Episode 19 How To Buy A House With 0 Money Down

Hello, hello, hello. Welcome to the New and Experienced Investor Podcast, the show that helps connect real estate investors from all walks of life. I'm one of your hosts, Alex Barnett. I'm the new guy.

And I guess that leaves me as being the experienced guy. My name is Joe Homs.

Yes, and today we're going to be discussing how to buy a house for $0 down. They said it couldn't be done. We're going to discuss creative finance and how to help sellers and make a profit at the same time. And at the very end, we're going to be giving away a free dialer, um, so make sure you stick around for that. If you guys are new or experienced, free dialers, you know, It's just how you get these leads. It's how you get these deals. So you're gonna want to stick around till the end. Um, before we start, please take a moment, share this video, share the live stream. We are live right now, so I'll be checking in, and if you guys are commenting, I'll see it and I'll put it up on the screen. If you have any questions, we can answer them live. That's why we're doing this, and we want to get more people in here to talk about and find out how to buy a house with $0 down. So where should we start?

At the beginning, I guess. Okay, it's like, how do we get this lead?

Yeah, okay, so we're gonna be discussing an actual property that we put under contract yesterday and opened escrow about 2 hours ago. Um, this lead came from texting. We like texting, we love texting. It sort of warms up the person, the seller, the prospect, whatever you want to call them, a little bit. It makes them a little bit warmer because you're, you know, you're texting them. The only downside that I found out to texting is that it takes a little bit more, um, what would you say, leads per contract. So right now the average with cold calling is about 30 leads per contract, and the average with texting is about 50 per contract. And the reason is, um, you're not gonna ask you that. Okay, well, that's good. That's a great question, Joe. Yeah, the reason is, the reason is, you know, people are— it's more of a chance for people to kind of mess around with you. Um, if you get people on the phone and let's say you have a lead manager that's cold calling, or, you know, a VA that's cold calling, um, they're having a conversation with them. So chances are by the time they send it over It's like an actual lead, and with texting, you know, people can say like, "Oh, I'm interested," and then by the time it gets pushed over, they're like, "Ha! I just wanted to get you on the phone to tell you to stop messing with me." Okay, got it. Yeah, got it. So, but we like it because the real leads that are you know sent over are actually you know pretty warm.

Mm-hmm.

So, yeah. So we pulled this from a. Tired landlords randomly was in a tired landlords list, but he wasn't a landlord.

No, he wasn't. Yeah, owner occupied.

Yeah, owner occupied. So I don't know how it got in there, but thank you.

Computer made a mistake.

Computer made a mistake.

Because it wasn't you. No, I know.

I would never make a mistake.

No, not at all.

So, um, we— and on the text, the guy just said, hey, I've been trying— I'm trying to call you regarding And then the address. And I was like, okay, let's find out. Give him a call and he says, all right, let me kind of just tell you what's going on with my property.

I like it when they start out like that. Love it when they do. I love that. I love that. Let me tell you what's going on.

Exactly. I'm like, okay, yeah, lay it on me. Um, he was in pre-foreclosure about a year ago and he went to a company or maybe a nonprofit, we still don't know yet, that basically gave him a bridge loan, a hard money loan, to cover his arrears and pretty much cover everything, give him a new loan, but it's for 12 months. And now the balloon is coming up in October.

And it was very expensive.

It was very expensive.

Expensive for him. And it was a year of him not making any payments because they built those Uh, payments into the loan itself. And here we are, yeah, you know, a month and a half away before he possibly gets foreclosed again.

Yeah. And so he's just said, you know, I'm ready, I'm ready to— we're ready to move. You know, I guess that year gives them a chance to sort of let it sink in that maybe they're not gonna—

It took a year? Come on, Alex. Wow, it took him a year.

This is their family home.

No, this is how he lives his life.

Yeah, probably. And, um, and so yeah, he said, I just want the— I just want the mortgage covered, and we just got a new solar system. So if I can get both of those paid off, you know, I don't— I don't need anything in my pocket.

