Most Real Estate Professionals are often asked about closing costs. Many real estate investors are coached by the industry 'gurus', or various late night infomercials that you can buy properties for little or no money down. Many of you skeptics out there probably find it hard to believe, but you really can. However, it's not quite as easy as those infomercials would have you believe.

 

If there is one universal truth to real estate investing, it's that if you buy the property right (i.e. if you buy it cheap enough), your opportunities are great. As in my previous blogs and bulletins, Mortgage World, LLC has partnered with some awesone lenders and they will loan up to 65% ARV (after repair value). This means that your acquisition and repair funds should not exceed this much if you want 100% financing. But how do you get the closing costs financed?

 

If you are shrewd about it, you will factor the points, or all the closing costs, in any offer that you make. If you need less than the 65% ARV, you will be eligible for a seller's concession (or seller's assist). Here's how it works:

 

Let's say that we have a property appraised, and the ARV is $100,000. Since our lenders will loan up to 65% ARV, we would potentially loan up to $65,000. But if you buy the property cheap enough, you may not need that much. On this hypothetical property, suppose you have a purchase agreement for $50,000, and your repairs are $10,000. In this scenario, you would only need $60,000. This will give you, or your realtor, the chance to go back to the seller and ask them to bump up the sales price by enough to cover some (or all) of your closing expenses.

 

If you have the buying price changed from $50,000 to $55,000, and have the seller use the excess $5000 towards your closing costs, you will have financed those costs. Congratulations, you would now have bought the property for little or no money down. This is a great way to buy investment property! It's not always easy because banks often won't work with you on this, and you will need to be very disciplined in what you offer. Be prepared to have twenty offers turned down for every one that is accepted. But if you can deal with this, you are truly a real estate investor!