The Truth: How To Buy Real Estate With No Money and No Credit

What's up, you guys? It's Graham here. So, I used to joke that when I first started making YouTube videos, the most common question I would get is, “Hey Graham, can you teach me how to buy real estate with no money down, no credit?” Oh, and by the way, I'm 16 years old; teach me how to do this!

Well, I think it's appropriate that a year and a half later, I take the time to actually make a video addressing those questions with a serious response. Because deals can and do exist with no money down and no credit, although they usually come with a little bit of a twist.

So, let's answer and describe how someone can actually do this, regardless of how much money they have, and how people are able to put these deals together in the first place. We'll start this video off with the most common methods, and then we'll go into the more nuanced situations.

Now, just for some disclosure here, this is not typically something I would recommend or endorse. The thing is, in order to successfully pull this off, there is a significant amount of work involved, a significant amount of planning, and a significant amount of local real estate knowledge in order to correctly put the deal together.

So, with that said, with that out of the way, let's answer the question for entertainment purposes only.

So, number one: generally, when people mention that you can invest in real estate with no money down and no credit, usually they're referring to wholesaling. Now, this is slightly misleading because wholesaling isn't really like investing. If anything, it's really like an active job flipping contracts, just like you would getting a commission selling a car or getting a commission by selling real estate. It's really more of an active job than it really is investing.

But the way wholesaling works, in just a quick 60-second explanation, is that you find a distressed seller willing to sell their home under market value. Then, you, as the wholesaler, get that property under contract, but that contract is written so that you can assign it to somebody else. You then go and find somebody else to buy that property from you for more than what you have that property under contract for. You then go and assign that contract to somebody else for a higher price, and you get paid the difference.

As an example, let's say that you find a property that's worth $100,000, and the seller is willing to sell it to you for $75,000. You then get that property under an assignable contract. You go out and find someone else to pay an even higher price than what you're paying. Then, let's say you find somebody who's willing to pay eighty-five thousand dollars for that same property. You then go and assign and transfer that contract to somebody else, and you profit the difference between what that new person is paying and what you're buying the property for. In this case, that would be ten thousand dollars.

Love it or hate it, agree or disagree with it, this is the wholesaling business in a nutshell. So, this is potentially a way that you can buy real estate without using any of your own money and then flip it to someone else for a profit without needing any credit. But from the way I see it, this is far from passive. It requires a lot of upfront work to find their ideal.

Just keep in mind there can be a lot of sketchy people in this business simply because it's largely unregulated. So, do research on this at your own discretion. But I have to say this would probably be the most common technique that people use when they say that you can invest in real estate with no money down and no credit.

And I'll teach you exactly how to do it for one easy low payment of $997.

Now, the second way that people buy with no money down, and this is a lot more common, it's a lot more doable, and I think we're gonna see this happening a lot more over the next decade, and that, you guys, is seller financing. This is when the seller loans you their property, and instead of paying your mortgage to the bank, you're paying your mortgage directly to the seller.

As an example, let's say that I own a property. It's a hundred thousand dollars. You, as the buyer, maybe don't have the down payment, don't have the credit, can't get a loan from the bank, but you still want to buy it. I, as the seller, can go to you and say, “You know what? It's no problem. I will finance the deal for you. No down payment, no credit check. All I want is a 7% interest rate, and I want the full amount due within seven years. And you know what? If you don't pay, I will simply foreclose on you and get my property back.”

With this, you, as the buyer, get the property, and I, as the seller, get a relatively risk-free return on the value of the house. If you don't pay, the seller forecloses and gets the property back.

Now, obviously, that is a very simplified explanation just to prove a point, but realistically, most sellers will want to receive some sort of down payment or deposit to cover their risk in the event that you move in, immediately stop paying, you damage the property, and then it costs money to foreclose and get you out of there. But in certain situations, I've read about sellers financing the entire deal with no money down for credit-worthy buyers or buyers willing to put down collateral just as security against the loan. Or maybe just delusional sellers who simply don't care.

However, typically, this will only work with sellers who own the property outright, and who don't need the money, and who's okay with simply just collecting their money every single month.

Now, the upsides for the seller is that they can typically get a higher rate of return for the value of their property than if they just kept it. They're not responsible for any management or repairs on the property since technically they don't own it, and their entire investment is backed by the collateral and value of the property. So if the buyer doesn't keep up their end of the bargain and pay, the seller simply forecloses and gets their property back.

This is basically seller financing 101. However, the drawback here is that if it were that easy, everybody would be doing it. Finding a seller who's amenable to something like this is more of a unicorn of a deal. It's very difficult to find a seller who's in that position, who's willing to do it, and also where you and the seller are willing to work out terms that you both agree on.

But obviously, if you can find a seller who's willing to do this at terms that are beneficial to you and the seller, by all means, go for it. It could be a great way to buy a property with no money down.

