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Many real estate “gurus” offer insights into how to buy something with no money down – zero down deals. The only problem is that, in most real estate asset types, a zero down deal comes with so many problems that it’s almost impossible to make money with them. A zero down single-family home deal is traditionally one in a floodplain, next to a lead smelter and behind a sewage treatment plant. That’s because there is plentiful financing for single-family homes, so any decent deal can qualify for some type of traditional financing.

Zero down RV park deals are entirely different. They don’t have to be flawed. It’s just an industry standard that it’s hard to get financing on an RV park, so the sellers are very amenable to “creative” financing.

Here are the most common type of zero down RV park deals.

Traditional no money down deal

In this scenario, the buyer closes on the deal and the seller finances it 100% over a specified term. One reason that these deals happen so frequently is that most sellers prefer carrying paper to cash. The reason? Many are older and retired, and are solely seeking the maximum monthly income. If they sold for cash, they’d get maybe 2% in CDs. If they carry the paper, they’ll get 8% -- four times more per month. To get that type of return on a regular investment, they’d have to buy a risky bond – with no collateral versus the park with huge value.

Many sellers know from past experience that no bank will make a loan on an RV park. While this is not always true, their perception is that they’ll have to carry paper. As a result, the only negotiating point is just the down payment. If you really think about it, all a down payment is for is “security” in the event you screw the place up – so you can often get around the down payment simply by “bonding” with the seller.

Wrap note

Another zero down construction is called a “wrap note”. In this format, the seller allows you to assume his first lien note, and then he “wraps” the property with a second note, leaving your cash down at zero. So, at closing, you end up with a first and second lien on the property – but nothing out of pocket.

These notes are harder to put together than one in which the seller has a first lien secured by the RV park, because a second lien is not as good as a first. However, if the seller does not own the property free and clear, a “wrap note” may be the only option to get the deal sold.

Master lease with option to buy

This is often a great way to structure a zero down deal, as it allows you to make improvements to the property and test your theories on how it can perform, without taking the risk of buying it first. Under this arrangement, you pay the seller a flat monthly lease, fully paid by the park’s operation, and then at some point in the future, buy it at a pre-set price. If you operate the property and find it does not perform as hoped, you can just cancel the lease and walk away from it.

To maintain this construction as a true zero-down deal, you would need to have the seller carry the financing upon exercising the option. If you have to get a real bank loan, you will have to put down some amount of money (normally 20%).

Conclusion

RV parks offer the opportunity to buy good quality real-estate with no money down. There are three different deal structures that allow you to take advantage of this opportunity. When you can buy good assets with no money down, why wouldn’t you be doing it?