How to Buy a House Without Paying

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By ampersand
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Buy a House Without Paying

Most people save up a down payment, apply for a mortgage, and spend at least thirty years of their life paying for a place to live. If you think a little more creatively, you don't have to pay anything at all.

Difficulty: Moderate

Instructions

Things You'll Need:

Duplex or fourplex
Investor
Confidence
Good work ethic

Step 1

Find a local investor. This person will be your partner in this venture. She'll supply the money; you supply work and management skills. You can find an investor by visiting a local real estate investment association group or advertising for one in the newspaper or your local pennysaver.

Your ad might run something like this: Looking for an investor to partner with on a profitable local real estate deal.

Take calls and set up interviews to make sure both parties are clear on their responsibilities (see following steps) in the deal. It might be a good idea to draw up a document stating these responsibilities (and rewards) explicitly and have both parties sign and date copies.
Step 2

With your investment partner, locate a duplex or fourplex that would cash flow. That means that the rents coming in from the property are higher than the monthly mortgage payments (plus insurance and taxes) would be.

In order to get that kind of a deal, you might need to be prepared to put a lot of sweat equity into the property: painting, flooring, cleaning--whatever work is needed to get the rents high enough. Since your partner is providing the money, the manual labor should come mainly from you to keep costs as low as possible.

The real trick is that you want to discount one of the units. So with a duplex, one unit should bring in enough rent to cover the mortgage payments. With a fourplex, three of the units should cover the costs. That's because you'll be living in one of the units, and you don't want to pay anything to buy your house.
Step 3

When you purchase the house, both your name and the investor's name should be on the mortgage. This will allow you to have an FHA mortgage on the property if you qualify, which can be a benefit.

You live in one of the units and act as property manager. The investor can pay you a fee for this, or can count the cost of the unit as recompense. You essentially live there for free, and every month someone else pays down your mortgage.

The investor gets to write off his costs in addition to getting tax benefits for depreciation of the property, management fees, etc.

This method of buying a house takes a bit of extra effort, but it's a win for everyone!