The main reason large number of people don’t start in real estate investment is because they think they need to have a lot of money to invest in real estate. According to me as a first time home buyer you only need 5% of the total purchase price as a downpayment. what are your views?
I absolutely agree with you, its not necessary to have a lot of money to invest in the real estate. I have recently discovered property crowdfunding where investments start as from little as 50 euros. I think, its a wonderful model for diversification because you can choose several projects at once and invest small amounts of capital.
@Jessica King
Thanks for sharing your views. Yes lot of money is not necessary.
I think right real estate investing education can help people to get started in real estate industry.
I agree, you don’t need a lot of money to start in real estate investing, but it certainly helps! If you don’t have much money, you could invest through purchasing money mortgage; in this case, the seller extends finances to the buyer, who will then repay the loan in the agreed terms. One can also invest in real estate through a leasing option. In this case, the property owner charges the buyer an annual premium in the form of higher rental properties. The buyer would be able to purchase RE property at a slightly higher rental fee than non-leasing options. Another option is hard money lenders, which is funded by private companies/individuals who provide funds with a much higher interest rate in a short amount of time.
@JMarmulstein1 Yes, Real estate is actually rewarding on many levels, you won’t regret getting into the industry. All you need is to get well educated in this field and then get busy making profits!
I’m just starting, and that’s the reason for the “fear” (for a lack of a better word): not educated enough!
In investment, having less or even no money is not the problem. The only problem are being to greedy or being afraid to invest.
What are you writing about? You can wholesale and flip without money and credit. I do! I did not pay anyone or buy any course. Learn online and jump in !
If you’re looking to get into your first rental, I would definitely tap more into the first-time home buyer opportunities for a multi-family house or a house to flip over a few years. Most banks have their own unique programs for first-time buyers, so I would suggest shopping around a bit. On my first house, I bought a cheap duplex that needed 6% down, which I got part of the money back through negotiating repairs and closing costs. I was supposed to get a better rate, but I didn’t ask around with other lenders and instead got a minimally-helpful lender who changed loan products many times before close. But even with that, I came out with a home and a tenant who pays my mortgage!
I see this is an old post… I’ve been pretty successful leasing out property, so I would just caution a few things.
I don’t know who’s saying you don’t need money to get into real estate investing. You absolutely do… I hate to be the only voice of reason on here.
Sure, there are lenders, but they’re also out there to make money, and they’re absolutely not going to risk vast sums of money on the off chance they may make a few bucks. The stock market has been on fire the past few years, and the economy is doing spectacular. There’s VERY easy ways to make money in a variety of investment options. So… again… a lender that has CASH to loan… can easily get high returns, so don’t think for a second you’re going to borrow money from somewhere super-cheap, and make a killing… certainly not if you plan to flip.
If you’re looking for a REALLY long-term investment to lease out a home, and to keep it for more than 10 years (the time period before the interest to principal ratio benefits you), then I say go for it. But keep in mind, even with spectacular credit… most viable lenders won’t give you anything better than 4.25% because it’s not going to be considered a “primary residence.” Also, for all states other than NJ and PA (in which it doesn’t matter anyway), you have Homestead exemptions. You will NOT be getting these since it won’t be a primary residence. Your taxes WILL go up from the time you purchase it, to when the tax assessment occurs and they drop the homestead from the prior tenant. Just be aware.
Finally, it’s important to understand what you’re getting. If you want to lease, you absolutely must be able to purchase a home for a cheap enough price that you can lease it out, pay for property management, AND… still make a profit. The profit is going to go into savings which will very likely all end up going to repairs.
Take my situation for example. I have a home in which my mortgage is $1,900 a month. My lease agreement with my tenant is for $2,800 a month. I pay an 8% property management fee which comes out to $224 per month. I’m only taking home $676 a month. This is REALLY good. Keep in mind that I totally renovated the home before I moved out of it and turned it into a rental. Really high-end renovations that I did all myself to keep the costs down. I still occasionally have repairs. One thing I hadn’t replaced was the A/C unit. Well… can you guess what I had to replace last year? In December, it hit me… $7,400 for a completely new 4.5 TON HVAC unit, 19 SEER from TRANE. Excellent unit, and having it has increased the value of my home. But… that one repair basically killed my entire year’s worth of profit. The goal at tax time is to run at a loss… which is what I’ve done. And that’s OK… the person is still paying my mortgage, which is lowering my principle, and my home continues to increase in value.
I say this above because you really need to be cognizant of the costs, values, and what you’re going to expect from a home. The above home I described is a $450k home with a mortgage that’s about $220k. So please consider what you can afford and what you’re going to lay out.
Few other things to consider:
1 - You want to get a home at the lowest value you absolutely possibly can. ESPECIALLY for a potential rental. This will absolutely dictate the money you make, not just on the initial investment, but how much you make every single month.
2 - You CANNOT have any emotions about the house. It’s a rental… it’s an investment. Having totally renovated the home, myself, by hand… it’s tough when I learn about things. This new tenant is great, the previous one was horrible. Do not be surprised if a tenant decides to change the oil on their motorcycle in the middle of your family room. Never happened to me, but it’s happened to some friends. So don’t be emotional about it. Just think about the house in terms of 1s and 0s.
3 - Have a good lease!
4 - Get a property manager, seriously… it will CONSUME you, and not something you want to do. 10% fee is normal, 8% is really good. You can negotiate this.
5 - Always buy homes in neighborhoods that are gentrifying or are increasing in value. Never buy in economically depressed neighborhoods, it never works. Also… make sure you buy homes in the best school district you can afford. That is why people move to those areas. The house I mentioned above, the Elementary School is a 10, the Middle School is a 9, and the High School is an 8. Just 2 miles down the road, the homes are literally half the value. Take two from each number I just mentioned above, and that’s the school ratings for that area.
