How I Bought This House For $0
I’m proud to say that this property…was free. It cost me $0. I was able to buy an income generating property…in Los Angeles…for nothing. Here’s how – enjoy! Add me on Instagram: GPStephan
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24 months ago, I began looking for an income property around the mid-city area of Los Angeles. I liked this area in particular because it was close to nearby transit, surrounded by several large new developments, it was only a 15 minute drive away from the beach…and most importantly, it was one of the few areas in Los Angeles where property prices were still selling under $1 million dollars.
After 6 months of searching, writing offers, getting out bid, and otherwise not finding a single opportunity – the perfect spot came up. And the price? Listed for…$585,000.
So I made them an immediate offer: I’ll pay full price, guaranteed to close…under the condition, that the owner accepts it immediately.
I bought it for $585,000…I put $150,000 as a down payment, and I got a loan for $438,000 to cover the rest.
Then, I spent another 2 months, and roughly $80,000 fixing it up. This meant, when I was finished, I had invested a total of 2 months worth of time, and $230,000 into a property.
So I went to the bank, and I told them I wanted to do what’s called a REFINANCE. This is when the bank will give you a new loan on the property, based on the CURRENT value of what it’s worth – NOT what you paid for it.
And the market value was very favorable to me…an appraiser determined the market value of my property, for a remodeled 1920’s Spanish duplex, was now $780,000, just shortly after I bought it.
So given the new value, the bank is able to give me a mortgage of up to $585,000, and give me back $145,000 in cash.
My current mortgage is $438,000
The bank’s NEW loan is $585,000
The new loan pays off the old one, and that leaves us with $145,000 left over after paying some transaction fees.
That was in 2017. NOW…I can do it again. I went from bank, to bank, to bank…to get a quote on a new mortgage. I was able to get at 3.75% fixed rate mortgage for 30 years, on a cash out refinance. The bank appraised it for $965,000. And given the new $965,000 value, I was allowed a $675,000 mortgage – leaving 30% worth of equity still in the property.
That meant…after all was said and done…not only do I have $290,000 worth of equity in the property…but I now SAVE an extra $200 per month on my mortgage interest payments, and I got back ALL of the $230,000 I invested, leaving a total out of pocket cost, to buy this property, of $0
Like I said, the first refinance got me back $145,000…and the second got me back $85,000. That was everything I had invested in this property…and it’s basically free real estate.
In real estate, your ideal situation is that you can control 100% of an income-generating asset…by having as LITTLE of your own money invested in it, as well. This gives you the opportunity to INVEST your money in other, higher generating opportunities – than keeping your money tied up in an asset where it isn’t actively working for you.
This is the name of the game in real estate…it’s to find a good deal, put your money in, make it work for you, refinance your money back out, keep the property…then go and use that money to do it again. And it’s by doing that, over and over and over again, that you can soon build up an empire of real estate, for free, by just…smashing the like button.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
A trick I used when buying my first home was I buying it from my landlord. Because I was renting it and already in the home I had the leverage to offer about $25,000 less than market value because I knew he wouldn’t have to pay realtor fees nor deal with a vacant house for potentially months if he put the house on the market. I had to play hardball but ended up with $20,000 under market value.
Very smart! And as a landlord, it makes it so much easier to sell it to a tenant who’s already familiar with the home.
Were you living in a duplex or a single family?
@Tiffany Onwudinanti single family.
Did u not know u paid too much.. lol
Max Maher I’m hoping to do the same thing. Out of everything Graham said in the video, the most important part to me was when he talked about his offer to get the house. He offered no hassle purchase (Meet Kevin talked about this too in a way with a direct to owner check and if he walked away the owner keeps the money). But you gotta really know how to read a building for value (and I don’t 😂 not yet anyway)
I’m in a 4 apartment building with a store front in NYC so it might be hard but I prob go for it. Plus the owner owns the building outright so he could be the bank if he wants.
For him he knows he gets an immediate deal, and I get an affordable building (well for NYC anyway).
Take notes. Most scammers would charge thousands of dollars in course fees for this info and Graham is giving it out for free.
I just charge….
One like on the video
@Graham Stephan yes but you do have a real estate course too so yeah…..
Nothing is free.
Jay Tree oH yEA mAn iM sUrE
Me too. I make money not barrow it..
I like the idea but to explain this to those who don’t understand.
This isn’t a net income situation, it’s purchasing a property at lower than market value, then refinancing for a bigger loan from the bank (possibly lower interest) and now using that property as collateral. This allows you to get back out the inital down payments/costs invested into that property.
Do it only if you understand what you’re going to do with the difference, otherwise you’re better off just paying down your loan for most nonreal estate people.
Very well said. This makes sense because I can reinvest into other areas at a higher return than I borrow for 30 years! If the money did nothing, or I’d spend it on cars and penthouse apartments…then it wouldn’t work.
Sorry if I’m misunderstanding, but even with the better interest rate aren’t you still going to end up paying the bank more money over the life of the loan by refinancing for the higher amount? or is that just an accepted loss because the money will be used in better places elsewhere?
@Corbin agreed.. thats a problem they dont care about.. according to him he made money.
