How Can I Make Money with No Money?

Question

Hey there.

I'm brand new here and trying to get into real estate after a needed career change due to the pandemic. I'm specifically looking for a STR property. I've done my research and narrowed down to a few locations. I'm getting to the stage where I'm ready to purchase.

Now onto my main problem: I have no money and I will not get approved for a loan or mortgage because I have little to no income. However, I do have someone I trust that is willing to invest in me and my dream. They have the income and the means to get approved for a loan and mortgage.

My question is, what are my options for taking this investment and turning it into an income for myself? Should I create an LLC and have my investor put their money into my business and then purchase the property through my LLC? Is that even possible? Should I have my investor purchase the property themselves and then hire me as an LLC to manage the property as a STR? Should we create an LLC together and be dual owners in the property? Is there something I'm not considering?

Does anyone have experience with this? Any advice appreciated.

Thank you!

Jonathan Greene · Answer

Why would this money partner be investing in you? What background do you have in real estate to support a positive investment? Just from your post, you are nowhere near ready to buy. You are taking some good first steps, but how can you be ready to buy an STR when "I have no money and I will not get approved for a loan or mortgage because I have little to no income"? Why would an investor sign on to have you choose a property and manage it? Based on what? Where are you finding deals? Do you have an agent? Do you know other investors? You need to slow down. No one should be giving you money to invest right now.

Kai Kopsch · Answer

great first post finding bigger pockets is a great first step into REI. To be honest it's very difficult to start REI with no money and experience. If you cant change the money situation how about getting experience in working in the real estate industry? I started 30 years ago working as an assistant for a Broker. The possibility are endless:  Property management, E-buyer, Construction companies, Brokers, Appraisers, Flipers,

Bruce Woodruff · Answer

Ok...'All what work' would you be doing? What do you think is a fair percentage for both parties for what you have to offer? Are you a RE professional or a Contractor of some sort? What do you bring to the table? Forget that they are family and be generous to them.....they deserve a fair return on their money, family or not...

And details are always important if you're asking professionals for their opinion...

Jonathan Greene · Answer

My comments weren't rude, they were what you need to hear, and reading the rest, I would triple down on what I said and hope you listen. Doing a deal with your romantic partner, when they are all the money, is a disaster. It has blown up in thousands of people's faces at all stages. What happens if you break up during the process? Also, you keep talking about how new you are and about you doing all the work, but you have no experience at all. Do you know how to estimate repair costs? Do you know how to know rental comps? Do you understand the ARV on rehabs?  What you are doing is risking your financial future and your partner's on a quick fix that you don't have the experience to manage, yet. If you want to do this, you should be at meetups, in the forums, reading books, listening to podcasts for a year or so to make sure you do not jeopardize the money your partner is willing to bet on you. Make it a sure thing, not a guess.

Bruce Woodruff · Answer

I would start a LLC with you and the money person as partners. You need to figure the percentage based on the value you'll be bringing to the business. I used to do this as a 50/50 deal, but I was also the Contractor and ran all of the remodel project plus bought, sold, did the books, literally everything...the money guy did absolutely nothing except provide the money.

So if you can do all of that, go 50/50. If you do not know construction forward and backwards, or if you buy a turnkey unit, then your value will not be 50%, probably more like 25 - 30%

Bruce Woodruff · Answer

@Kristina Lumm Well, a partner like that sure makes it different! That's why we needed details :-)

Now, don't get discouraged, you can do what you want to do.....however - @Jonathan Greene is right once again and I would heed his advice. All you need for your relationship is to enter into a disastrous business venture.....your relationship is more important than making money.

So given the nature of the relationship, you don't have to bring all that experience to the table as you would in a real business partnership. You can get by on guts, instinct and hard work, kinda....

I don't think you're getting the difficulty of the business you're trying to enter. I've owned lots of businesses and without a doubt, the Real Estate/Construction business is the most difficult and has by far the most risks....imagine playing a game where you don't know all the rules when you start, and you are guaranteed that the rules and the information will change on a regular basis as you move forward....and it costs a LOT of money to play. You wouldn't do it.....right?

So if you're going to do this, make sure you gather all the information you can....volunteer at a RE office as a weekend assistant, volunteer at Habitat For Humanity as a jobsite gofer, read every book you can get your hands on, even take the courses for RE and GC licenses (even if just for the info).

No one is trying to shoot down your dreams, but realize that we've all done this for decades and seen (and experienced) the heartaches.....

Bruce Woodruff · Answer

#1 - Figure out what type(s) of real Estate you would like to get into, #2 - Ask LOTS of questions here on BP....it is a fantastic, free resource, #3 - Educate yourself, #4 - Just do it, don't over-analyze.....

Cory S. · Answer

With no cash reserves, that will be the end the business, once surprises pop up, and 100% they will.

Bruce Woodruff · Answer

Still.....a good, smart investor can minimize the number of oooops! by knowing the game and choosing the best property......

You need to become that investor. Your partner will get real tired of you burning through his money, even if he is loaded......

Bruce Woodruff · Answer

@Jonathan Greene is right as usual. Put yourself in the money person's place. Now ask yourself: why would I give Kristina $300,000? What is she giving me that I can't get elsewhere?

Of course, if this person is a family member or very close friend that may be different...their judgement may be clouded...but in reality, they should not be giving you money to play with if you have nothing of value to bring to the Real Estate business..........

How Can I Make Money with No Money?

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