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Updated over 5 years ago, 04/01/2019
How To Get Started WITH No Money?
Hello all! I know this one is tough! I'm trying to get started with NO MONEY, which is almost impossible. I've read plenty of books that say it's possible. I've even found a few properties that will do owner financing with me, unfortunately I just can't afford the down payment. Another thing is, how do you refer a property to an investor for an appraisal fee? If I could do that a few times, I would then have enough money for a down payment. I know that I'm not the only one who's been in this position before. ANY advice is great advice. Thank you.
@Sheila Campbell how about wholesaling ? Ever thought about building capital that way ?
@Sheila Campbell How long have you owned the house? Maybe you have some equity you can borrow against?
@Sheila Campbell
Yes, I’d only suggest it if you get 0% interest. If you’re like me and get 25%, you’d be better off asking your friends/family. Seller concessions is typical in a Real Estate transaction, you’ll have to negotiate that in your deal. Happy Hunting!
@Sheila Campbell
Hard Money Lenders. How long have you been in your house? If you have some equity, use it. Yes it sets your home back a bit, but long term you can pay that fast. Also use a bank credit card
If you can use a credit union, my CC has an 8% APR and banks CC are more likely to allow 20k or higher limits which is just $400 minimal payments per month.
@Sheila Campbell
Hi! It is possible to purchase a property without any money. Here's a typical way that it can be done. Let's use the Rochester, NY market as an example. Homes here are typically around $130k. First thing you need to do is open up what's called a personal unsecured line of credit at a bank for around $15k - $20k. Second, find a hard money lender. Typically, your first hard money lender will want some skin in the game, which is when you'll use your personal line of credit that you've opened. Third, identify a property that's roughly 60% of its ARV, so roughly $78k and spend $10k fixing it up. Typically at this point you should be able to cash out and refinance it with a bank once a tenant is in place, or you can list it and flip it. But either way, you have none of your own money in the deal.
@Sheila Campbell does your current house have any equity ?
@Sheila Campbell If I had a house I was living in, I would rent out that house ! move into something much less expensive and Put every dime of cash flow back into my mortgage to raise my equity.within a couple years you should have enough in that , so you can get yet another property, hopefully a multi family where you can move into it , stop paying rent and still have cash flow from both properties
@Sheila Campbell
I honestly don’t know how anyone can write a book on buying a house with no money, especially an investment. And I find that people who actually do figure out a way are being irresponsible. Rental property needs a new furnace, $5000. Water heater, $900, etc etc.
the old saying “it takes money to make money” holds true here in my book.
I bought my first house in 2000, 24 years old, and my mom telling me I have no business buying a house, I know nothing of houses. I had $5000 to my name, bought a $45,000 house. I was a chef with zero experience fixing up houses. Fixed it up myself while living there over the next 2.5 years, sold it and walked out of closing with $40,000, tax free. It didn’t take a lot of money to make money, but it took some.
Work hard, save your money, and hopefully it will make you money. And thank you for your service!
Originally posted by @Paul Wade:
Well let me de-lurk and use my first post here at BP to fuss. I really wish all the people here scolding her to get her financial house in order would find a more productive use of their time.
Maybe you all missed it. She IS trying to get her financial life in order by working extra hours to make more money. Isn’t that something we should encourage rather than dump all over?
You can start with no money. As Robert Kiyosaki himself said of people starting with no money, “That’s OK, you’re not supposed to use your money anyway.”
Ignore the nay sayers, you CAN get started with zero money down, ethically and morally. I know because I’ve done it and I made $140,000 my first year. (Disclosure: a large part of that was luck but I always say, “The harder I work, the luckier I get.”)
But let me back up.
