesale like checks up front you can
get the benefits of owning rental
properties
by collecting passive income every
single month
and you can make huge profits on the
back end
as if you were rehabbing houses so
really you get the best
of all worlds and that's exactly what i
want to show you
today and the great thing about what i'm
going to show you is you don't need a
lot of money
to get started you could have anywhere
between 10
and 100 dollars in your pocket right now
and you qualify at that point
to do exactly what i'm going to show you
today so
if you're looking for that way to build
real wealth
and real estate by owning rental
properties
and you're looking to get your first
rental property going right now
this is the video for you also if you've
been in a business
and you're using traditional ways to buy
rental properties
keep watching this video because i'm
going to reveal something to you
that's going to open your eyes to
another world of real estate investing
where you don't need the money when you
don't need
the credit and you can still reap the
benefits
of owning rental properties so let's go
ahead
and jump right in okay so the first
thing i want to talk about is how it's
even possible
to buy rental properties even if you
were in a position where you didn't have
a lot of money
or you don't have the credit to be able
to do it because
typically the average person who's
looking to buy a rental property
what they're looking to do is go to a
bank to be able to get financing
and then they also think that they need
large down payments in order to be able
to do this as well
so i'm here to dispute all of that and
change your thought process
on how this actually works so the way
you're going to be able to do this
is through a method called owner
financing and just to keep it simple
owner financing is basically
a method that allows you to bypass the
banks to go straight to the owner of the
property
and use them as the bank on the property
so rather than going to the bank
to get a loan or get financed you're
simply going to go to the owner
of the property and have them finance
the property for you
and there's a lot of benefits to doing
this you don't have to run your credit
you don't have to fill out stacks and
stacks of paper with a mortgage company
you don't need a lot of money to do this
so it really doesn't matter
what your personal situation is because
you're going to use the house
the asset to be able to create the deal
through something called owner financing
and this benefits the seller as well
they get tax benefits for doing this
they also
get a monthly passive income on a
property that they no longer own
so there's a lot of benefits to using
this strategy both for
you and the seller creating a true
win-win situation
when you're working your real estate
investing business
now as i've mentioned before you can get
started using this strategy even if you
had as little as a hundred dollars
in your pocket right now but stay with
me until the very end
because even if you put down that
hundred dollars i'm gonna share with you
how to get that hundred dollars back
so you can truly be into the property
with no money
out of pocket keep watching until the
very end so let's go ahead and jump into
step number one
all right so step number one is to find
the properties
and the beautiful part about what i'm
going to show you today is you don't
have to spend a dime
to be able to find these types of deals
the reason for that is because
you're not always looking for the
wholesale like
deals and when we say wholesale like
deals we're talking about the deeply
discounted properties
when you're using owner financing you
can literally
pay top dollar for these properties it
doesn't matter what the condition is
it doesn't matter what the price is if
the owner is financing this property for
you
and you can create a cash flow on this
property and the numbers make sense
then guess what you can buy as many of
these properties as possible
and one way to find these properties is
by using zillow
you could also use craigslist using the
same exact method so i'm gonna show you
exactly how to do that right now let's
go ahead to zillow.com
all right so what we're gonna do is go
to zillow.com
so we're gonna type that into the search
bar and once we get to zillow.com what
we're gonna do is select the city
that we're interested in investing in so
one of the cities that i invest in
is greensboro north carolina so i'm
going to go ahead
and select that now once i select
greensboro north carolina you'll notice
a for sale tab
up in the navigation bar up at the top
so i'm going to go ahead and select that
for sale tab then what i'm going to do
is
select this drop down menu right next to
the for sale tab and when i select that
drop down menu what i want to do is make
sure
that the only thing that's selected is
by owner
and the reason for that is because i'm
looking to work directly with the seller
of the property yes i can find these
deals through agents i could find them
through other means as well i can focus
on foreclosures and things like that
but for the purposes of what we're
focusing on
right now i only want to focus on
working with
private owners so i'm going to make sure
that that's selected
and i'm going to go down to the bottom
and click on done now once i click on
done
i'm going to ignore price i'm going to
ignore beds and baths because this stuff
doesn't matter
i can use this method in any price range
any beds and baths
and also on any type of property as well
but what i am going to do is go ahead
and select more
once i select more what i want to do is
