How to Buy Commercial Property with No Money

Did you know you can own a commercial property with no money? Sounds crazy, right? Well, as difficult as it may look, you can get that dream commercial property with little to nothing in your pocket.

Before diving in to look at how to buy commercial property with no money, it is worth noting that this is not that business you will wake up one morning, go out and come back in the evening with a done deal. There are a few important things you should note in your mind and do to make it real. If you are still with me, follow me to the end as I show you the process.

Things to Keep in Mind as You Look for Opportunities

• Employ Creative Thinking

Before you begin working on acquiring a commercial property, it is necessary to think out of the box. The best deals you can find are not always from what you get in the books but from those you get when thinking creatively. Connect more with people in real estate.

• Think About Getting the Property Without Any Money

It might be easier to acquire commercial property when you have cash. If you find yourself competing for a particular Real estate deal with individuals with money, you may think about finding money first. That competition will always exist in the business world. However, remember the angle you are working from. You are the business owner with a plan and a purpose. You have what it takes to get the job done.

Acquiring commercial real estate without any money is possible if you use your creativity. First, you could look for private lenders interested in supporting your venture. You can also search for joint venture partners who can help with the purchase price. Additionally, you might be able to lease the property with an option to buy. It would allow you to make payments on the property over time and eventually own it outright.

Of course, acquiring commercial real estate without any money is not always easy. However, if you are willing to put in the work and be creative, it is possible; to keep your eyes open for opportunities and be prepared to act quickly when you find them. With a little effort, you could be the proud owner of commercial real estate property in no time

• Connect

Connection is a core element in the world of business. You have no money, but you have time: Investors have money but have no time. As said earlier, for an investor to put their money into a deal, it must be good. It means you have to work hard to secure an investor’s money. Take every chance you meet with brokers, business partners, and stakeholders in real estate to connect with them. Read between the lines, and you will get leads to the best deals in the market.

• Do Not Settle For Less

The best deals in the market will always attract several parties. Since you have little or no money, you may feel underprivileged. However, do not relent in your ambitions if it is an excellent deal. Think like you already have it and work on ways to succeed with acquiring that property.

Strategies to Buy a Commercial Property with No Money

You can use a variety of creative financing techniques to purchase a property with no down payment. Let’s look into methods that may be available to you.

Get a Real Estate License

A real estate license might seem of little importance for buying a commercial property. However, it is crucial as a new investor to first get your real estate license before embarking on any business.

A real estate license might seem like an obvious solution, but it’s not always as simple as getting your license and then buying a property. In order to get a real estate license, you’ll need to complete a certain amount of training and pass an exam. Once you have your license, you can work with a broker to find properties that fit your investment criteria. You may be able to find a no-money-down deal by working with the seller to structure the transaction in a way that suits both of your needs.

Lease with Option to Buy

Some people refer to lease-to-purchase deals as rent-to-own. If you find a vacant property somewhere, this is the best strategy you can use to own that property without using your money. This option benefits the Seller as much as it will be necessary to you.

In the lease period, you can get a chance to test whether the property is profitable. If the building is unworthy of its price or located in the wrong location, you can quit the deal or negotiate with the Seller to lower the purchase price.

To benefit from this strategy, the Seller has to agree to give you the green light to formalize an agreement. In the agreement, you have to state that a portion or all of your lease payments will be applied to the purchase price. Here is an ideal process of rent-to-own:

1. Decide on a reasonable monthly rent rate as you would do on a regular lease. This includes any tenant improvements.
2. Negotiate with the Seller the rent percentage that will be applied to the purchase price. Also, negotiate on purchase options and the purchase price when that time comes.

• Finally, set the timeline for the lease period and the time to exercise a purchase option. Typically, this time comes between 3 to 7 years.

Once you formalize an agreement to have the property, you can go ahead with occupying the vacant property and putting up your own business. This way, you can make rent-to-own payments from the operating income. Alternatively, you can sublease the space to some tenants. Then you will get rent fees from the tenants and use them to make your rent-to-own payments.