Anyway… lots to think about, and you need to do some serious research. You can’t invest everything you have into a house, and then not have any money to fix it when things come up, you’ll be in violation of your lease agreement, and things will just not be very good. You need to maintain a good house.
Finally, if you have ANY DEBT AT ALL except maybe a mortgage on your own home, then don’t even consider investing in real estate, as you’re just going to get yourself into a world of hurt.
You need to do the usual thing people recommend, live an austere lifestyle. Pretend like you’re unemployed. Live off the minimal amount you need to live, and pay off all your debt with the highest interest rates first. Only then… after you’ve acquired 6 months of savings, should you even consider investing in real estate.
I apologize if what I’m saying is a bit sobering and not-fun… but life is hard. 
I would say there’s a ton of options with no money. It’s more so the education and the networking foundation that’s crucial.
Thinking about it, you’ve got so many options open to you once you start. FHA mortgage on a fixer-upper, house hacking, wholesaling, etc.
Once you’ve got those two key pieces handled, the rest will be figured out over time 
When I first started I had seen a real estate guru on late night TV saying you didnt need money or credit to start in real estate. Of course I had my doubts and people were saying it was a scam. But I was desperate. The book was only $19.95 Well, guess what? I’ve done many wholesale deals with no money. At first I wud just place ads on Craig’s List that I buy houses. I got very little responses until I started up several email addresses and starting placing many ads and also in other states. I got a few deals that way, then after making contact with other local wholesalers and investors I wud get deals they needed help with. All I wud do is place multiple ads with some attractive wording & add 5-15K and get them sold.
With absolutely no money.
I also have used direct mail and bandit signs and that does take money.
You can get your ass in gear and just do it, or listen to some know it all’s negative spew.
This is a fact… You can wholesale real estate and do Sub to’s, Lease to own type deals. WITH NO MONEY! I have not used a penny of my money or had to borrow any.
Another method I’ve used is when I get a pre-foreclosure from my free ads on CL. I have the owner sign the property over to me. There is no saving the house cuz it needs repairs and is many months behind and it wud be impossible to make current. I never messed with short sales. Anyways I rent them out till the bank takes them back. Sometimes it can take 2 frikin years. If a similar house wud rent for 900 in good shape, I rent it for $600 The renter is a handyman type and he signs my agreement that he knows the status and it wont be a long term rental. If your willing to be creative and your desperate you can do real estate with no money. Also I have lenders that will lend on distressed properties, and I got a course that tells how to cultivate private lenders at low interest. So Mr. Wenger Todd, please dont dash the hopes and dreams of new real estate investors with your negative spew.
Because, you are most assuredly, wrong.
WengerTodd,
Most of what you offered is sound advice.
However, let me just tell you that I’ve invested in a LOT of real estate using NONE of my own money.
Probably newbies are the worst at being able to get in with no money. They just don’t have the credibility and trust necessary to negotiate ‘no money’ deals.
The richer/smarter investors (thinking long term), will maintain liberal buying criteria at the beginning, simply to build a portfolio. Once that portfolio is built, he can trade off of it (market himself), using that portfolio to show credibility, if not stability, if not tons of equity wealth. The more you appear to be worth, the cheaper, and easier it is to ‘get in cheap.’
And just for giggles, who’s to say how much equity you actually have, on paper, in your portfolio? Who’s to say that those ten ghetto houses you bought for $30k apiece are not now gentrified, middle-class homes worth $100k, or more than half-million dollars in equity? See how this works?
I show sellers the deals I’ve done, and produce testimonials about what a 'fantastic-and-not-at-all-fly-by-night-operator-I-am, in order to build trust in a seller about me. This way, I can way more easily negotiate 100% financing.
Not all sellers need money to sell. Some just need debt relief. Some just need to move, knowing that they’ll eventually get paid their equity, and perhaps capture a monthly payment until they are paid off.
Suggesting that one have six months worth of income reserved, before they invest in real estate, is impractical for most.
I mean, if you don’t have reserves, and you end up losing your shirt on a deal, what have you actually lost? It’s when you’ve got squat, that you should go for broke, and take a risk of winning.
After you’ve got a ‘million’ in the bank, you can justify being more careful. Until then, you’ve got nothing to lose.
One of the contributors here shared how he finds sellers that will pay him to buy their houses.
In one example, a seller give him ten-thousand-dollars to buy his house (to relieve him from debt and avoid foreclosure). Of course, the investor retailed the house with seller financing included, for another ten-thousand down, and grossed twenty-thousand-dollars in profits.
I say, “Do that once a month.”
“No Money” should mean, “Other People’s Money.” Just saying.
Yea, some interesting concepts going on here.
But I have noticed I get more deals when I put out more effort and spend money for marketing.
So, what are you saying? It’s not always free? You lied to us. And you didn’t mention how hard it can be.
Who are you asking these questions?
I got this book called, “What to Say When You Talk to your self” It’s all about replacing negative unconscious self talk with positive self talk and catching it as soon as you think it, and then quickly reversing it.
I also watched a speech by the author on You Tube. When he first came out, he asks the audience, “How many of you talk to yourselves”? Only a few hands came up, he then says, all the rest of you were talking to yourself when you were thinking, No, I dont talk to myself.
It’s thought by many or most, that anybody that talks to themselves is Bat Sh-t crazy and shud be locked up in a psycho ward…
It’s really interesting how our thoughts create our lives.