scroll all the way down to the bottom
to where it says days on market and i
want to make sure that that says
any there's a couple of reasons for that
and i'm going to explain what that is in
just a moment
after that i'm going to go ahead and
click on done now the reason why
i want to leave the days on market alone
and i want to do a broad search which is
why i didn't select the price range
beds and baths or home type it's
primarily because
i can buy any type of property using
this method i can buy land
i can buy residential real estate i can
buy commercial real estate
any type of real estate that's available
can fall under the owner finance
category
so that's why i'm looking for pretty
much anything that makes sense
but for the purposes of this particular
video
what we're focusing on is buying your
first residential
rental property so that's exactly what
we're going to focus on
now if you notice some of the labels on
some of these properties
one says price cut and one says days on
market
what we're looking for are the
properties that have these types of
labels
i'm looking for the properties with the
price cuts and i'm looking for
the longest days on market so you can
see that this particular property had a
price cut on december 18th
by 2601 dollars and this particular
property has been on the market for 755
days
but as you can see these two properties
are
land and that's not what i'm looking for
in this particular video what we're
looking for are
residential properties that you can rent
out
to tenants and be able to collect the
monthly cash flow on
so let's see if we can scroll down a
little bit and find some you can see
there's a lot of land here
just scrolling down and what i'm looking
for primarily is a ranch
style home because in this particular
investment area i do very well
with ranches now obviously we buy
colonials and things like that as well
but when it comes to rental properties
ranch style homes
work best for us you got to find out
what rents well
in your area and then stick to that type
of property
because it'll be a lot easier to offset
that property on the back end
so i'm just looking for some properties
here and i notice a couple here so
here's one
on sedgefield lane okay it's been on the
market for 17 hours and what i'm gonna
do is contact
this particular seller and here's
another one they had a price cut
on december 21st you can see for fifteen
hundred dollars so chances are
this person might be interested as well
and i may
also contact this one let's look at the
conditions of some of these properties
and then we'll take it from there so
let's look at the one on
sedgefield first usually i like to focus
on
the longer days on market type of
properties so if it's been on the market
for a while those are the types of homes
that i'm looking for i'm just looking at
the pictures
this looks like a rehab type of property
an investor bought property so someone
actually purchased this house
they rehabbed it and now they're looking
to sell the property so this is probably
not going to be
a good fit for what i'm looking to do
let's go over to the next property so
the next one here
is in greensboro as well
again this has been on the market for a
little while had a price cut
about a month ago and that price cut was
for fifteen hundred dollars and if
i'm scrolling down a little bit notice
the pictures okay
uh this house needs some work all right
so this is
a thumbs up for me again not taking the
condition of the property into account
i really don't care about the condition
of the property because i'm never going
to put a dime of rehab money into this
if i were to sell this on the other end
which which is something that we'll talk
about
later on in this video i'm selling this
property
or renting this property as is it's
going to be the tenant
buyer's responsibility to go ahead and
bring this property
up to par that's typically how i usually
do
these types of deals so if the property
is in excellent shape
or it's in terrible shape it doesn't
matter as long as i can make a deal like
this
happen you can see the uh flooring needs
work
the house is dated you know just looking
through the pictures here
house is definitely out of date this
master bath
needs some work as well uh you can see
another bedroom
there's the garage the good thing
there's a two car garage
right there uh this kitchen is old
and outdated so this is something i'm
definitely
interested in looking into and that's
exactly what i plan on doing
so i'm interested in contacting these
owners the good thing about
zillow is you have access to the
property owner's information
just like you would on craigslist as
well so what i'm going to do is go ahead
and find the property owner's
information
once i find their information i'm going
to share with you the message
that i'm going to send to them in order
to get them to contact me back
so being that i have an interest in this
particular property
i'm gonna go ahead and contact the
seller direct
the beautiful thing about using zillow
and craigslist
and for sale by owner and sites like
that is you can contact the sellers
direct all right how do you do that so
in the side panel on the right hand side
of the page if you scroll all the way
down to the bottom
and you keep going you'll notice where
it says contact
agent chances are somewhere around this
vicinity you'll notice it says listing
provided by
owner okay and there's the owner's phone
number so i can
take this phone number and text the
property owner or i can simply click on
this button that says contact
agent and contact them there
i'm going to do both personally i want