Before I made a penny, I took 6 mos to learn the trade. If you’re watching TV you’re doing it wrong. Listen to a podcast or 50… or 150. BP has a fine podcast. Being a small businessman, I like the Invest Florida podcast. Even if you don’t invest in Florida, they are two commercial brokers and they are great. For the first (I dunno) 50 shows of theirs I listened to I learned at least one very cool thing from every show. There are tons of other good podcasts too. And listen to shows even if you aren’t interested in that asset class. I listened to all the Mobile Home investors. I learned a lot I could apply to Bricks and Sticks. Fast forward a few years and I’m negotiating a 40 unit apartment deal and when I ask the guy why he’s selling, it turns out he’s got dozens of MH parks and “hates apartments and just wants to get rid of it.” – My understanding his market gave me cred and he offered 6% owner financing without my asking. Repeat after me, “The harder I work the luckier I get.”
As you listen to podcasts you’ll hear a whole bunch of words you’ve never heard before. That’s why we have search engines. Don’t know what a Cap Rate is? Search it up. Your education is the most important thing you have. You’re entering a world with lots of zeros. You CAN make a $40,000 mistake. So let’s agree right now you should learn not how not to.
Oh, and read some books, “Rich Dad Poor Dad” is a great first step.
But at some point the “Death by podcast” era must end and action must begin or you just wasted 6 mos of your life. So let’s talk about your next steps….
But before we do, and while I’m annoying people, let’s me say one more thing. Real Estate “Investing” is a misnomer. We’re not investors, we’re dealers. In fact, real estate is a poor “investment” that’s why you use other people’s money.
(I’ll repeat) As Robert Kiyosaki himself said of investing with no money: “That’s OK, you’re not supposed to use your money anyway.”
Sheila, you’re not learning ‘investing’ you’re learning how to start and run a business. A business that buys and sells (and possibly rents) real estate. You wouldn’t open a restaurant if you couldn’t cook. You can’t run a real estate business unless you know real estate. ‘Nuff said.
OK so let’s start making money.
And here’s where your work begins. I’m not going to talk to you like a newbie. I’m going to talk to you like you’ve been studying at least 3 months. If you don’t follow everything I say, THAT’S GREAT. You now know what you don’t know.
The First Rule of Real Estate. You make money on the buy. PERIOD. If you buy it wrong you have very very few options. Which leads us to…
The Second Rule of Real Estate. There is one reason and only one reason a house does not sell. Price. If you price a house cheap enough you can sell it in minutes.
The key to starting with no money is getting your first deal. Then you have money. (and experience) As part of your education, you’ll learn how to buy houses $20,000 or more below market value. (no really we can all do it) Buy it low and sell at market value. - Notice I didn’t say "buy low sell high," because with a few exceptions that’s impossible. You buy low and sell at 100% of value.
You can start by wholesaling, which is assigning contracts to the final buyer. Or you can do a concurrent close.
Let me walk you thru my first deal.
I found a distressed seller thru a referral. (offered the guy $500 if I bought the house) The seller made good money but it was his deceased dad’s house and he lived 3 states away. (very common way to buy houses) He wanted it gone and didn’t want the hassle of selling it.
I communicated via email as he was out of the country. I had walked the unoccupied house several times and had a friend who was good at inspecting houses look at it with me. THEN I DEVELOPED A BUSINESS PLAN FOR THE HOUSE.
That’s the magic step that we all do but we few people describe it that way. In short I figured out how much a buyer would need to invest and what they could make.
The seller came back in the country on a Monday and told me he would sell it at my number. We set up an appointment for Wed to sign the deal. I IMMEDIATELY dropped this ad on Craigslist:
=== Legit Wholesale Deal for Legit Flipper (general Location) ===
This is a legit deal no B.S., I am driving 400 miles Wednesday to get a house under contract. It’s in –this area- walkable to a major employer. It needs about $10,000 in repairs just make it livable. And maybe $20,000 to make a make it rentable.
Here’s how I see the numbers:
Flip:
Buy it for $60,000 drop $30,000 into it. ARV is $110,00 easy and $120 if you get a bit of luck. Maybe a true ARV is $115. Bottom line you're making 20-$30,000 for a flip.
Buy and hold:
Buy for $60,000 drop $20K into it and rent for $900 to 1000. If you put put $30K into it you cold probably get $1100+ a month.
