16

immediate cash down payment obligation has therefore been offset by an amount equal to the rents.

Technique No. 21 Deposits

The situation with tenant security deposits is similar. It is not uncommon for the landlord to require the tenant to pay an amount equal to the first and last month’s rent as a damage deposit. If a property is sold, the deposits are passed along to the new buyer. Unless state law prohibits the commingling of deposit funds with the rental accounts, the buyer can effectively use the deposit funds given to him at closing as an offset to the cash down payment obligation. Of course, when a tenant moves out, all or part of the deposit must be returned. If the new buyer is a wise manager, he will require a buffer period before returning the deposit. This will give him some protection against the possibility that the tenant may have neglected to pay some bills and will allow him meanwhile to find a new tenant who can add to the deposit kitty.

Virtually every real estate transaction involving rental property has the potential of providing access to these two techniques. For example, the buyer of a $325,000 mobile home park in Cheyenne, Wyoming was able to raise $8,000 of the $25,000 down payment from tenant rents and deposits in a recent transaction. We know of another case from our Los Angeles files where the buyer of a 72-unit apartment complex received $7,000 in rents and deposits at closing to apply to the transaction.

5. THE PROPERTY

The fifth source of down payment capital is the property itself. The buyer who is on his toes learns to recognize aspects of a given property that might be sold off to raise funds for the purchase. The variations are endless – everything from fixtures to parts of the land itself. There are two techniques that belong to this category.

Technique No. 22 Splitting Off Furniture and Other Items

Two years ago, one of the Nothing Down graduates in Florida was $5,000 short of funds needed to purchase an option on a valuable tract of land near Orlando. While wandering over the property one day pondering how he might come up with the necessary capital, he noticed a large area overgrown with beautiful ferns of the type one finds offered for sale in florists shops. Since problems often lead to creative solutions, he put two and two together and arranged to split

16