You may have seen the real estate guru advertisements for books, DVDs, programs, seminars, and mentoring coaches promoting no-money-down deals. Perhaps you have watched the infomercials on TV with people telling their stories of how they made millions investing in real estate with no-money-down and cash back to the buyers.
Maybe you, like us and many others, have purchased books or expensive systems based on these no-money-down and lease-option investing schemes. Here's the rest of the story.
Perhaps you have seen an ad in your local newspaper offering a home with 100% financing from the seller or a lease option. You should know that the investor offering these types of deals makes money by purchasing the property at a discount and selling the property for an inflated price.
Lease-option real estate investors play the odds. They bet that most people would not be in a position to purchase the lease-option home in a year. So the investor seeks a hopeful tenant to make higher than average rental payments, pay more move-in cash, and make the investor's mortgage payment. Those tenants who do eventually purchase the home paid much more for the home than the investor. Many tenants never come up with a new mortgage loan to purchase the property when the time runs out. Either way, the real estate investor makes money.
First-Time Home Buyers: If you need to buy your first home to live in, these home-purchase methods may help you if you have terrible credit and can clean it up in time to finalize the purchase in a year. Just understand that you are paying too much for the property and may not make any money on appreciation. On the other hand, if you have strong credit, you can purchase a bargain house with no money down legitimately.
Tips for Beginning Real Estate Investments: Do not buy overpriced property! Avoid 100% investor-financed deals. You will have to wait too long to make any money. Plus, the rental income most likely would not come close to making the mortgage payment for you.
Do not waste your money buying real estate guru books, DVDs, programs, seminars and mentor-coach promoting no-money-down deals. Would you buy a book on how to make a fortune on the Internet that was written in 1995?
These out-of-date, no-money down schemes, tell you to look for home sellers in distress who will let you buy their home for no-money down with the seller financing the property for you. This system worked last century. Today home sellers know that they can get a buyer who can get their own financing.
Further, today home sellers know that other sellers have lost money selling with no-money down. They've heard the stories where home sellers did not get paid and had to foreclose on a property. They've heard the stories where the investor-buyer rented the house to tenants who trashed the property. They have heard the stories where the investor-buyer collected the rent and did not pay the home seller.
To get started building wealth in real estate today: Get your credit ready for mortgage financing. You would appreciate that mortgage credit differs from consumer credit. Buy right. Don't overpay for deals that sound too good to be true; as these schemes are too good to be true!
Guard your money. Do not get yourself in over your head with high mortgages on rental properties that cause you negative cash flow and jeopardize your financial well-being. The best way to do this is to make sure you get the best mortgage rates on a bargain-priced property. You can buy investment property for little or even no-money down. Get started by buying your home or a second home. Real estate investing offers you the most tried and tested way to build wealth; as long as you avoid investing schemes.