Buying Real Estate with Nothing Down

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When I think back to some of my real estate investments, the best deals often feel like those where I made significant money with none of my own.

When I started, I purchased a foreclosed property that the bank was selling for $89,000.  I offered $50,000 and picked it up for $52,000.  On closing, the bank gave me an extra $4,000 because it had been appraised higher than I was paying.  I received 100% of the financing plus an additional $4,000 in my pocket.  In 1988, with little money and three children at home, that was a fantastic deal.  After all expenses, the property also started cash flowing over $500 a month.  I felt wealthy.

It's more challenging to find those deals today.  But here is another way to buy real estate with nothing down.

It’s called a Vendor Take Back Loan or VTB.

Agents and most sellers hate these.  It’s the kind of deal where very little money, if any, changes hands.

Let’s say someone is offering to sell their duplex for $325,000.  They are retiring and want to spend 6 months a year in Florida and 6 months in Nova Scotia.  They have no mortgage on the property.

It might be accepted to offer $325,000 with a VTB at 6% interest only for 5 years.

The seller purchased the property for $125,000 many years ago. When sold, they would have a significant federal tax bill. However, with your deal, those payments can be spread out over the 5-year length of the mortgage, saving the seller taxes.

You would provide the seller with monthly cash flow, coveted in retirement. The sellers may want a shorter mortgage, say 3 years or less, but by doing so, they would be paying more capital gains taxes.

Often, 99% of sellers would likely say no to this deal.  But you must make 100 offers to get 1 to say yes.

I’ve made a number of these in my career.  In one case, I purchased a small office building with an attached beautiful house for $175,000.  The seller took back 100% of the mortgage.  I severed the property, selling one building for $135,000 and the other for $200,000.  It was a great deal, making me $160,000.

These opportunities are all out there if you are willing to do the work and are ok with hearing all the excuses and abuse thrown your way for asking for a VTB.  Never ask an agent if the seller will do one before making an offer.  They always say no.  Write up a firm offer with that in the conditions. Then, it is up to the seller only.  The longer on the market and the weaker the market, the more likely they will accept your offer.

So, take action and start writing offers.  It’s a lot of fun making money without using your own.

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