How to Start Investing in Real Estate with No Money Down
Do you need money to invest in real estate?
The answer: Yes and No.
Yes, you need money. No, it does not have to be your own money.
I’m here to tell you that money should never stop you from going after what you want or losing a good deal. If you don’t have the money, that’s okay. But you will need to get creative in finding ways to fund your projects!
Investors often share stories of how they got started and many over the years have admitted that at the beginning they used Other Peoples Money (OPM). OPM refers to borrowing funds to increase the return on invested capital.
The traditional method of borrowing in real estate is to obtain a loan or mortgage from a bank, although this still often requires money for a downpayment and an income to secure the loan.
What happens though if you find a great deal and don’t have a large enough downpayment saved or high enough income to secure the property. It would be a shame to lose such a great deal. You must think, “surely, if others knew about this great deal, they might be interested in partnering and doing the deal together”.
In these situations, joint ventures work very well. A joint venture is a business arrangement between two or more parties, where all parties pool together their resources and skills to accomplish a shared goal.
In order to do a deal with no money, you must be able to contribute to the team and offer some experience or valuable skills. If a person is going to give you money to invest, they need to trust you and believe that you know what you are doing. With real estate, valuable skills might include experience in project managing or home renovations.
Finding Partners
Option #1
When looking for someone to partner with, you might search for an individual who understands the benefits of real estate, already invests or is keen to invest but does not have the time. In exchange for money, you can offer your time and skills to manage the project.
Option # 2
Another option, which I have seen, is to approach a seller who is selling a perfect ‘flip’ property. That is, a property that is being sold below market value because of its state, where you know that you would be able to sell the same property for significantly more if it was fixed up. Many people don’t have the time, patience, or know-how to project manage a renovation. This is where you come in (provided you have the experience and know-how). What you can do is approach the homeowner and work out a deal where you are both compensated based on the increase value you bring to the property.
Note that each deal will be unique as each situation is different. Keep in mind that you are in the business of creating win-win outcomes — always be working in the best interests of all parties involved. Your success will rely on this. And know that money should not stop you from achieving your goals — think creatively, think smart, think simply.
What are your thoughts?
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I’ll be posting more about getting started in real estate and how to get the most out of your property investments!
