Has anyone started investing with no money? and ended up gaining good/amazing income?

Question

I'm just asking just to ask. I am still saving money for a down payment on a rental property out of state and i understand none of this should be rushed, but I am wondering if anyone has ever started investing without any money at all. (loans, etc.) and how did you do so?

Jean Bolger · Answer

Amanda's original question was about achieving income- I'm assuming that's income that she would like to get before her retirement, which at 22 is a while from now ;)

So any investing within a retirement plan would not achieve that goal since you can't withdraw without penalty before your retirement age (although if you are able to start investing through your IRA in your twenties you could probably have a pretty awesome retirement income in 45 years)

Tom Waddell · Answer

Amanda, I'm in the same boat. No cash available for down payment funds as of yet. However, I do have a traditional IRA (the funds in that had been rolled over from my former employer's 401K). I'm heavily researching self-directed solo 401Ks that will allow me to use those IRA funds to invest in real estate. I own my own business and I'm a sole employee, so I qualify for a self-directed solo 401K. If you don't own your own business, then a self-directed IRA would work as well. I expect I'll be rolling funds into the solo(K) here pretty soon and will have my down payment(s) ready to go. Just a thought in case you weren't aware of this opportunity.

Account Closed · Answer

Back in the day (but more recently than David K., I used credit (as in credit cards), hard money or seller financing to get into properties with no down, no cash out of pocket.

You may want to consider old school equity sharing/partnering.  I have good friends that live a few blocks away.  I would say they are totally uncreative financially.  But back when they had two little kids, one income earner and no down payment they wanted to buy instead of rent.  They said so at a dinner party one night.  A couple they didn't know said:  We'll pay your down, if you'll make the payments and pay the taxes. When you sell, we split the profit 50/50%.  BTW there was no contract about improvements or repair costs. It was uncomplicated.  The deal was: down payment in exchange for a 50% equity split.  The couple sold the house 2 years later.  The investing couple received $40K (after lending $15K).  The paying couple received $40K and used it as a down on a better house.  Totally unsexy.  Totally do-able.

David Krulac · Answer

Account Closed

Yes, I started with nothing, literally, for at least the first 5 properties I borrowed 100% to buy.  I borrowed closing costs, and rehab costs as well.

Dmitriy Fomichenko · Answer

@Tom Waddell brings a good point about using self directed Solo 401k!  I would like to add and piggy back on comment by @Jean Bolger that if Account Closed is looking to create income stream that she could use now, they Participant Loan options of the Solo 401(k) need to be investigated.

Amanda, since you own a small business, you could qualify for the Solo K and then take personal loan from it, the funds then can be used for a down-payment on the property that you would personally own.  You would have to pay back the loan to your Solo 401k, but you can personally use the income from the property now.

Tom S. · Answer

Account Closed

I did by partnering with someone.  They put up the downpayment and I got the loan in my name.  After I built up some more money, I purchased the next place with 10% down, and owner financing.  The place after was 25% down, and owner financing.  Both of the owner financing places needed a lot of work and wouldn't qualify for conventional financing. After I fixed them up, I was able to refinance and pull out some money.  All of these were rental properties.

I would always caution in any of these scenarios, make sure you have plenty of reserves to address issues that pop up.

Good luck!

- Tom

Account Closed · Answer

Thanks @Tom S. that helped. @Tom Waddell I actually do own my own online business so I will check that out. I'm 22 years old and actually don't know much about 401Ks and IRA so i will learn more about that.

Jerry W. · Answer

@Amanda Salas , I have bought 2 properties using practically no money of my own.  I paid full asking price on the condition the owner take a second mortgage for 20% of the purchase price at 2% interest for 5 years.  I financed the property at 80% from the bank on a 15 year note.  At the end of five years the bank mortgage was at 60% of total value and I could refinance and pay off the 5 year balloon note from the seller.

Warning these do not cash flow very well.  The good news is that after 20 years the property is free and clear.  I have not found a good cash flowing property that can do that.  You need to have some money saved because most repairs must be paid out of pocket due to the poor cash flow.  Do not get very many of them, again due to the cash flow.  The first one I have held for 7 years and it had a slight negative cash flow, over all it was about $100 per month in the red.  Due to upgrades I did and rising demand I was able to increase the rent $150 per month and now it is cash flowing.

Tom Waddell · Answer

@Jean Bolger, I had brought up the self-directed solo 401K to @Amanda Salas because, not knowing her age or financial history, I thought it might provide a way for her to roll in employer retirement funds (if available) and start investing in real estate right now. This is exactly what I hope to/plan on doing myself.

@Dmitriy Fomichenko and @Jared Lopez thanks for the clarifications!

Has anyone started investing with no money? and ended up gaining good/amazing income?

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