How to buy rentals with little or no money

Las Cruces, NM · Member since 2016 · 28 posts · 3 votes

I am a virgin investor. The only real estate experience i have is the purchase of my personal residence and I have excellent credit. I want to purchase a rental property and become a landlord but i would like to know how it can be done with little or no money down. The lender I spoke to said I would need to bring to the table at least 20% down plus closing costs. I have that money on my TSP (similar to 401k) but I am hesitant to get that out of my TSP account. Can someone please guide me how people get buy and hold properties with little or no money down.

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Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

10y

Not having money is a symptom. Earn more and save. Scorched earth sacrifice to change your life. No car payments. No restaurants or malls unless it's to go to your 3rd job. Fancy coffee and 200 channels is what the broke without a plan do. Nothing worthwhile is easy @Miguel Romero!

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Tim Lindstrom
Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes
10y
This book should tell you everything you need to know...
http://get.biggerpockets.com/nomoneydown/
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Janette Vogel
Investor · Hudson, FL · Member since 2016 · 21 posts · 2 votes
10y
If you have enough equity in your home you could take out a second mortgage but be careful because if you default on that loan, you could be losing your home as well.
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Bhekizwe M.
Bulawayo, Zimbabwe · Member since 2015 · 1k+ posts · 253 votes
10y
Refinancing the primary residence is an approach.Be very conservative though
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
10y
Take out a HELOC on the equity in your home. Aside from that although there are many possible options my first choice is always to advise people to modify their life style to be able to save every penny possible and invest when they have enough cash for the DP. I believe saving money for the first one instills the life skills you need for the future as opposed to the quick fix no money down approach to life which adds very little in personal development.
Growing wealth through real estate investing is not a race. It's a life time slow and steady plan. Once you get started you will find it much easier moving forward if you adjust your lifestyle. Most people waste vast amounts of money on useless consumer products and will continue to do so if they do not make the necessary attitude adjustment.
1 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y
@Miguel Romero,
You'll want to read up on how attract and partner with private lenders. These would be people with retirement accounts who are looking for better returns and safer investments. You'll want read up on how to help them work with self-directed retirement accounts which they can then invest in your project / business.
Search the BiggerPockets forums for "SDRP", SDIRA" and "Self directed".
If you need more info than what you can find here, let me know. I am connected to some very good, recently updated on-line education you may find useful.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
1 Reply
Account Closed
Real Estate Agent · Niagara Falls, Ontario · Member since 2016 · 26 posts · 2 votes
10y
I am in Canada and I am looking for the same solution.
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Tapanga Matthews
Mississauga, Ontario · Member since 2016 · 23 posts · 2 votes
10y
Hi @Miguel Romero
I'm new to BP and even newer to real estate. I'm also interested in becoming a landlord and having a few rental properties. I've been researching and learning the basics. There's actually a few podcasts on BP on how to get a rental properties with little or no money down. You can learn a lot.
Hope this helps
Best regards,
T. Matthews
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Miguel Romero
OP
Las Cruces, NM · Member since 2016 · 28 posts · 3 votes
10y
Thank you all.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Miguel Romero in my personal opinion its much like Dave Ramsey and your rainey day fund.
rentals cost money to own..they do not always cash flow..
buying them with no money down because you have no money is really not very good approach.
Save your rainey day fund ( IE your down payment and your capital reserves then go shopping) if its 100% leveraged you need money in the bank to withstand periods of vacancy and or bad tenant that does 5k worth of damage and you have to spend that before you can put unit back into service.
Podcast Guest on Show #222
JLH Capital Partners51 Review
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
Not having money is a symptom. Earn more and save. Scorched earth sacrifice to change your life. No car payments. No restaurants or malls unless it's to go to your 3rd job. Fancy coffee and 200 channels is what the broke without a plan do. Nothing worthwhile is easy @Miguel Romero!
3 Reply
Richard Bradshaw
Investor · St Petersburg, FL · Member since 2015 · 127 posts · 39 votes
10y
Search the BRRRR strategy on the forums. Essentially, buy properties under 75% ARV, fix them, rent them, refinance and get your money out. @Miguel Romero This is what I've been doing. Purchased 2 properties this year and took my money out plus some and have cashflow positive assets.
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Miguel Romero
OP
Las Cruces, NM · Member since 2016 · 28 posts · 3 votes
10y
Thank you for your input. Like I mentioned in my post, I do have the money needed on my TSP but I really don't want to use my TSP funds. Being an avid Dave Ramsey listener, I have been working on paying down my debt, which is why two years ago I refinanced my home to a 15 year term (13 years until its paid off now) and I really would hate to do a cash back refi on my personal property because then it would set me back. I bought my current home about 2 1/2 years ago as a foreclosure but in excellent shape for $225k, I now owe about $190 and my home is worth about $320k. I have even contemplated of selling my current home and using the appreciation to buy another home for cash but we love our McMansion.
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Miguel Romero
OP
Las Cruces, NM · Member since 2016 · 28 posts · 3 votes
10y
***^used wrong word, just researched what McMansion means, it is not a McMansion, it was not mass produced and is not a cookie cutter home, It is a custom built home.
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David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y
Originally posted by @Steve Vaughan:

