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“YOU Too Can Buy Real Estate -NOTHING DOWN! – Well Maybe NOT…”

By Sherman Ragland | August 5, 2007

As you know, if you have been to the websites for my company (WeGetThingsDone.com), or my coaching programs (ShermanRagland.com) I have been involved with real estate investing at just about every level for over 21 years.

Intially as an employee in the real estate land development group of a FORTUNE 500 company, then the largest privately owned developer of office buildings in downtown Washington, DC, and ultimately on my own for going on fourteen years now. In short, I’ve seen this before. That is, this phase of the real estate cycle where seemingly everyone is ready to throw in the towel and call it “game over” for real estate investing and real estate investors.

The truth of the matter is that this is exactly the phase of the cycle where YOU want to be BUYING – when foreclosures are reaching an all time high, mortgage money (for the general public) is getting very tight and/or very expensive and everyone else (seemingly) is selling, or sitting on the sidelines… This is Exactly When Creative Real Estate Investing Strategies are the key to acquiring assets “cheap”. The key to staying in the game is to have MORE THAN ONE STRATEGY for Buying and Holding.

Nor is this some shamless plug for getting yourself over to a Realinvestors Academy and learning the correct way’s to creatively invest in real estate…

No, that’s not really the topic of today’s post.

Today’s post is about just how interesting the topic of converstion has gotten around the Bar-B-Q’s and birthday parties <- Sherman don’t drink, therefore Sherman don’t do “cocktail parties”. Nevertheless, whether it is a Bar-B-Q, birthday party, or cocktail party, the conversation always tends to drift in the same direction…

Over the past five or so years, I would stand there laughing (to myself) as somehow I would become the arbitrator of the verbal fights that would break out between part-time investors and the truly un-initiated when the topic of “NOTHING DOWN” real estate investing would seem to always come up. The altercation would go something like this: …”Sherman, YOU need to set this guy (woman) straight – he (she) says that there is NO WAY that ‘Nothing Down’ real estate investing really works… and then the other side would speak: “…I don’t care what Ron LeGrand and Robert Allen say, No one can really buy a house, or at least a decent one coming to the table with ZERO MONEY – it is like professional wrestling, a COMPLETE AND UTTER SHAM!… and You Can’t look me in the eye and tell me that this thing really works…”

And, of course, I would not only look them dead in the eye, but then begin to share with them that not only are investors doing “Nothing Down” deals, but that there was SO MUCH CHEAP Mortgage (at the time) money sloshing around that many first time home buyers were not only getting NOTHING DOWN financing, but were actually walking away from the table with DEEDS and CASH BACK at the Closing Table – kinda like going to McDonalds and driving off with a BIG & TASTY, Fries, a Shake AND Getting Change Back!

Getting Cash Back at Closing

They would of course say, “Sherman, with all due respect (o.k. some had zero respect, they just said…) I DON’T BELIEVE YOU”, and I would then invite them to search the public record to confirm the six houses we sold in just the past year alone, where we had made over $80,000 per house in profit from a “quick” rehab and then sale to a first time home owner. Not bad, but not nearly as sweet as the deal for the home owners who were able to get either an 80/20/10 (a first mortgage for 80% of the purchase, a second for 20% of the purchase and a third for 10% of the purchase) or a straight-up 110% first time home owner (or in a couple of cases, investor) loan.

In other words, they were buying a house for $145,000 to $189,000, getting the deed and walking out with $5,000 to $10,000 after paying their share of the closing costs. A BETTER THAN CLASSIC Carlton Sheets style “NOTHING DOWN” DEAL!

Unfortunately, with the MELT DOWN of the Sub-Prime market, one of the big Losers is first time home buyers, WITH AND WITHOUT Low Credit Scores. Why??

Because one of the “Casualties” of the SUB-PRIME MELTDOWN is that ALL lenders have greatly scalled back, if not completely eliminated, their “NOTHING DOWN” loan programs, regardless of the person’s credit history. In fact, one of the big time group of “losers” are the folks who are in the marketplace right now looking for mortgage money to buy a home, as ALL LENDERS have tightened their lending criteria in reaction to the SUB-PRIME MELTDOWN. There is a silver lining on this cloud, however, as mortgage rates are probably heading down in the next several months, but this tidbit does you little good if you need the money to settle right now.

Even as I am writing this, my wife is helping me with my spelling (sorry they don’t teach you how to spell at the Wharton School) and telling me about an article she is reading on this very topic written by Dina ElBoghdady in today’s Sunday Washington Post – FRONT PAGE! The vibes are in the air…

So, next time I am asked to “Settle a NOTHING DOWN” argument at a birthday party or Bar-B-Q, I guess my answer will be: “YES, You are both Correct! Because of the Meltdown in the Sub-Prime Market, and its “Spill Over Effect” many first time home owners can no longer do ‘NOTHING DOWN’ deals, and therefore, the only people doing nothing down real estate are the trained real estate investors…”

Bad, maybe, for first time homebuyers but tomorrow I’ll share with you who it is “GOOD FOR”.

Thanks for reading – God Bless,

-Sherman

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