Why did he get a new solar system? What was— what's the reason there? I mean, obviously some solar guy came over and said, hey, you know, you want to buy a solar system for your house.

Yeah, he got swindled.

Yeah, he did.

With the promise of a $10,000 rebate and the new net something net. I don't know.

It's a net metering.

Net metering.

Yeah.

And then you basically get free utilities.

Nothing's free. Come on. Nothing's free. I know he's paying for somebody to put solar on his house. So instead of paying the electric company, he's paying them.

Yeah, yeah, yeah. And it's a 20-year loan, I think like 8% interest or something. So not the best, not the best deal, but nice. He got it put in and he says, you know, let's get all this debt wiped. And if you can do that, you know, then you guys can—

What's the, what's the loan on the, the, um, the bridge loan on the refi?

The bridge loan is $525,000.

Okay, but what's the, uh, percentage?

The percentage is 11%, we found out.

11%. Oh my God.

And he said, you know, they're, they're making— they're getting their— they're getting theirs. Because I was like, oh, that's nice that they have these programs out. And he was like, yeah, but they're, they're getting some money.

Sure they are. They're making money. Yeah. You know, and it's not a hardship on the seller because again, he's not paying anything monthly. It was built into the loan. You know, all his payments were built into the loan.

Yeah.

It was like, I think you told me it was like, what, $57,000 or $60,000 or somewhere around there that was built into To the original loan.

Yep.

So yeah, he's got a year basically of living rent-free, but—

Plus, yeah, loan origination, and there's a bunch of other fees.

Well, yeah, of course they made a lot of money.

Yeah, so it was a whole one page of fees.

Yeah, probably a lot of junk fees in there as well.

Yeah, some junk fees, yeah, processing fees as well.

Oh yeah, that's a junk fee. Yeah, it's a junk fee.

So there's a lot kind of riding on it, and it's coming down to the wire, and he just, you know, said, if you guys can help me out, this would be great. So we checked out the comps. It seemed to kind of, you know, make sense. It's on a golf course.

On the golf course?

Yeah.

Actually on it?

Yeah.

He's got, uh, holes in his windows to prove it?

Yeah.

From the golf balls?

Yeah.

Yeah.

Apparently, yeah. If you, if you shank it hard enough, it goes right into his bedroom. So, so I asked him, you know, and, and luckily, I mean, The one good thing about the solar is they did the inspection. And so apparently they wouldn't put solar on if your roof wasn't up, you know, 20 years.

Yeah.

Yeah. So we knew the roof was good.

Yeah.

He put a new AC in last year, so that's nice. And then everything else is pretty much, you know, just kind of standard original. And it was built early 2000s, so not terribly old. So I'm gonna go check it out on Saturday and hopefully everything checks out. But, um, yeah, so let's get to the zero, the zero down part.

Okay.

So, um, you know, I kind of went, went in to just do a cash deal, and Joe says, well, hold on a second, stop. What if we can get this balloon extended a couple months, a few months, and we just assume— or not assume, but purchase a property Subject to the existing mortgage, meaning we'll make the payments even though there aren't any payments to the lender, and then you know we can take over the solar payment, which I think is $140 a month. So we we track down the lender, which is actually like a private just two people private person private person yeah call her up then she says oh yeah if you're trying to sell you know like Yeah, Bob will give you some extra time if you need it, as long as he knows it's coming down the pipe.

She was very nice.

Yeah, very nice lady.

She gave you her email. She says, you want my fax too? I was like, oh God.

I was like, no, that's okay. She's like, oh no, the fax is— and then gave me the fax number. But super nice lady, and it was a lot different than dealing with the servicing companies.

Oh, it was like night and day. Yeah, we'll work with you, whatever you need. You know, those, those sellers are very nice people and we are nice too. So yeah, you know, we'll give you some time to sell it. We'll work with you.

