Free House for You, Jim

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I’ll do anything for free stuff — Sandra Bullock

We love free stuff. The simple idea of ‘something for nothing’ speaks directly to the primitive part of our brains that wants to maximum output for minimum input.

Content. Product. Money. Information. Oh, it’s free? We’ll take it.

After all, why not? It’s free, right?

…but just how free is ‘free stuff’?

A closer inspection reveals that many of the things we might consider ‘free’ are not free at all. It’s only that the payment we make isn’t financial. We pay with our attention and privacy. With freedom. Implicit compliance or endorsement. Sometimes even a sense of moral debenture or psychological dependence. The bait on the hook is never truly free.

People often say that “The best things in life are free”, and for the most part I believe this is true. Risking using cliched examples, the best things in life are things that are given unconditionally, like a true gift, parental love or nature— and they never ask for your email in return or ask you to sign the terms and conditions before taking it.

This does not mean that we should never use or take ‘free stuff’. We just need the wisdom to recognise that things are rarely truly ‘free’, and see what the true payment of something is — and only make that payment if we think it worthwhile.

Otherwise, you might wake up one day and find that sometimes what you get free costs entirely too much.

“It’s Free Real Estate”

The desire for ‘free stuff’ is not limited to the small things in life. “No money down” real estate investment strategies has been very popular over the years, first finding mass appeal through late-night TV infomercials and now through various online courses. Many of these courses are advertised as a way to acquire ‘free real estate’, even prompting a cheesy meme to go viral.

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Although I haven’t personally tried to do a no-money-down deal, I believe that it’s entirely possible to acquire ownership of a property without paying anything ‘out-of-pocket’. Real estate financing and term structures can be very flexible, and enterprising investors can definitely find ways to acquire properties with no or very little personal financial investment.

Some examples of this would be:

  • Using seller financing
  • Using hard money
  • Assuming the seller’s mortgage
  • Lease options
  • Others

The list could go on.

Again, there is nothing inherently wrong with these methods if they are used legally and morally. A high barrier to entry is one of the things that prevent lots of people from starting their real estate investing journey, so knowing that creative methods like these exist can be a great thing.

But to think of them as a ‘free’ way to acquire real estate, or to advertise them as such, would be a mistake. The real estate is not free, it’s simply that the payment is non-traditional. With many of these methods, you are paying with the assumption and transfer of debt and risk. The assumption of risk has a definite financial and psychological cost. The insurance industry, for example, is one that gets paid to assume calculated risk.

So when you use hard money with a personal guarantee, or assume the seller’s mortgage, make no mistake — you’re paying for the real estate.

Don’t get fooled by the lure of ‘free stuff’. Find what the true cost is, and only pay for it with a clear head and your eyes wide open.

Sam Lee

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