Lease Purchase 2

Lease Purchase 2

Tips on using leverage to buy real estate

Wednesday, August 02, 2000 By Robert J. Bruss

Not every property can be leveraged for nothing down. A few weeks ago, I was talking with a typical young couple. They want to buy a house for their growing family. Then I asked "How much down payment do you have?" The answer was "zero."

Yet they somehow manage to take fancy vacations to Hawaii, drive the latest $40,000 SUV and run up credit card bills. They are now renting a house they tell me they wouldn’t want to buy.

(Second in an eight-part series. See part 1)

In other words, they have their sights set on their ultimate dream home—for nothing down! Yes, it’s possible. But it is highly unlikely until they get their finances under control.

I hate to break the bad news, but not every property can be bought for nothing down. However, all you need is one! My suggestion is, for the first leveraged nothing down purchase, don’t attempt to buy a $1 million property. Be realistic. Stick to a lower price range.

As explained below, look for motivated sellers. Fixer-upper properties are top candidates. An excellent book to study for additional sources is "How to Buy Real Estate for At Least20% Below Market Value" (Reed Publishing Co., Alamo, Calif).

In that book is an example of a condemned house in a great neighborhood I bought for nothing down (it had big holes in the roof in the living room and front bedroom—I called them "open-air skylights") with the help of a 100% bank loan based on the bank’s appraisal of the fixed-up value of the home.

How to acquire your home or income property for nothing down

You’re probably saying "This is all fine and good, Bob. But where can I find a house, condo, or income property to buy for nothing down?"

The answer is it has never been easier to buy real estate for nothing down than it is today. Fannie Mae and Freddie Mac are begging homebuyers to take their 97% mortgages up to $252,700! You’ve seen their TV, newspaper and magazine ads! But you do need good income and good credit to qualify.

As we will see, there are also lots of other ways to use leverage to buy just about any type of real estate for nothing down. Thanks to rising mortgage interest rates, the home sales market is slowing down from its feverish pace of early 2000. That’s good. A slower real estate market will make high-leverage real estate purchases easier than they have been.

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