Depending on the negotiation with the Seller, you will reach a purchase option and close on the property. This time, you will not need to worry about making a large down payment to execute the purchase, as then you will have built equity in the property from the payments to the purchase price.

Can You Abort the Deal When the Lease Period Elapses?

Well, you may decide to drop your bid to buy the property after the window you decided to buy the property ends. The time you agree to lease the property before buying is just a lease. If the property’s returns or worth is below your expectation, you can decide not to buy the property. You will not need to pay any fees since you have been paying rent-to-own payments.

Lease-to-purchase is one of the best strategies to buy a commercial property with no money. Apart from allowing you to use the rental income for the tenants or operational income, you get to learn about the potential of the entire property. You can also decrease your overall risk exposure.

Subject-to Deals

You may consider this option if you want to own a commercial property with no money. If you are an opportunist, you can probably land a better deal by finding a property owner who can no longer maintain or raise the expenses of owning their property. Usually, these deals come as an impromptu decision by property owners who may need relief from financial distress when they risk defaulting on their mortgage.

Buying a site subject-to to an existing mortgage means that you also own the expenses that come with the property. Besides, to use this strategy to own a property, you will have to find a property owner who really wants to walk out due to the circumstances at hand.

If you decide to acquire this property, ensure you check with the lender and thoroughly read through the loan document to ensure that the loan can be assumed. Otherwise, if the loan document indicates that the loan is not assumable, the note will be called once the deed transfer between you and the Seller is complete putting both of you in the wrong position.

Besides, you need to remember that not all properties you can acquire this way. For instance, those properties with a due-on-sale clause included in the loan documents will mean the property cannot be acquired by subject-to deals.

If you are not sure about the rules, you can employ a real estate attorney to help you in reviewing the existing loan documents and let you understand fully the kind of financing you will assume.

Request Seller Financing

Most people believe that only a bank or some specific credit institution offers loans to purchase commercial properties. Getting loans from such institutions is usually stressful, with some conditions you may not meet, especially if you have no money. If you also have credit issues, traditional lenders might not finance you.

As said earlier, you need to be creative and work actively with real estate professionals to get an opportunity to buy real estate with no money. Seller financing is an excellent option for people with issues with the traditional lender, as the sellers will not perform credit checks or extensive background checks like traditional lenders do.

It is worth noting that despite acquiring a property with zero cash in your pocket, you may have to pay higher interest rates than the average market rates. Similarly, the Seller may need you to sell the property on a hire purchase terms to be comfortable with no down payment. However, some sellers use this way as means of marketing their properties.

As sure as this may look, you can decide to request seller financing. This way, once you agree to buy the property, the Seller carries its debt. Then you have to make a monthly loan payment to the Seller instead of making it to the bank. The best part is that most of these sellers may not need a down payment.

As time goes by, you will establish equity in the property. At this time, you will be in a position to refinance the property on your own. Most projects with seller financing have 5 to 7 years balloon. In other words, after this time, you will need to refinance the property and pay the loan in full.

This time allows you to establish equity, which will keep you from making a down payment to the traditional lender with cash from your pocket. If you have built enough, you can refinance the property before the balloon to help you find better terms with the traditional lender.

Let the Seller Pay Your Down Payment

This is our final and one of the most creative strategies for buying commercial property with no money. However, you need creativity at its best and to be more careful while approaching a seller who will pay your down payment.

One of the tips you will need here is to be upfront with the lender to let them know the process of paying the down payment. Some lenders may not buy into your idea that the Seller is the one paying the down payment instead of the buyer. However, if you have a strong pre-existing bond with the lender, they will be willing to work with you.

On the other hand, you will also need to convince the Seller to accept to pay the down payment for you. Show your Seller the process is beneficial to them. Since you need to own a commercial property with no money, you may need to incentivize the Seller by raising the overall purchase price, which will also end up profiting the Seller more. Maintain transparency with all parties to avoid throwing yourself in a legal bind.

You can be a commercial real estate investor or own a commercial property with no money in your pockets. Yes, you can use other people’s money to make a fortune. Practice and work hard to gain experience in real estate to be a trustworthy commercial operator. Find good deals, and investors will be welcoming and ready to invest in your deals.