Car as down payment?? Hypothetical deal - Posted by DanMO

Posted by Brent on November 28, 2000 at 03:09:41:

You are asking the seller to take the automobile instead of a second on the real estate. Even if he thought it was a dream car, it is a rapidly depreciating asset that is 100% leveraged. It isn’t the same thing as an asset owned free and clear. He can’t sell it, trade it, or transfer the title without paying off the car loan. You’re really offering the use of the car plus your unsecured promise to pay for it. It is my belief that anyone with landlord experience would recognize the weakness in the offer and not take you seriously. The only way he knows your credit is important to you is if you tell him so repeatedly.

Maybe you could add collateral to the deal so the car isn’t standing alone. How about:

an unsecured promissory note due only if you don’t pay the car note (your credit was good enough to buy the car, the note must be worth something);

a note secured by your furniture;

your first-born child;

He knows you have no experience. The idea is to give him reason to believe that you won’t walk at the first time of trouble because you have something to lose. Trouble is what made him tired. Sellers must believe that you have the energy, determination, and ability to learn new skills necessary to solve the problems that he couldn?t or wouldn?t. Then, they will consider entrusting you with their hard-earned assets.

#2 I understand the deal is hypothetical. 30% for expenses is often illustrated, but is at the low part of the range. Try 40-50%. The folks on the commercial board deal with multi-units all the time. If you read all the posts from the first through the current ones it is possible to gain the equivalent of hard-knock experience in a short time. Can?t beat the price either.

IMO, reviewing all the posts on this board too, will give you the insight one needs to fully appreciate the information imparted in the courses you have coming to you. Sometimes understanding comes in flashes. It comes quicker when your mind has a pool of related (real estate) knowledge to work with. More tools to choose from.

For trust info, check out

Car as down payment?? Hypothetical deal - Posted by DanMO

Posted by DanMO on November 27, 2000 at 23:04:05:

Hello all, I was thinking today about something a little radical. Well maybe NOTHING is radical when it comes to creative real estate! But I have a new vehicle (2000) with 9k miles on it that I owe about 20 grand on. I am paying only 2.4% interest for 60 months on the jalopy…
Now lets suppose I find a tired landlord with a 10-unit that I can get for 200,000. He will take 10% down and finance the rest at 8 percent. It so happens he likes the looks of my 20-grand wagon and will take that for the 10% down. I owe about what the vehicle is worth. The numbers on the 10-unit are $325 per unit. So with a 5% vacancy rate that gives us a gross income of $3,088 a month. Then I believe the expenses are figured in as 30% of the gross income (as a rule of thumb) which gives us about $925 a month expenses. Net income is about $2160 a month. Payments on $180,000 @8% over 30 yrs is $1320 a month. I am also paying $412 a month on the jalopy for 54 more months. So for the first 54 months I get $2160 - (1320+412=1732)= $428 net income a month. But then of course after the car is paid off in 54 months I get $840 a month plus any increase in rents…

Has any of the pros done a deal like this? I figure that I am only paying 2.4% interest on the car loan so why not somehow use that to my advantage when investing in real estate? Of course it would work best on the larger multi unit apartments like this one. Any pitfalls in doing something like this? BTW I am completely deaf right now after having cochlear implant surgery but in two weeks I get hooked up to my new hearing and I am praying that I will be able to make the phone calls necessary to get this thing under way. I plan on hitting the ground running! Kaisers “Totally Dominate Your Foreclosure Market” course is on the way and am also considering Bronchik’s “Cash Cow” course to aid me in doing “subject to’s” and using land trusts. Any recommendations on these courses or any others would be welcome!
Thanks for listening you guys and good luck!
Dan (MO)

Re: Car as down payment?? Hypothetical deal - Posted by phil fernandez

Posted by phil fernandez on November 28, 2000 at 09:04:53:


Excellent thinking. No reason why it can’t work. I once heard of someone trading his motorcycle for the downpayment. In fact anything acceptable to the seller could be considered.

Just a couple of points from your post. Your expense figure of 30% as Brent said is on the low side. Who heats the place, you or the tenants. My guess is there is no reserves for replacement in the 30% figure. The real figure might be between 40 - 45% for expenses, but do verify all expenses to come up with a solid real number when you find a place.

The title to the car will remain in your name until the car loan is paid off. This may bother the seller. Then again it may not.

I have both Cash Cow and Kaiser’s Foreclosure course. Both are excellent courses that you will want to acquire.

Good luck and keep thinking the way you are and good things will happen.

I Like it… - Posted by David Alexander

Posted by David Alexander on November 28, 2000 at 06:31:13:

Your using your brain… and leveraging low cost money. It would work better if you could somehow get the 2.4% on a variety of vehicles. You’d probably still have to give security from another piece of property or the 10 unit itself depending on the motivation and knowledge of the seller.

Hmmm,… Is that Jalopy a Porsche by chance, if so let me know I may need to find a 10 unit to trade.

David Alexander