Not having money is a symptom. Earn more and save. Scorched earth sacrifice to change your life. No car payments. No restaurants or malls unless it's to go to your 3rd job. Fancy coffee and 200 channels is what the broke without a plan do. Nothing worthwhile is easy @Miguel Romero!
More often than not in this economy, not having money is, indeed, a symptom - of factors beyond the individual's control. It's easy to say, "earn more and save more" - the reality of things is rather more complicated ... and, of course, hindsight is always 20/20.
In today's reality, what are needed are solutions, and that typically means taking an unconventional approach to problem solving.
In today's reality, not having money for deals is a symptom of not knowing how to raise it. No law says you can only use your own money. You're actually more profitable and more helpful to others if you don't. I think of it as being selfish if you don't help people getting fractions of a percent in interest from banks and investment funds when you can easily provide them with double-digit returns secured by first-position liens.
The "hard" parts are freeing your mind from the prison in which you keep it and then learning how to help others so you'll have the resources you need to help yourself.
"You can have everything in life that you want if you'll just help enough other people get what THEY want!"
- Zig Ziglar
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
1 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
@David Dachtera I agree we can change the way we think to understand and be aware of new opportunities. I disagree we are all in factors beyond our control. One second you sound like everyone is a socialistic victim, the next you quote one of the most entrepreneurial and successful, inspirational capitalists our great country has known. His message- get on the business end of your own destiny. Meet demand by establishing a business that serves many people and you will be rewarded.
In helping others, we do help ourselves. My point is - if we cut back on the frivolous spending so many partake, we have a better chance of having some savings. More options. We are all not helpless victims unable to save two nickels because of factors outside our control. What would Zig say to that statement of yours?
2 Reply
Stephen Moore
Real Estate Investor · Lake Charles, LA · Member since 2009 · 271 posts · 52 votes
10y
Simply read brandon hicks posts on here, he has bought almost 2 million worth of properties with not alot of $$$
1 Reply
Eric Bilderback
Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
10y
Have you considered renting out your home and buying a new one for yourself, maybe a duplex or fourplex etc? That should immediately put you in a better family situation. I think that is your best bet depending on your family.
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Omar Ismael
Agent / Investor · Newark, NJ · Member since 2015 · 95 posts · 60 votes
10y
Eric Bilderback in Miguel Romero last post he said that he loves his McMansion, there is no way he would ever consider renting his house and buying a duplex or four plex to share his space with tenants
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David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y
@Steve Vaughan
Zig would probably agree 100% because he didn't swing his pendulum to extremes. I said, "More often than not, ..." You said, "... we are all in factors ...". Moderate vs. extreme. Get it?
Again, MY point is: from where you are MOVE FORWARD. The past is past - leave it there. Why bother to look back? It has nothing new to offer you. Learn the lessons and move on.
... and yes, stuff happens that you cannot control. Get over it. Learn to work around it and/or make the best of it. Successful people get that way not because the best always happens to/for them, rather because they always make the best of what does happen to/for them.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
10y
Originally posted by @Steve Vaughan:

Scorched earth sacrifice to change your life. @Miguel Romero!
this x1000
I took a few years to back and scorched earth save and it worked so much better than having to take all that risk.
great advice
[email protected]Podcast Guest on Show #301
1 Reply
John Nisewonger
Investor · Chesterfield, VA · Member since 2014 · 93 posts · 11 votes
10y
You can do what I did. So you bought your first house. Take a HELOC out on that property and use it as a down payment for another property. You can turn your property now in to a rental. BAM! Ive done that a couple times. Works great and HELOC rates are nice and low.
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Janette Vogel
Investor · Hudson, FL · Member since 2016 · 21 posts · 2 votes
10y
I have learned that real estate can not be emotional. I think your idea of simplifying is a good one. If you can sell your home, buy something outright and maybe take out a small cash out on it, that would be good. Better yet, sell it and buy a duplex or triplex you can live in while renting the other parts. Pay your mortgage using the rent and when you have enough saved, buy another. Or, buy yourself another house, or buy and flip a couple until you have enough money to pay for your home outright. Be emotional about the home you retire in!
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