I’ve been looking into investing in multi-family/commercial real estate near Cincinnati. I was talking to an old friend of mine about the possibility of no-money-down purchases. He said one deal he has been successful with in the past is where the purchase contract stipulates that you pay a 10% balloon payment due in 2 years, and that serves as the down payment. Have you seen anything similar to this? It seems pretty hard to manage unless you have a young desperate seller. However I would like to know if such easy transactions exist for investors with little to no capital.
I would not call it an easy transaction. I have tried something like this about a year ago.
I had the seller carry a second lien and borrowed the first lien from a mortgage company. The mortgage company did not like that transaction at all. They wanted to see real money being used as a down payment. (They call it skin in the game)
Balloon payments were big in the 1980 when the saving and loans went broke and the government had to bail them out, because no one had saved the money when the balloon came due, thousands of people lost their homes. Just like now from all the ARM loans that are causing so many foreclosures now. What makes you think you will have a large amount of money 2 years from now when you don’t have it now. Look at all the easy transactions that people got 3-4 years ago with 0 down and no credit and look what happened. Stay away from anything with a balloon payment or a ARM loan.