@Jay Tree well no I dont see that as a problem. Thats a valid strategy, accepting losses when money can be reallocated towards something that will yield greater results. Ultimately he got his return investment, probably pays a minute amount more per month and has a nice property that is generating money, so yes he did make money. My comment was more me looking for clarification
@Corbin clarify how oweing 600k is making money?
how i started a business with 0$ :
1. started a business with 600k
2. business made me about 10k a month
3. after 5 years it paid itself and now my business costs 0$
I got a chuckle with that one… :o)
That’s how I felt watching this video.
Alaeddine Bensalem 420 blaze m
this is legit the problem with rich peoples idea of having no money. they see 0 dollars as the moment after they invest into a business. not actually having 0 to work with.
funkydiscoduck u sound broke af
Nice! We had a similar situation with an 8 unit apartment we bought 2 years ago. The property desperately needed rehab throughout the units. We bought it for $250k and had to put in $125k for rehab… BUT… we bought the property at $0 down with owner financing which meant that we didn’t have to use a bank financing or an outside lender. We have the entire breakdown of this in our video: https://www.youtube.com/watch?v=zoRrOwPbSaw
I feel like all of this should have been taught in school! And I love that you put the numbers on the screen because I’m such a visual learner👏🏾 Definitely subscribing!
mibellanote many things need to be learned in life not expecting schools to teach us everything
Punchi Games reading and writing are important don’t underestimate education- the fact that many don’t care when in schools is not a school problem it is a societal issue
Punchi Games stop being a victim- you were taught to read and write and do math last time I checked that was important- come on
@jakemf1 only elementary school
@POTATO History in HS, Advanced math in HS, many schools also have economics
Hi Graham, could you also make a video about what you did when you were just starting out, how did you able to come up with your first down payment fund for your very first real estate investment? I’m on my way to that, but I am dealing with my doubts and uncertainty as well. It would be really cool to know that you have experience it too or how was your experience on that moment. Thank you Graham you’re the best, you are one of the few genuine youtubers I have ever known. Love your content!
Love all your videos Graham thanks you so much for teaching us your secret in real estate. I wish i found you two years ago and i would of been better off. I flipped my first house last year and working on my own house right now. After watch a bunch of your videos the past week it has motivated me to the next level anything is possible. I smashed that like button for all the videos i watched and of course i subscribed. I have a question How do you protect all your properties from tenants suing you? Since we can’t borrow money from the bank under an LLC. Brandon from bigger pocket did a video on LLC he did touch base on this. Will you please do a video how we can protect our assets with out an LLC b/c the bank don’t let us borrow money under LLC. I know they let us borrow money but the interest rate is a lot higher. Thank you so much and keep up the awesome work is life changing for me god bless.
I’ve been binging your videos and personally its been great! Your explanation was clear and easy to understand from a completely non-business point of view! Keep up the great work!
Graham, This video does make sense and congrats on that sick play. I still have some questions about details though. What was the initial loan interest% of the mortgage? With Refinancing, you may be getting lower interest % but you are taking out bigger loans. How does that compare vs not refinancing?
He really just explained why Cash Out Refinance is a good strategy when property values are increasing. Normally I’d ask him why not just sell the property outright, but if this is a rental he can’t do that. So instead of letting that money sit in the property and do nothing, he took it out and can invest in other things. His only risk is that instead of selling outright, he takes the refinance, the property value declines, and he’s left underwater on his loan.
Which is almost guaranteed to happen in the coming recession. Reckless really, because he would know that given the uncertainty lead to a better interest rate.
@Dr. Benjamin Bird it’s LA, that won’t happen
This is the reason why you should always work with an agent who is local! And also goes to show you that you need a buyer agent who knows market value! Thanks for making this video, Graham! Love seeing fellow agents do great!
THIS IS GOLD. Well done Graham!!! This is exactly what I plan on doing, and as a real estate agent I see how you put all your inside knowledge to hard work. Only question is why didn’t you buy a dublex so you have 2 units to rent vs. 1?
This is a duplex.
Smart move, Graham. Thanks and you help us learn something about real estate investing with almost no money (as long as you have some money for the down pmt.) Kudos and more power to you.
Watching this video the whole time I kept thinking to myself how lucky he got. Then I remembered how long he waited and how much work he put in and realized he made his own luck.
Geez, imagine a monopoly game with this guy.
ahahah this is such an underrated comment
🤣🤣🤣
Why would you bother you’d lose in 4K
Lollll
Just thinking about it makes me feel like I already lost
Hi Graham
I’m from South Africa, I am starting to learn about real estate.
This was a great video!
I have a question, once you refinance the property, do you need to increase rent, to cover the new monthly costs from the new loan? Is this dependant on the amount of the new loan? Or am I missing something?
Thank you so much. You arr truly inspiring. I am learning a lot from watching your videos than when i took my real estate classes years back. God bless. Please keep up the great work on helping others like us through your awesome videos. ❤
Graham I just wanted to let you know that I’ve been watching you for years and you motivated me to finally start my YouTube channel. I kept telling myself that I don’t have time and I finally stopped making excuses and I started. Thank you for the motivation and keep up the good work.
Thanks Graham for always showing detailed steps and visuals to see each action step. I really appreciate you. Just discovered you a month ago and catching up on all your videos. I work near San Bernardino so you when you shared that was your first investment home I thought how cool- you’re doing this in California- I can too!