the seller to see my text message
and i want them to see an email from me
as well so i'm just going to scroll up a
little bit
i'm gonna deselect this i want financing
information
tab i'm gonna type in my name here
i'm gonna type in my office phone number
and email address
and it says i'm interested in this
property in greensboro north carolina
i'm just going to paste
another two paragraphs there which will
allow the seller to see what my
intentions are
when i'm contacting them so let me just
share with you what that says
says i'm interested in your property in
greensboro north carolina
my wife and i are looking to purchase
another property in the area and wanted
to see if you may be interested
in taking payments on this property if i
paid
close to full price and then it says if
so
when can we speak now i'm i'm truly
interested in this property so i am
going to go ahead and click on contact
agent and hopefully i'll hear back from
them shortly
and as you can see this pop-up came up
so is this your first
time buying a home i'm going to click on
no they're basically looking for more
information so i'm just going to x out
of that
but i did contact the seller as you saw
and hopefully
i'll get a return call from the seller
so i can gather more information
from this seller as well let's go ahead
and x out of this box here
and then as you can see here's another
one i was interested in
let's take a look at this one as well so
we've been on zillow for
literally less than five minutes and we
found three
solid properties one of them didn't fit
the criteria
one did now let's see what this one is
looking like now this one is a pretty
clean property as well
not much to look at in terms of uh
pictures
let me just see what they're working
with here just looking
no they don't really have a lot of
pictures on this particular one
but it is a for sale by owner not a lot
of information on it
but what i'll do is i'll go ahead and
contact
this particular seller as well in fact
as i'm scrolling down here
there's an email address that i can use
to contact the
property owner says that they did some
work on the property
this is an out-of-state phone number
which tells me that this is probably
an absentee owned property it says that
this is the property owner's
phone number so again i'm going to go
ahead and
text this property owner and i'm also
going to click here
so i can get in contact with the
property owner as well
i'm going to type in my name
i'm going to type in my telephone number
the email address and you can see the
property address right there and it's
going to paste
that little paragraph and i'm going to
go ahead and click on contact
owner and there you have it the message
was sent
and hopefully we'll hear back from the
seller shortly so that's how you use
zillow.com in order to start finding
these deals
you can see it cost me absolutely
nothing but
about five minutes of my time if you do
a little bit of this every single day
there's no way that you're not going to
be able to make offers and create some
type of deals
using this particular site so as you can
see there's a lot of properties
available online you can do this right
from the comfort of your own home
right from your laptop to start finding
your first rental property
right now and you can also use sites
like craigslist for sale by owner
and other sites to do this as well in
fact an even easier way to get this done
is by using my investor deal pro
software what it does is it scrapes the
entire internet
craigslist and other sites to be able to
pull those leads into the software so
you never have to leave the software
you can contact these sellers in one
spot be sure to check that out
in the description box below now once
the seller contacts you
back step number two is to go ahead and
pre-screen the sellers
so how do you do that well an easy way
for you to pre-screen the sellers is to
use my property information sheet
that i'm going to link right up at the
top for you i created a video on this a
little while back
where i actually went through the entire
seller script
and i reviewed it and showed you exactly
what you needed to ask the sellers
in order to create any type of deal
whether it be a wholesale deal or
a creative deal just like the one we're
discussing in this video
but just to give you a general idea of
the type of questions that you need to
ask
in order to create a creative owner
finance
type of deal what you want to do is find
out two things
if there's a mortgage on a property and
also if the seller is willing to take
payment over time now another thing you
want to keep in mind is how you present
this
to the seller i wouldn't mention the
words owner financing
to the seller instead you can say take
payments
over time would you take payments over
time
i also wouldn't ask the seller if they
have an existing mortgage on a property
instead you can say are you currently
making payments
on the property so as you can see how
you word things
can either make or break the deal the
seller can easily throw up their
defenses if you ask them personal
questions like
is there a mortgage on a property or
would you consider doing owner
financing so instead of using key
phrases like that
use simplified phrases that will allow
the seller to feel comfortable
when they're talking to you again rather
than saying
will you take owner financing say will
you consider taking payments
over time and rather than saying is
there a mortgage on the property
simply ask are you currently making
payments on the property and that will
tell you
if they are making payments obviously
they have a mortgage