Personally, I think it’s a better flip but if you buy and hold it’s a decent deal.
Legit cash wholesale cash buyers only , this is not for sale to retail buyers.
-- end ad –
That day I got 2 calls. One guy was a joke the other legit. He asked for the address. I chuckled. I gave him everything I knew about the house except the exact address. He told me if the house was as described, he wanted it.
Wednesday morning I drove 200 miles, got the house under contract and started home. I called my buyer from the car, told him the address and set a 3pm appointment.
We walked the house, he agreed I described it fairly and told me he actually did rent to own. But my numbers helped in that space too. We had a handshake that I would not advertise it until the next day at noon. (I had already taken the ad down.)
At about 10:30am he called and said he looked at comps, my numbers were fair and he wanted the house.
So to review, I ‘bought’ it on Wednesday for $30,000 and sold it in less than 24 hours for $60,000.
Notice other than gas money to drive 400 miles I have not a penny out my pocket.
We did a double close or a concurrent close. You’ll have to learn that on your own but suffice it to say, I walked into the closing company with no money in my pocket and walked out with a check for well over $27,000.
It’s important to realize here, if I had the cash, it would be a nice rental. Or if I rehabbed it myself I coulda made $60,000. But I gave up the home run to make a VERY HEALTHY payday for about 10 hours of work total. Where else can you work 10 hours and make $30,000 with no money out of pocket?
I also could have retailed it and made more money. Or tied to squeeze an extra 10 grand out a rehabber. But I had a 60 day close and I didn’t have $30,000 in my pocket to buy it if I could not retail it in time. So, again, I traded money for speed of transaction. See second rule of real estate above. I left him a nice payday so I sold it in hours.
Now consider this: If you could –only- find ONE DEAL PER YEAR like this would $30,000 a year help you out? What if you could find two per year? Even including closing costs and referral fees, that’s $54,000 a year. Extra. Part Time.
Shelia, the above can change your life.
Now it’s up to you to DO IT!
Thank you for a great example and your first transaction!
@Sheila Campbell I am active Marine Corps with two kids and two with two different mothers. I take care of both kids and keep the mothers happy. (not a cheap task). But I make time to search deals and offer my help to local investors and agents for nothing more than experience. Oh yea I forgot to mention that I have a part time job working security and also 3 semesters away from my bachelors in forensic accounting. I saw all this to simple say people make time for what they consider to be their priorities. So of you truly want to get into investing you will do whatever it takes. Even if that means not being able to go out to the clubs or whatever else you are doing with your free (read wasted) time. Last note, if someone gives you advice and they are where you are trying to be. You should probably stop making excuses and figure out how you can do what they are advising. Best of luck to you from another super motivated newbie.
@Sheila Campbell
Wholesale, don't need money.
@Sheila Campbell just because you used your VA loan doesn't mean you don't still have entitlements left you could very well use it again, if not I'd refinance into another loan using any equity you may have and that'll free up your entitlement. This does mean though that your next home would have to be your primary residence and you current home possibly becoming a rental. Also if you focus on renting to military you know the BAH rates and will also have some leverage knowing that they can get Article 15'd
@Sheila Campbell if you have a phone and a computer, I would recommend looking up phone numbers of people with run down properties in your neighborhood. Call then and ask if they would be intersted in selling and agree on a good price. If you get a good enough price you will be able to flip the deal to an investor for a fee. It will cost you nothing and will help get you started. You’ll also meet good investors who might be willing to lend you money to buy one on your own. Good luck.
You ought to consider flipping seller-financed notes. You can do it without any of your own cash or credit and make a nice lump sum profit in 30-60 days. Once you flip a couple of notes, that will give you the cash to buy and hold notes. Then you can buy seller-financed notes at a discount and get amazing rates of return by negotiating an early payoff on the note and realizing your discount in just a couple of months. You can build up cash very quickly, with no money to start, and best of all, you have none of the headaches of dealing with the actual real estate. Flipping discounted seller-carrybacks is under-rated!
