With the bursting of the bubble, largely due to lax lending standards and poor decision making, came tightened and more restrictive loan guidelines. Zero down programs quickly dissipated, and now the closest thing owner occupied buyers have these days are FHA insured loans allowing financing between 3.5 - 5% to well qualified buyers. Investors who were once able to purchase non-owner occupied properties with no money down, meanwhile, found that the only loan programs they could qualify for were at a minimum 20% down scenario.

I'm not going to argue against drastically changing the loan programs to mitigate further damage to the real estate market because, frankly, it was necessary. Real estate became the "it" thing and people were buying homes that made zero sense as an investment unless the value saw repeated double-digit appreciation. Many investors, for example, would buy a home with zero down financing that would only rent for a fraction of their payment… they would count on double-digit appreciation to offset their monthly cash flow loss. This scenario gave the investor only one option which was to depend solely on appreciation.

In the wake of the change to 20% minimum down investor financing were smart investors who were left on the sidelines because they were no longer able or willing to put 20% down. This continued to hurt the demand for homes and still hampers the recovery today.

In our consistent search for great investment properties we have recently started to come across some homes with 0% down owner occupied financing and 5% down investor financing available. The homes are foreclosed homes that come with a government loan program designed to help sell the home more quickly.

BOTTOM LINE: If you are an investor that has been inactive due to the 20% down requirement, then we have some options for you. The options we have are homes that can rent for more than the investor's monthly payment and can be bought BELOW market value (as opposed to having negative cash flow and being bought with the price escalation clauses that became the norm leading up to the bursting of the bubble). By being bought undervalue and with a loan payment below the market rent, these 5% down investment properties have the safety and risk mitigation that was missing before the bubble burst.

- Robert E. Wasser - Seattle and Bellevue real estate news, market trends, and blog