I am here to tell you that you CAN buy property,
regardless of any of the above.
In this day and age, there is absolutely NO reason
why anyone can’t own their own home. The strict days of
the 20%-down-excellent-credit-and-stable-well-paying-job loans
are over, replaced by no-down-payment-prior-bankruptcy-and-stated-income
With the wide array of today’s diverse lifestyles
comes an abundance of opportunities and programs created for each
and every possible situation. Businesses need to make money, and
the best way to open themselves up to a larger range of customers
is to offer services for the vast and varied circumstances of
Many lenders today offer little to no down payment
programs, poor credit leniencies and even no proof of employment
or salary requirements (in lender speak, it’s called “stated-income
programs” where you simply state your income to the lender
without having to prove it with pay stubs, W2’s, etc. This
is widely used by freelancers and consultants).
In addition to the countless programs offered
by lenders, there are now government grants and (often free) services
available for the low-income, low reserve home buyer as well as
plenty of programs for first time home buyers. Government programs
and many private loan programs also offer assistance for closing
costs (the costs required up front to pay for lender fees, escrow
& title charges, etc.), with some programs requiring the seller
to pay for most of them.
For a list of government grants, go to www.cfda.gov
(The Catalog of Federal Domestic Assistance) or www.firstgov.gov
(The US Government’s Official Web Portal). Click on “Benefits
& Grants” to get to their grants page.
“Ok, that’s great,” you’re
thinking, “but the real estate market is so inflated now,
even if I could qualify for a loan, how am I going to afford a
house in the neighborhood I want?”
Welcome to the wonderful world of foreclosures,
tax auctions and rehabs (otherwise known as fixer-uppers)! It
is a myth that all foreclosures and tax-defaulted properties are
in poor, run-down neighborhoods. One good thing about foreclosures
and tax-defaulted properties is their indiscrimination. They occur
in gang-ridden crack neighborhoods, middle class neighborhoods
and elite million dollar communities alike.
Another benefit is that they are generally much
cheaper than the lowest priced house in the same neighborhood.
We all know the difference between retail and wholesale. You could
go to the mall and buy a shirt for retail at $20 or you could
go to the garment district in the city and buy the same shirt
for wholesale at $10, or better yet, with the advent of the internet,
you could do all your wholesale shopping online in the comfort
of your pajamas.
The same is true for real estate. If you wouldn’t
spend that extra $10 dollars to buy a shirt at retail, why would
you spend an extra $10,000 (or usually more) to buy a house at
In the industry, houses that are listed on the
market are considered retail. Houses you find through foreclosures
and tax auctions are considered wholesale. These are discounted
houses, available at a low price for a quick sale, usually because
the Bank or County is seeking to simply make back the money they’ve
spent on it before (and after) the buyer defaulted. This equals
to huge savings for the educated buyer.
Rehabbing is buying houses that are a little less
than perfect and fixing them up, either to sell for a profit or
to keep as a residence. Some people enjoy the challenge of buying
a property that needs a complete overhaul (new roof, extensive
remodeling, structural fixes, etc.) while others prefer a “cosmetic
fixer,” a house which needs a little touch up paint here
and there, some flowers planted in the yard, maybe even a new
kitchen countertop, etc.
Cosmetic fixers are a fun and easy way to make
money. You get to do a little artistic handiwork (even if you’ve
never done it before) and make money at the same time. The quick
profits you yield can be rolled over into a bigger and better
house, you can repeat the process over and over again, working
your way up from a $50,000 house to a $500,000 house within a
few years – and the best part, it’s all tax-free!
Called a “1031 Exchange,” the gains
you receive from selling the house can be tax-deferred as long
as you continue to buy an equal or higher priced house with the
proceeds you make from the sale. Unlike a straight sale of a residence,
there are no occupancy requirements or live-in time restrictions
for a 1031 Exchange. For a residence, federal law states that
you must live in the home for 2 out of 5 years of ownership in
order to avoid capital gains tax. You may choose to live in it
for 2 years and bank the proceeds – yes, tax free! –
or you may choose to flip it and do a 1031 Exchange – yes,
If you’re sitting there scratching your
head, thinking all this sounds like too much work when all you
want is simply a house to call your own, chances are good you
can still find a great deal in the retail market as well.
If you are convinced, or even slightly convinced
that you just might be able to buy a home after all, here are
some steps for the average, traditional home buyer.