A Real Estate Broker’s Share

But a lot of people get tricked into thinking they have to deposit at least something whenever they buy real estate, even using a simple option purchase agreement.

That is a massive misconception. Huge! So in the next couple of minutes let me show you how ordinary people like you are confidently doing safe, no money down real estate investing even in today's economic environment. Some of them are successfully dong this on their own, although this is not easy. Many others are utilizing only their good credit and provable income yet getting real estate investments that are secure, high yielding and yet are practically turn-key.

Have you heard about the highly negotiable, so-called 'sandwich' lease option?

With it, you take over the house payments and equity of someone who can't keep those payments up, but not the house ownership, by linking a revocable option to purchase agreement with a lease agreement written in your favor. The option ties up the property before you buy it, but makes it possible for you to revoke it. Almost certainly you will have to make a promise to pay, or put money or a security down at the time you sign the agreement. But with these instruments in place you can back out when you want to with no recourse except losing anything you might have put down.

Now, most people seem to think they have to write a check or put down some cash to make these options legally valid. This is not correct. Because you and the seller can make a revocable option turn on a consideration of any sort that you both agree to. It can be money. But it could equally be a promise to pay, say, part of future rentals. Or something like a car or jewelry. Anything you both write into the option.

That promise to pay is attractive ... it basically means you put nothing down right now and will only make an agreed payment once the option is exercised. People are using these promise to pay clauses right now. This is pure no money down real estate investing with the security of commercial law and requiring zero cash.

Because it is so good, it is difficult to get this written into your option to purchase. Also, sellers generally must get rid of the property but with this option you are not taking over the ownership of the home. However, when you can agree on this option you scoop up all the benefits of no money down real estate investing.

There are several things to consider before trying to strike this agreement, however. And many first-time real estate investors gloss over them.

One, you must find out why the seller has not yet sold his house? Is there something wrong with the location or the physical condition of the house itself? Are city building or zoning regulations unhelpful? If there are problems with the house, will these make it difficult for you to keep up the payments you take over?

Next, do the numbers stack up? Most people thinking for the first time about no money down real estate investing concentrate on the fact that there is no money down. Don't overlook another fact --- you might lose money if the rental market is paying less than your payments. You might lose a ton of money! Here's an example of this. Say you take over mortgage payments of $1200 a month and rental market for the property only pays $1000 a month. You will be losing from Day One.

I don't mean to highlight the negatives that are present in this form of no money down real estate investing. So let me show you anther way to get into this business. This can even be turn-key.

If you have good credit (and it is easier to have good credit than you may realize) and make over $70,000 a year, it's possible to find a program where you can purchase real estate with 100 percent financing. Again this is pure no money down real estate investing. And to make it stress-free, you just need to find a program that will take care of the variables I've mentioned.

Ideally, that program would sell you a good looking, well designed property that could definitely be rented out. The home would be refurbished and meet (or even exceed) city building codes and standards. It might even be rented to a tenant backed by a government initiative such as Section Eight. The property would come with sufficient equity to get the bank loan and make certain your future profits. And it would give you a cash flow after moorage, insurance, tax and maintenance expenses.

Sound like a turn-key dream? There are no money down real estate investing programs that deliver exactly this.

So my advice is that you keep learning about no money down real estate investing, but that you raise your expectations and only consider joining turn-key programs that genuinely require no money down at the start, take care of many of the variables, and give you a reasonable return for relatively low outgoing costs over the life of your investment.

First and foremost...decide how you will pay for it! Do you have cash...or you will be looking for financing? If financing is in your plans...be sure to arrange for it ahead of time. Be sure to obtain a copy of your credit report and correct any mistakes...NOW! If you plan to live in the home as your primary residence, it will require a smaller down payment. But, if this is an investment...you should plan on at least 20% down. AND always have a pre-approval letter from your lender in hand when you make your offer! It will greatly help your agent negotiate the best possible price for you.

Then, when it's time to start house-hunting...look for a good Exclusive Buyer's Agent who will help you find the right property...and buy it at the best possible price. A few tips to consider when buying real estate:

- Look for a good neighborhood that will most likely increase in value. Be sure to drive through communities to see which ones would best fit your needs. It stands to reason that you wouldn't want to buy on the upper end of any neighborhood...so look for a smaller house in a nicer neighborhood.