Yeah, yeah, exactly. And, um, so, you know, essentially we can close on it and like you're not putting anything down.

Nothing. Zero, zero down. Yeah.

It's not that hard.

Last time I did a zero down deal, I was thinking about it earlier. Um, was literally about 30 years ago. Um, obviously the prices were different, but that's when I did. In fact, let's, let's go back 40 years. 'Cause my first property that I purchased was zero, zero down. It was a divorcee and she was in the middle of the divorce. She didn't want the property, was in her name. She put an ad in the paper. She said, take over my payments. And, you know, this was way before subject-to or any, anything like that. But back then you could actually take over the loans on properties. The banks had no problem doing that. You know, just like today, as long as they're getting paid what's owed to them monthly, they don't care that you do subject-to deals. They really don't. They're not going to call the loan due. That's very rare that they do that. In fact, in the 40 years I've been doing this, 40-plus, I've never heard of a bank uh, foreclosing on somebody that, um, did a subject-to deal, um, due to the due-on-sale clause. It just, it doesn't happen. I'm sure it happens, but I, I have not seen a case where it happens. If you've seen a case and you want to let us know down in the comments, that would be like appreciated so we can check it out and see what happened in that, in that case. But, um, yeah, so 40 years ago, ad in the paper, take over my payment. I went in, literally took over her payment. And owned the property after close of escrow. There was a tenant in place. Uh, I assume the tenant, um, they were not very clean. Let's just say that's a polite way of saying they were, um, filthy dirty. But anyways, um, the first thing he asked me is, you're going to raise the rent? And I go, well, um, this is the way I look at it. You got— you kind of made this mess. So I'm just going to leave the rent like it is. And then when you move out, I'll go in and I'll rehab it, fix it up. But for right now, no, I'm not going to raise the rent, but don't be calling me and saying, hey, this is broken. That's broken. Can you put new carpet? Can you paint? No, that's not going to happen. Okay. If you want that to happen, then yes, I'm going to raise the rent.

Right.

Okay. Again, 40 years ago, it was a lot easier to do back then than it is now. So, um, So anyway, that, that was, yeah, the first deal I bought. I forgot it was no money down, which, um, I still own today, which is amazing. Yeah, it is kind of crazy. Um, but yeah, so zero money down. Wow. Yeah. And so what, you know, we were discussing the exit plan on this. Why don't you let them know what the exit plan is?

Yeah, it seems to be that the comps You know, there was— there's one flipped property and then the rest were kind of still original, just cleaned up. So we're thinking we're not gonna have to do too much, but, uh, maybe go in, clean it up a little bit, and just relist it, you know? And then that's it. And that's— that's that. And find the next one.

Yeah, they're out there. You just have to find them.

Yeah, yeah. Um, I went to a meetup last night. They talked about another one where basically The lady was in pre-foreclosure, and they were able to tap into some of the like state funds, and and there's programs out there. And so basically, they got their their rears paid, and then they gave her three months extra on top of that. And so they got their rears paid three months extra, and so they were able to take over the property. She said, "I don't want it anymore." And so they got it $0 down.

Wow.

Yeah.

And so— Did they, did they have to pay the, the loan back to these people who did that for her?

No, no, it wasn't a loan. Yeah.

What was it like?

Uh, it's just a, it's like a grant program. A grant?

Okay.

Yeah, yeah, through the, through the state.

Wow.

Yeah.

Wow.

So that's something we could look into too. And I think California has one up to $80 grand.

So— Okay. You know, I was talking to somebody about a month ago And he was a real estate commercial broker. And we went over there to talk to him about buying his place that was in foreclosure. And he knew it. And he says, well, I'm just, you know, sick and tired of the bank and I don't want to pay them. And he mentioned that. He says, well, I can get $80,000 from California to get me out of this mess. And I'm thinking, who in the world is going to give you $80,000 with no strings attached?