@Sheila Campbell it sounds like you have had a few possible deals. Maybe you should look into wholesaling a couple deals to build up some cash.
If you haven't used all of your VA loan entitlement you can use the remaining amount to purchase another property.
Hey everyone I’m a new investor from the south eastern part of New England. What do you find to be the most difficult when getting through your first deal? Your take away?
You should be able to purchase a new primary residence with the remaining difference between your first VA loan purchase and the maximum amount allowed, with the same VA loan financing and make your current property the investment. You can say that you're looking for a new home that accommodates your growing family, but that you would like to keep the current home as a rental/investment property. This is all based on you moving to the new property to occupy it as your primary residence. This is something I know my military friend did a few years ago.
Wholesaling, joining a realtor team or bird dogging are pretty good low budget ways to get in.
- Ian Walsh
@Jason D. Spot on. Buying investment property is buying a business. YOU are also a business. So work on your household finance first. If you are drowning in debt then real estate is not going to save you. Attack that first. Make some extra money in doing something real estate related to get the experience and use that to pay down that debt. Remember paying debt down is risk free and often times has higher returns than real estate!!!
@Sheila Campbell I assure you two things. 1. It’s very possible 2. You are not the only one. It’s just going to be harder to start.
It’s inevitable that you would need to find a partner to compliment your skills. There’s always a money partner and a swear equity partner. Do you think you can find someone like that? It’s a great way to start and will take you a long way. Once this first property start to generate returns, you can then take that money and move to another one and that’s how you get started.
@Sheila Campbell you are definitely not the only person with this same question. And luckily, a TON of very successful investors started out the same way. A great way to start is by finding deals and bringing them to established investors in exchange for a brokerage fee. String together a few successful deals and you’ll have more than enough for a down payment. This also is a great way to see how a deal is done from beginning to end without having to risk your own hard earned cash.
Hope this helps!
@Sheila Campbell militaries have a option not down payment ..
You should look into that ..
@Sheila Campbell There are many ways to purchase a property with no money! Here is an example or two:
Early on I read a book that said that you could get a realtor as your buyer agent to lend you his/her commission. So we did that early on. I called about 19 realtors in my area to see if they would lend me their commission so i could use that money to purchase a property creatively. The first 18 said: "no, no, never heard of this, my broker would not let me do this, you are not serious for asking...." You get the point........any way the 19th said sure I'll do it! And so with his help I was able to purchase this foreclosure that there were running no money down special.
With his commission I was able to pay for closing cost on each of the properties we purchased. I gave him an unsecured note at zero % for 48 moths of payment. The nice thing about this that I ended up buying many other properties with his help on the closing cost.... and in a year or two he was getting from me close to $2,500 per month, so during the winter, when the other realtors were starving, (the ones that did say no to my request) he was doing fine...and I ended up buyer pretty much all of my properties with
All these payments came out of the cash-flow, and even thought the properties were so leveraged that I barely broke even at the beginning (they were in quite suburban setting where it was/ is harder to cash flow) But now two decades later the property values close to quadrupled and the cash flow now over a $1000 on each of those properties. (Probably $700 after capex)
Also we would close at the end of the months and in some cases we did show the house to potential tenants before closing on the property and did sign the lease with in the same few hours after we did purchase. What was nice about it, that the lease due in advance for the month but the mortgage is not due only 30 days later (if you settle on the last day of the month) so in many cases we purchased the Fridge or stove from the first month rent if the unit was missing one)
Good luck to you in these fun times!
I have zero doubt that you will succeed!
Where there is a will, there is a way!
Kind regards
Val
@Brandon PhillipsDo you personally know any one who does did bird-dogging and succeeded with it? I used to believed and / said the same things to people including all of my wife's relatives and our extended friends, but never really heard one case of it personally that worked out not even in one case that I know of it. Frankly it is probably easier to become a mustachian (look up mrmoneymustach) so you can save up a little bit of money really fast so you start house hacking. Of course I might be wrong about this like many other things in life.... :)