How To Get Started WITH No Money?

[Sheila Campbell]

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. 

[Sean Dargie]

@Sheila Campbell I'm active duty as well, and though after reading this whole thread it seems that you're a step ahead of me in the self-education process, I just wanted you to know that you aren't alone in a less-than-textbook-ideal situation to start investing in order to take care of our families.  

I have no advice for you since I'm still practicing with the BP calculators to learn how to recognize deals before I move on to financing, only encouragement: We CAN figure this out; We WILL figure this out; We MUST figure this out.   Good luck!  I'm rooting for you!

[Chris Szepessy]

You said you're getting married next year...how's your fiancé's credit/debt situation? Can he be your "partner" in a deal? Is he on board with investing in RE? That can cause problems as well if both people aren't equally interested in it. There's a bunch of topics on here about that. You're moving out of state next year...what's the plan for your current house? Can you get enough in rent to make it worth holding onto as an investment? Otherwise, I'm with a bunch of the others where I'd recommend selling your primary and buying a 2-4 family and live in one unit and rent the other 1-3 units.

Thanks for your service!

[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.”

@Sheila Campbell

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!

[Scott Williams]

House hack your current residence by renting out a room.  This allows you to save money and also learn the business.  After your one year is up with your current residence, move, then buy a multifamily with the rest of your entitlement.  

[Brian Midden]

@Sheila Campbell a lot books you read will say you can get started with little to no money. In my opinion though this is nearly impossible. Especially if you haven’t done a deal. Lenders with be reluctant to lend you money when you don’t have much skin in the game. If the deal is just smoking then you can put the home your buying as collateral and this will make it a little easier for you.

Obviously you know that wholesaling is the best way to start to build capital. I suggest this route because it lowers your risk, gives you a way to start learning different markets, helps you to start connect with investors, and it helps you understand how real estate transaction work.

As for a referral fee, I think you mean an assignment. Where you put the property under contract and assignment to an investor. The problem with this is you have to put it in the contract that it is assignable and you have to explain to your seller that you are passing it on to and investor/ partner to take care of the deal. In today’s market that is very difficult since sellers have MANY options of buyers.

I would look at your state laws to see if you can double close on a property. Another route is contact some local investors and see if you can work out a deal where you will give them a list of warm leads daily or weekly. In exchange they can give you a fee for every deal they close.

[Kyle Myers]

@Isaac Owens

What’s method to present deals to investors like that without them basically stealing deal and cutting you out? Have to get deal as if it was yours I.e offer, get contract, etc and before making payment bring it to investors? I assume you probably need investors lined up prior to a deal like this?

[Nathan Rea]

@Sheila Campbell. Check out a HELOC if you own a home. A lot of credit unions will do 95% to 100% LTV on a HELOC. Plus you can use it for a down payment over and over again after your tenants pay it back each time.

[Sherwin Gonzales]

@Sheila Campbell

Great topic and you've already gotten some great advice from a lot of people. From using credit cards, creative financing, etc. Not sure if anyone mentioned this already, but have you thought of just partnering with someone that has the capital? You said your family is not an option since you lend them money but what about a friend or fellow military coworker? It's it better to go half on a great deal than to not have a deal at all. Plus you mitigate your risks and you can build your track record and scale faster. I hope this helps. Good luck!

[Ravi P.]

@Sheila Campbell

If you are limited on funds to invest I would recommend renting a room out in your home that you own, if you have the space. You can furnish it or rent it as an empty room.

[Bill Haley]

@Sheila Campbell there’s a lot of good advice in this thread.

I didn’t read all the threads, and maybe you know of this podcast already, but I just learned about it. It’s called Active Duty Passive Income. https://www.activedutypassiveincome.com/

Maybe you’ll find some more information there specific to your military status.

Thank you for your service!

[Jaison Emmanuel]

I have several credit cards... and over the years, I have built up my credit line to on avg 32K each. 

I usually do a balance transfer to do rehabs on the flips.  But now, I can use all 4 credit card transfer to buy a house outright. 

[Justin Hammond]

@Sheila Campbell ,

I started out with no money as well. It took me 5 months of knocking doors, cold calling, hand writing letters, etc until I finally found a property that I could wholesale. I immediately rolled my 10k wholesale profit into an FHA downpayment on a duplex that I house-hacked for 18 months (now it cash flows 800$/month). By the time I found another good rental property, I STILL didn't have enough money to take it down myself. So I negotiated a subject-to deal with the seller, requiring 12k out of pocket. I didn't have the 12k, so I found a partner to come in with 20k for a 50/50 split: 12k to the seller, 3k in reserves, and 5k in my pocket. Yes, I got paid 5k to own half of a rental. I rented it out immediately and it cashflows about $500/month.

Now I have over 25 rentals and I have since bought out my partner on that deal. If you don't have money, you need a lot of hard work. Use it to your advantage.

[Stephanie P.]

@Sheila Campbell

I think you're going to be stuck with what you have.  

Your choices are defining what you can and cannot do. I've read most of the posts and the best solutions are getting shot down by either you getting married and moving or not getting deployed for extra money or because you bought a single family property with your 100% financing VA loan rather than house hack. Again, choices.