Yeah.

Welcome to California.

Oh yeah, yeah, that's, that's that program.

That's crazy.

And then they'll give you, you know, if it's not 80, then they'll give you the 3 months extra just in case.

Now this house was in Irvine. It was a 4-bedroom condo. Remember, this is Irvine I'm talking about. It was worth $1.5 million, and I think he owed like $500,000 on it. So he had $1 million in equity. And I'm thinking, who in their right mind in this world would give you a loan For $80,000 to get you out of this mess with no strings attached.

Oh yeah.

To me, it was just like, that's crazy. Yeah, that's crazy. I told him, I said, you know, send me the details, please. I never got the details from him, but—

I gotta track that down.

Now that you, uh, hear about this, yeah, we got to do a little bit more investigating because, yeah, we, you know, we might fall behind or something. Yeah, we might need some extra grant money out there because Yeah, so the government wants to give you grant money. Yeah, I say take it.

And apparently when you, when you do that, it's like it's the relief fund. When you do that and it's in process, it stops the auction too.

Oh nice.

Yeah, so it's just another possibility. Yeah, especially anybody that's, um, fallen behind due to COVID and whatever the last couple years. So yeah, um, really quick, you guys, we see there's some people in here in live with us right now. If you guys have any questions, let us know. Shoot Share the stream with your friends, with any new or experienced investors. Let's get them on this train of buying houses $0 down. And one of the best parts is, you know, for this guy, we're coming in, he's got this on his back, you know, this huge debt there. The, the, the loan— whoever originated the loan made their money, everybody made their money, and now he's responsible for that.

Yeah.

You know, and so that's, that's a tough spot to be in. And so, um, you know, coming in and saying, you know, we're gonna pay off half a million dollars for you or more, it's, you know, it's a huge relief to them. And then they're basically just going to move out of state and start new, start fresh. So they're really excited.

Where— what state are they moving to?

They're going to San Antonio, Texas.

Okay. Yeah, I figured either Texas or Florida.

Yep. Yep.

So there seems to be the trend nowadays.

That is the trend. Yeah. And he's, he's gonna figure out— well, what's cool is he had another property in Pomona.

Um, you didn't tell me about this.

Yes. So this is a little sidebar.

It was— he still owns it?

Yeah, he still owns it, um, with his brother-in-law. It's an investment property. It's a big lot. They were gonna put 4 houses on it, but for the, you know, it blew up. And so now they're gonna try and sell it. Um, or, you know, do something with that. But with that money, he's going to be able to move to Texas. So yeah, he had like a whole thing planned out, which was okay, you know, which was nice. But, you know, then I was like, oh, tell me about that property.

Yeah.

And so that'll be, I guess, next on the list. We'll see.

Absolutely.

Yeah, we'll see what happens with that.

Yeah. So I don't necessarily like land, to tell you the truth.

No, I think it has one house on it currently. Yeah, it's just giant lot. Oh, and you could build something. Yeah, exactly. So they were gonna do like another— that, that's what the play was. But you know, if you get it deep enough, maybe it makes sense to wholesale it or something.

Yeah. Is it— do you know if there's a loan on the property, or—

I think they were trying to get a loan and then it fell through.

So imagine that. How come they didn't ask for the additional $80,000 on that one, right? I don't know. Free $80,000 from California, come get it.

Yeah, so there, you know, as long— once you start diving into the world of the creative finance, and it's been around for a while, that's what they say.

Yeah, I'm living proof it's been around for a while.

Um, that, you know, you can do, you can do a ton of, um, really creative deals, great things to just create a win-win-win all around. So, um, that's just— I don't know, it's pretty Pretty amazing, actually. Once you brought that up, I didn't even realize it once we kind of figured out the whole, you know, push the, push the balloon payment out.

I keep teaching you every day, don't I? It's like, you're like, oh yeah, it's like, hello, we just finished another one. We're in the process of evicting them. They've got about, uh, 20, 30 days left. The court gave them 40 days to get out, so maybe not.