if they're not making payments then
guess what chances are
there isn't a mortgage on a property or
they're just backed up because they
simply stop making payments either way
you can create some type of deal out of
that situation so those are two key
things that you want to keep in mind
when it comes to screening the sellers
again be sure to check out my property
information sheet
and my seller script review video up at
the top now if you're enjoying this
video up to this point do me a favor be
sure to rock that like button below
and also share this video with all your
friends that might be interested in
purchasing their first
rental property but might be limited on
capital now let's go ahead into step
number three
all right so now that you have a
property for sale and you've also
pre-screened the seller
your next steps are to make an offer to
the seller
and get your agreement authorized now
when it comes to making your offer to
the seller what you're going to do is
use my creative
offer formula and i'm going to go ahead
and link a video up at the top that i've
put together
which shows you in full detail how that
creative offer formula
actually works now just to give you a
general idea of what the creative offer
formula is all about
it allows you to pay close to asking
price if not full asking price
to the seller it also discusses the
deposit amount
and the down payment amount that you're
going to provide to the seller
the monthly payments as well as the
amortization
to the seller now let's break this down
a little bit so when we're talking about
the actual
price to the seller let's just say a
seller is asking a hundred thousand
dollars
for a property and they want let's say
five thousand dollars
down what we're going to do is offer the
seller 100 000
and 5 000 down but we're going to ask
the seller
to delay the down payment until the
closing
occurs and remember that hundred dollars
that i told you about
earlier in this video what you're gonna
do is take that
100 and provide that as an earnest money
deposit
to the seller solidifying your agreement
between you
and the seller making your contract
valid
now just because you negotiated a
hundred dollars with the seller doesn't
mean you can't put down less
you could put down anywhere between one
dollar and 100
and still make a deal happen so if you
have
very little capital right now this is
the strategy that can work for you
no matter what your financial situation
is once you negotiate your price
as well as your earnest money deposit
and your down payment with the seller
what you're going to do is find out what
the rental comps are in
the area and in that video above i show
you exactly
how to do that and whatever the rental
comp's coming at you're going to slash
that in half
and offer that as a monthly payment to
the seller and as far as amortization is
concerned
you're never going to mention the word
amortization to the seller instead
you're going to use the word
payment so let me give you an example of
how this actually looks let's just say
that you have a property where the
seller is asking a hundred thousand
dollars
for the house you're gonna offer the
seller one hundred thousand dollars
and let's just say that they want five
thousand dollars down you're gonna offer
them
the five thousand dollars down but
you're gonna ask them to delay the down
payment
until the closing occurs and in exchange
for them delaying the down payment
you're going to give them a 100
earnest money deposit and again i'm
going to show you how to get that
earnest money deposit back
so you can be into this deal with no
money out of pocket even the down
payment is not going to come out of your
bear with me i'm going to explain it to
you in just a moment now in addition to
the price
and the earnest money deposit as well as
a down payment
that's a part of this deal what you're
going to do is offer the seller
half of whatever the rent two comps are
in the area so let's just say for this
particular
fictitious property that we're talking
about the rent
will come in at about a thousand dollars
per month
then what you're going to do is offer
the seller 500
a month and rather than mentioning the
word amortization
you're going to ask the seller if
they're willing to allow you to make 120
payments to them
and on 121st payment you'll pay the
property off
through what's called a balloon payment
or in other words a lump sum of money
to the seller up front and again that
money is not going to come out of your
pocket either
and i'm going to explain how in the next
step now when it comes to
the agreements that you're going to sign
with the seller
what you're going to do is sign what's
called a standard purchase and sell
agreement so any type of standard
purchase and sale agreement will do for
this type of deal
and in addition to that you're going to
sign a seller financing
addendum with the seller okay and these
two agreements will be put together
and combined as one agreement
and the cool thing about using a
standard purchase and sale agreement
is it usually will have a section in
there which will allow you to spell out
the terms
of your seller financing deal with the
seller
and if that doesn't cover it the seller
financing addendum
will cover it for you and i'll provide a
copy of these for you
in the description box below so be sure
to check that out now finally there's a
couple of things that i want you to keep
in mind
when it comes to getting your agreements
signed by the seller you never want to
use the words
sign or contract with a seller
okay those are red flag words if you use
the word
