You will have more debt service. This is the natural course of 100% financing for an income property. The result could be a large loan payment that will eat away at your cash flow like a gorilla and require you to feed the property. That is, you could wind up digging into your pocket every month to make up the difference between cash you receive and cash you pay out.
If it’s the seller making you the loan (or secondary loan), ask yourself this: Why would the seller allow me to purchase this property without coughing up one penny of my own cash? Unless the seller has a slate loose, chances are that the price you end up paying for the property is inflated and the seller counts the financing as a wind fall.
Here’s my answer: There are plenty of places to find good deals. You can find jewels right in your own back yard or hometown. I’ve been investing in California and you might know what that market has been like. The prices have been very high and there is lots of regulation.
By investing your money in a real estate investment group! These groups are like a small mutual fund solely for rental properties. What does that mean? It means that if you are interested in having a property up for lease but don’t want to be a landlord, this group is the right solution for you.
Our third challenge make sure you have a clear plan for making money with your subject-to acquisition. This is an area that many new investors fail to plan. Are you going to rent out the property to cover the mortgage payments while you gain equity? Are you going to sell the property through a lease to own option? Are you planning to list the property for sale, and just wait for the right buyer, while you make the monthly payments out of pocket? While all of these are potential ways will make a profit, unless you’ve planned your profit making, you may overpay for a property, resulting in a loss. Plan your money-making strategy in advance, and you can make a wise buying decision.
The Burger king guy shows up with no helpers, but with two huge bags of sausage biscuits–we had to fend for ourselves to get coffee. He came by himself, because he had no assistants or site selectors working for him. He covered his seven states all by himself. He selected every site, wrote every contract, and did all the research himself. He had no big research facility and he didn’t pay much attention to demographics. Although his talk took about 45 minutes, it boiled down to this, “I go into Greenville, South Carolina, and look around for McDonalds. Then, I’d buy whatever is closest to them.” That was 15 years ago, but that is still their strategy today. They go and look for McDonald’s.