No, they got 20. Less than that. What are we on?

Yeah, but anyways, yeah, okay. Um, yeah, maybe that was a subject-to deal as well.

Yep.

So yeah, we're, we're like moving forward with these subject-to deals. I, I love them.

Yeah, it's pretty nice. It usually starts with them saying, let me tell you what's going on, and then I'm like, oh yeah, yeah, because every other conversation is me having to pull teeth about, you know, what's kind of going on with the situation, but You know, it just, it all goes down to the list that you're pulling. Joe always says the pre-foreclosures are the low-hanging fruit because, you know, these people are motivated. They need your help. So that could be a great list if you're just starting out to pull and, you know, door knock, call, text all of them if you can and, you know, figure out what's going on and see how you can help them out.

Yeah, absolutely. Yeah. Yeah. So, and this is just literally one way to make money in real estate. There's so many different ways to make money, just absolutely different ways to make money.

Yeah.

Yeah. Just go out there, find your niche, and move forward with that. I, I was actually speaking to a guy who, um, wrote a request on BiggerPockets forums that he's looking for an investor Because he's buying mobile homes on land, which we have been doing for the last 2, 3 years, and flipping those. And his money source apparently dried up. I don't want to say dried up, I guess, because what happened, he got old, and then his daughter took over, and the daughter says, no, I'm not going to give you any more of my dad's money.

Hmm.

So he's looking for a money partner, and it so happened as we were talking on the phone, he goes, You know, I think we met before. And I looked him up and we actually met about 5 or 6 years ago.

Wow.

Through BiggerPockets.

Okay.

And we actually— he bought me a cup of coffee and we talked. Oh my gosh. And here we are, full circle. He's, he's back again. I'm gonna meet with him and find out exactly what he's doing. And if I can plug myself into that, that deal, then fine, then I will.

There you go. Heck yeah.

Yeah.

Okay.

So, I mean, there's 2 ways to make money in real estate and there's so many more. Yeah. You know, whatever, whatever works for you, please, please find that. And, uh, and reach out. I've pretty much done it all. So reach out if you need any help. Um, you can find our information at the end of the podcast here. Uh, reach out and talk to me or Alex and we'll get you moving forward.

We'll get you started. Um, one thing we did, or I did it, but you know, you're a part of this. Um, I, I basically compiled all the systems that we're using because everybody's always asking us, well, you know, what, what system are you texting with? What system are you calling with? How are you keeping all the leads together? You know, and that's through a CRM. Um, and so I compiled a list of all those and I put them in the description box. So if you guys are just starting out or you're looking for more organization to stay on top of these leads to follow up, you can, uh, you know, check that out down below. And if you use any of those links, it helps out the channel, so we would greatly appreciate it. Um, you know, and then that way—

Greatly.

Greatly appreciate it.

Greatly.

That way you guys can, you know, find these, these deals as well, you know. And if you need help structuring or anything, like, you know, like Joe said, reach out to him and, you know, he'll walk you through it because You've seen it all?

I've seen it all.

Okay, that's great. Um, so we'll keep you posted on sort of the updates with the few subject-to deals we have going. This one I feel will be a little bit quicker than, you know, having the tenants in there because they're ready to move out. So, um, that'll be nice. So we should have a, you know, a better update real soon. But, uh, oh, the free dialer.

A free dialer.

I forgot. Okay, if you guys want a free dialer, um, Batch Dialer is actually sponsoring the podcast. Thank you so much to them. And they're, um, giving us a special link that you guys can use to get 7 days free and 300 minutes. And what a dialer is, um, is basically you upload your list, so pre-foreclosures, use it, use it for free and get a deal. Um, Put some notice of defaults in there. And what it's gonna do is it's a multi-line dialer. So it's gonna dial 2 to 3 people at the same time. And then whoever picks up, that's who you talk to. And then it kind of keeps track of everything. And it's a lot better than just hand dialing, meaning like you're picking up your phone and you're just dialing. It keeps everything organized.

