Here's One Way To Start Without Cash Out of Pocket

[Michael Carbonare]

I’m often asked by new investor hopefuls how to get started in real estate when cash is light. Here’s a recent real world example. . .
This deal was put together by my former student, current friend, and now successful real estate investor.
Source: expired listing
Location: investor, Florida; property, Illinois
Type: long term lease option via a sandwich lease
Terms between investor and homeowner:
a) 48 months
b) option to purchase price $135K
c) rent, $1200
d) cash out of pocket, $0.
Multiple exit strategy possibilities:
a) Traditional rental at current market rate of $1500. At any time during the 48 month lease the property can be purchased. All appreciation is the investor’s. If investor doesn’t want to purchase the property, it’s an option to purchase, not an obligation to purchase. He can utilize it for the cash flow until his lease expires.
b) Assign entire deal to another investor for a negotiated amount. Cash out, move on to the next deal. (Similar to a deal I wrote about here).
c) Most common approach is to sublet the property as a lease option to a tenant/buyer with fatter terms on the other side. For example, a 12 month lease at $1500/mo. Tenant/Buyer is required to put down nonrefundable option money. In this price range and conservatively, $5000. The option to purchase price will be set at $155K. If the option to purchase isn’t exercised, he can sublet the deal again to another tenant/buyer, possibly with increased rent and purchase price, depending upon the local real estate market. 

[Jonathan Greene]

This is way too complicated for most people who want to invest without money. It's also almost impossible to find on their own.

Posts like this give no-money down, new investor false hope that it's easier than it really is. The best way to do no-money down deals is to have money as leverage to make the no-money down part more attractive in another way.