sign and contract the seller feels like
their back
is up against the wall so rather than
using the word sign
and contract use words like authorize
and agreement you see how that will
allow the seller to drop their guards
hey mr seller do you mind authorizing
this agreement
rather than hey mr seller can you sign
this contract so the words you use
and the way you talk to the seller is
really the key
to getting these types of deals done and
making the seller feel comfortable
while you're doing these types of deals
so again make your offer
get your agreement signed by the seller
make sure you talk to them in a way that
they're gonna feel comfortable
with the situation and then you can move
on to step number four
all right so step number four is to go
ahead and find your end
tenant buyer for the property now notice
i said tenant buyer
and the reason for that is because when
you're brand new what you're looking to
do is build
capital while creating passive income in
your real estate business
so by you finding a tenant buyer for the
property
what you're in essence doing is allowing
yourself to collect some money up front
collect some money every month and
collect some back end profits
and guess what the tenant will be the
one taking care of
your down payment the tenant will be the
one
taking care of your monthly payment and
the tenant will be the one
paying for the property on the back end
leaving you with a spread
on the property allowing you to make a
lot of money
on this type of property so how do you
go out and you
find these tenant buyers well it's
really easy
one strategy that we use in our business
is posting ads
on craigslist notice what this ad says
it says
quickly buy a house with no bank
involved
and very little down now you think
somebody's going to call on that type of
ad
absolutely quickly buy a house with no
banks involved
and very little down everybody's looking
to buy a house quickly what you're doing
is providing a solution for this type of
buyer
you're allowing them to purchase a
property without having to go to the
banks
and guess what if they don't have a lot
of money to put down
or they don't have the ability to pay
cash for a property
they can take a portion of the property
price
and put that amount down as well now one
thing i want to point out is notice i
said
very little down i never gave them an
actual amount
to put down the reason for that is
you're looking for the buyer
who has the ability to make the monthly
payments and put the most
down on the property so when a buyer
contacts you
and they say how much do you want down
your very next question is going to be
how much do you have to put down and
guess what the person with the most
money to put down
is going to be your buyer now generally
speaking you're looking for at least 10
down on this type of deal and that 10
will allow you to make
your down payment to the seller and in
addition to that
if your rental comps come in at let's
say a thousand dollars a month
you can actually increase the amount of
the monthly payment that
the buyer is going to have to make so
generally i like to increase that amount
by 10 or 20 percent and i'm selling the
property on at least with an option to
purchase
aka a rent to own now one thing that we
do
with these types of deals is we sell
these properties
as is so you never have to come out of
your pockets
for rehab capital either so keep that in
mind
now finally when it comes to the rent to
own exit strategy
typically what we'll do is we'll make
the buyer's terms
shorter than our terms what do i mean by
that
well if i have a 10-year payment plan
with the seller
i'm giving a buyer five years so
remember we talked about that 120
payments
and then having that balloon payment or
that lump sum payment
on 121st payment guess what that money
is never coming out of my pocket
because what i'm gonna do is go ahead
and offer the buyer
60 payments and then the buyer has to
pay me off on the 61st
payment making this a true no money down
deal
the buyer took care of my down payment
the buyer is paying off the house
and the buyer is going to pay off the
balloon payment allowing me
to make a huge profit on the back end as
well
so you've found the property you've
screened the seller you've made an offer
you found a tenant buyer
for the property finally you have to
close the deal
and the buyer is going to fund the
entire process
for you so in essence what you've done
is created a no money down deal
you've bought yourself a rental property
that will allow you to create
passive income for yourself every month
for
several years you made some money up
front you make some money
every month and you make some money on
the back end and like i said remember
that 100
earnest money deposit that you had to
put up in order to make all of this
happen
that money comes back to you once the
buyer
gives you the down payment on the
property so that's how you can go ahead
and buy your first rental property even
if you're broke
i've given you a five-step process in
order to make this happen
now it's up to you to get out there and
take action
in order to get the results that you
want that's the only way you're going to
go from where you are right now
to where you want to go in real estate
it's by taking massive action
in order to get results listen
go ahead and like this video subscribe
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on this channel i hope you like this
video be sure to leave a comment let me
know what you thought about this video
and i'm looking forward to seeing you
guys on the next one peace
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