You wanna automate it.

Yeah, you wanna automate it as much as possible. And so they're giving us, they gave us this link that you can use. Um, to get 7 days free. And so that's— That's—

test it out. Yeah, you know, test it out.

You never know, you could get a lead. You could even get, you know, just some leads that you're gonna follow up with later. But, you know, turn it on, cancel it, boom. Uh, if you want, or if you still enjoy it, then obviously, you know, keep it going. But let us know how you guys enjoy that, if it works for you. If you need any more help, reach out. Book some time with us one-on-one. Um, anything else?

Uh, yes. Was there some other real estate news in your family recently?

Oh, I forgot. Yes, my wife Lauren Barnett, um, recently passed her real estate license, and so she's gonna be a part of the family brokerage over here. Yeah, that's super cool. Um, she, she studied hard and she passed it on her first time.

Yeah. Awesome. Yeah. Yeah. She might, she might, she was doing the fingerprints and all the rest of the stuff. So she might have her license by the time we sell this 0% property.

Yep.

So that'll be good training for her to list the property and I'll walk her through everything and, um, and go from there.

And dealing with buyers.

Yeah. If you're, if you're an agent out there and you're looking for a new brokerage, Um, look up PelleGo, P-E-L-L-E-G-O.com/agents, and you'll find out everything about PelleGo. And it's, uh, our fees are really simple, $85 a month. You keep 100% of your commission, and we charge a transaction fee of $850, and that includes your E&O insurance. So it's really, really simple. You get to keep a lot of your money. We're investor-focused. Uh, you know, I'm the broker, so you'll be dealing with me, and I can answer whatever questions you have out there and also train you how to do exactly what we're doing here.

Yeah, yeah, I can speak to that. Joe took me from living in a van down by the river to buying houses, $0.

So it was a nice van.

It was, it was a nice van, actually. It was a mid-'90s— we enjoyed it. It was a mid-'90s conversion van with 5 dudes in it traveling around, um, plucking strings and stuff. Uh, Julian jumped on. He said you guys are fire.

Thank you, Julian.

Yeah, appreciate it. Yeah, we miss you, bud. We miss you around the office. Yeah, hope you're doing well.

Yeah.

Um, hey, you guys, you know, jump on. Let's, let's get this a little bit more interactive. We're coming every week and, um, just Joe's dropping some knowledge and I'm adding some, you know, little chuckles here and there, but Um, but yeah, this has been a lot of fun. Uh, we have a monthly meetup Joe puts on. It's gonna be at BJ's over here in Laguna Niguel.

Laguna Hills.

Laguna Hills. And this next month we're talking about, um, the insurance crisis.

Yes.

What we're calling it.

Major crisis.

Major crisis. So if you don't know what that is, you're going to want to attend. And then also we have about 75 other investors, all walks, new and experienced investors that show up to this thing. And so you never know, you're gonna find you could find your next partner or your next deal or your next buyer if you're wholesaling.

So yeah. It's on the 28th. You can find it on meetup.com, Orange County Real Estate Investors Networking. So yeah, it's easy to find. So please, please attend if you're local in this area. If you're not, I have people coming from L.A., Riverside, San Bernardino. Yeah, they're coming from all over. It's, it's a big event. It's free. Yep, I should say that. It's free.

It's free.

But if you get there, if you could buy something to drink and eat, that would be awesome because that's how we end up paying for the place. If enough people buy something to eat or drink, then it's free for us and you. Yep. Um, and everybody else who attends. So please do that.

Awesome. Cool. Well, I think that's it, you guys. Once again, please share, subscribe, like, the whole thing. You guys know what to do, and we'll see you next week.

See you later. Bye. If you want some more advice on real estate investing, reach out to us one-on-one.