- Have a game plan! Study the market -- and have your facts before making your offer to purchase. What is the median home price? Average days on the market? Comparables? -- Your agent can provide these for you. How many homes are owner-occupied? What about vacant properties? Foreclosures? Environmental issues such as high tension wires, noise, etc.

- Find out all you can about anything that could affect the home values in any given area. New road construction? Schools? Shopping? Hospitals?

- Before spending money on a home inspection, look the house over for yourself! Does the roof appear to be in good condition? What about the floors? Do they sag or look worn? Do the appliances need to be replaced? Do you notice any water and/or damage in the basement or crawl space? Are there any noticeable cracks in the brick or foundation wall? What is the age and condition of the HVAC units? Do the bathrooms need updating? What about paint?

- Remember that the seller is obligated by law to disclose any known problems...so be sure to take a close look at any and all disclosures relating to the property.

It's always wise to do your homework and investigate before buying real estate!

When preparing your offer...be sure to listen to your Exclusive Buyer's Agent. He/she will be able to give you good solid advice based on years of experience. Keep in mind:

- Make your best offer and present it with your pre-approval letter from the lender.

- Keeping the contingencies to a minimum can help you obtain a lower purchase price.

- Offering a decent earnest money deposit will help assure the seller that you are a serious buyer.

- If the home is in danger of foreclosure -- your best bet is to offer a quick closing. In this situation, the seller is interested in one thing...getting out of the house quickly...with as little damage to his credit as possible.

- It if is already a foreclosure -- make your best offer up front because you may be dealing with a multiple offer situation.

Please contact me with any questions you have about buying real estate in today's market.

Some of the most basic real estate terms to learn when initiating your first transaction are:

Realtor or Real Estate Agent

Realtors are those individuals who have registered with the National Association of Realtors. Both real estate agents and realtors work to help buyers to locate properties and for sellers to sell their properties.

APR

APR stands for Annual Percentage Rate and this is typically listed on your offer for a mortgage loan. Your APR is typically higher than your interest rate listed on your mortgage.

Seller Note

A seller note is a financing strategy in which the property owner self financing the sale of their property to a buyer. The terms of the self financed mortgage such as the interest rate, duration of the loan and the loan length are all determined between the buyer and the seller.

Assumable Mortgage

This type of mortgage is one in which the loan and payments can simply be transferred to another person, typically a buyer.

Appraisal

When purchasing a property, it is common for the lender to require an appraisal prior to agreeing to fund the loan. An appraisal uses features about the property as well as current comparable properties in the area to determine what the present market value of the home is. Appraisals are also often required when a home owner inquires into refinancing the mortgage or for a home equity loan.

Inspection

A home inspection is common in both residential and commercial properties and is sometimes required by the lender. A home inspection involves carefully examining all portions of the property, including the interior, the exterior and the land itself. Any issues will be reported to the buyer and the seller for remedy prior to closing. Some buyers will request that items be repaired prior to the closing, some will ask for financial renumeration in the amount estimated to repair the items found in the inspection and some buyers will cancel their offer if the inspection items are perceived to be too costly.

Closing Costs

Closing costs are one-time costs that the buyer and/or the seller will be responsible for when the closing takes place, transferring ownership of a property to another party. Closing costs are in addition to the down payment applied from the buyer and can include things such as property taxes prorated, mortgage interest prorated, insurance payments prorated, fees assessed by the title company, fees assessed by the real estate agents and other miscellaneous administration fees required to process the transaction. Closing costs range, but can typically be estimated from 2-4% of the purchase price of the property.

Earnest Money

Many sellers will require a good faith deposit called earnest money when a buyer makes an offer. These funds are held in an escrow account by the title company closing the transaction. And, it is typically applied towards the down payment.

Property Taxes

These are the taxes due annually for your property which are based upon the property value. They are typically due at the beginning of the year, although some municipalities require payments semi-annually. Some mortgage companies collect a portion of real estate taxes due each month to pay the annual real estate taxes on behalf of the property owner.