Now, the third way to invest in real estate with no money down is to bring in a partner or investor. This is something I see happening quite a bit, and no joke, this happens every few weeks. Someone is willing to invest and give me money, sometimes up to hundreds of thousands of dollars, simply to go and invest in whatever I end up buying, which the answer to that is always no.

But, of course, it could be a very viable option for people to purchase property with no money down. Now, this is something you can typically do once you're more experienced in real estate. Someone else will come in with the money and finance the deal, and in exchange for that, you do all the work. You find the deal, renovate the deal, evaluate the deal, manage the deal in exchange for a percentage of the ownership. The other person simply just brings in the money, invests it passively, and that is it.

However, doing something like that comes with a lot of risks, and you better know what you're doing. Anytime someone gives you money, you better treat that money as if it's your own, if not even more carefully than how you would treat your own money. Because simply, it's someone else's. Partnerships alone could be extremely risky, and real estate is a business where you can easily lose money if you don't know what you're doing and don't know what you're getting into.

I would personally reserve this method for experienced real estate investors who simply are maxed out on what they can qualify for or maybe simply just have invested all of their money in real estate. Bringing on more partners allows them to continue expanding beyond what a bank is willing to do for them. I would absolutely never recommend someone ever doing this on a first deal, especially taking out money for partners or family or anything else like that. It's simply too risky. You can lose money, and it's just not worth it.

But I think in the right situations, where everything lines up, a partner can be a good option. The same also applies when borrowing money from friends or family. My advice on that is generally, in like 99% of situations, just stay away from that. It's not worth it. Don't get involved in that. Don't bring in family or friends with money, and just probably don't do that.

The fourth way to buy property with no money down kind of is what's called a lease option. Now, this is something I've been approached to do quite a bit that I've always turned down, but this would have been very advantageous to a buyer.

Now, lease options work like this: let's say that I have a home that's worth $100,000, and you want to buy it, but you don't have the money. So, I might say, “Hey buyer, the market value of my property for rent is $1,000 per month, but how about this? Pay me $1,200 per month, and you have the right to buy my property within 24 months for $110,000.”

Now, that extra two hundred dollars you pay me every single month above the base rent will be applied to the purchase price in the event you buy the property. So, this means that after 24 months of paying $200 per month extra, you have applied $4,800 towards the purchase price, meaning the final price of the property after 24 months will be $105,200.

Now, if you don't end up buying it, that's totally fine with me. You can walk away, and I, as the seller, just receive an extra two hundred dollars per month. Now, if you do end up buying it, that's totally fine. I get my price that we agreed on.

Now, this works especially well in an appreciating market, because basically, this is just an option contract to buy a property for a specified price with very little risk to the buyer. So, now, let's say it's two years later and the value of that property went up to $130,000. This means that you've essentially made about twenty thousand dollars in profit, and you will find a way to buy that deal, given that there's instant equity in that property. Or you can always renegotiate with the seller at that time, given the value is a lot higher for the seller to then buy you out of that deal.

Now, typically, these situations favor the buyer the most, because if the market goes down, the buyer simply walks away or tries to renegotiate the contract again with the seller at that time for a lower value. Finding sellers like this is not uncommon for sellers who don't need the money right away, who don't need to sell, or maybe just want a little bit of extra cash flow every single month.

Now, even better for you is if you can find a property that cash flows, allows subletting, and is in an appreciating market. But we all know, I mean, that's just a needle in a haystack deal. But I'm sure that deal will exist somewhere.

Now, I want to mention this because I've just discussed four ways that you can invest and buy real estate with no money down and no credit. But I do have to mention that these tactics are not easy to do. There is a reason why you don't see people doing this all the time. There's a lot of work involved, there's a lot of planning involved, and there's a lot of patience that goes into finding the right deal and finding a seller who's okay with this.

Combine this with often a seller who doesn't need the money right now, who owns the property outright and is agreeable to all of the terms that work with you. It's all doable, but by no means do I think this is the best option to chase after. Personally, I believe your time and resources are best spent earning money, saving as much as you can, living frugally, and simply having the patience to wait for the right deal to come up.

Doing that will open up the options that you have to choose from, and with that, the chances are that you will find a good deal. But for all of those that were curious and simply wanted to know, “How can you buy real estate with no money down and no credit?” That's how you do it. Now you know.

So, as always, you guys, thank you so much for watching. If you enjoy videos like this, make sure just to smash that like button. It does really make a difference on the channel, so just give that video a smash that like; it really does help. If you watched it all the way through already and you haven't subscribed, make sure to also smash that subscribe button and smash that notification bell, so it notifies you anytime I post a video.

Also, feel free to add me on Snapchat and Instagram; posts are pretty much daily. So, if you want to be a part of it there, feel free to add me there. And then finally, I have a private Facebook group in the description for anyone who's interested in real estate, real estate agents, investing, wholesaling, anything real estate. The link to that is in the description; feel free to add yourself to that.

Thank you again for watching, and until next time!