If you want the real solution, you have to be more flexible.  In this business, you have to be like Gumby.

• Sell your current home and get a short term apartment or better yet, sell it and rent it back until your wedding and then move out.  Unfortunately, because you bought it recently, you may have paid top dollar and may lose money exacerbating the no money problem.
• If buying another property that has units is not a good solution because you're moving after you get married, you could postpone your wedding a few months and just move after the sale of your current home.
• As many have suggested, Air BnB is an excellent source of rental income.  I've closed loans for short term rental investors and some are making 3 and 4 times what they would have made with long term rentals.

Lots of solutions, but all require flexibility

Best of luck and thanks for your service.

Stephanie

[Paola Viteri]

Start making money from another way, a job that you can save and then invest in Real Estate, start with something small, restore and sell . That profit you save and  buy  a bigger one. Build your savings!!!

[Joshua R.]

@Sheila Campbell

As mentioned below have you explored VA options as a way around the 0% down? I know you mentioned family is not an option for you, but partnerships are a great way to also finance deals. Consider talking with your close friends and try putting together a pitch. Also, since you already own your primary residence have you considered house hacking (i.e. renting out one of the rooms in your primary residence)? This can help to generate some cash flow that you can put towards your next property.

Stay positive, be creative and always try to problem solve. You will get there!

[Michael Ealy]

Originally posted by @Sheila Campbell:

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,

I was financially WORSE than having no money ($0) - I was bankrupt so I was in the negative net worth - and yet, after several years I was able to acquire over 1,000 apartment units. So if I can do it, so can you.

BUT it takes hustle, it took a lot of time and took a lot of work.

It's not for the faint-hearted but if you can survive the military and have the mental discipline needed, you can do it too!

Below are ways you can start investing in real estate starting with $0 money:

• Wholesaling - but this is a side-job - you put a property under contract and then you sell or assign your contract for a wholesale fee. Not sure if you can do it given you are military and could be deployed halfway around the globe at a moment's notice and could stay out of the country for a couple of years at a time. You can wholesale virtually but I have not done that personally.
• Borrow the money - as others have said, if your credit is good, you can borrow money from 0% credit cards (those running those promotions for 6-12 months)
• Raise the money from family and friends - you can start with a small deal and raise money. This can be a form of a loan collateralized by the property.
• Partner up - you do the work, and/or your name is on the loan and another investor puts up the money; and
• Creative financing - this can take many forms like getting a seller to put up a 2nd mortgage and then give you credits at closing like deferred maintenance credits, etc. so that in effect you don't put down any money down. I've done this and it's actually easier with 50+ unit apartment buildings because seller 2nd mortgages is more common with multi-family compared with single family homes

[David Dachtera]

Originally posted by @Sheila Campbell:

@Jason DiClemente I'm active duty military, so getting a job in real estate isn't an option at the time. Thank you

Where a lot of folks slip off the track is they confuse "no money or credit" with "no money or credit of my own".

The group I'm in typically does deals with none of their own money or credit, yet credit does figure into the deals and money does change hands.

You'll want to focus on raising money for deals.

Right now, you may not know anyone who has money they want/need to invest. That comes out of relationship building. It's too big a topic for me to undertake in a post or right at the moment. In a nutshell, it's about building relationships while learning how to solve people's retirement funds problems. Those come together to help investors find more money than they can find deals for.

Research the topic of raising money for deals. It's often ignored or side-stepped.

[Isaac Owens]

@Kyle Myers not sure on the exact method, I've only just spoken with a client who said this is what they do. I don't do this myself

[Jose Castillo]

@Sheila Campbell learn how to wholesale. Absolutely you can get into real estate with no money. I've done my first flip using other people's money. All you have to do is learn how to find the deals and take it from there! I'm living PROOF!

[Joe Miller]

If you have good or great credit, you're in luck!

[Carl Crump]

Originally posted by @Sheila Campbell:

@Chris Connolly If you read above l, I used my VA loan to buy my current home

 Hey Sheila,

So I am a little late to this thread but want to give you some input.  I did not read every thread so apologize if I missed something.

First of all Chris had a good point about moving to a 2-4 unit property that you occupy. I know you are using your VA but there is not a limit on how many times you can use it... You would just have to sell your current property. I was in the military for 11.5 years and did not know i could use multiple VA's. I was waiting for the magical house I could use my one VA loan on. So selling then using on 2-4 unit will allow the rented units to pay your mortgage and be another source of income.

Secondly depending on how much your property has appreciated you can do a refinance.  I know you just bought it and haven't paid 

much down. If it has appreciated at all you can get 100% cash out of a VA loan. Usually max is 85% using FHA. Also you will skip 2 payments which will save you money too... Depending on your rate you could also just do a streamline refi called an IRRL and just skip the 2 payments.

Let me know if this helps or if you have any other questions.  Thank you for your service!!!

Carl

[Curtis Mears]

@Sheila Campbell

just a word of caution. I have purchased many properties cheaply because the previous owner did not have enough funds saved to do the necessary repairs. it tends to snowball. they do not have enough money to fix HVAC, then the roof, etc. eventually they end up selling to investors with money at significant discounts.

[Daniel St cyr]

@Sheila Campbell

You're a veteran it's not hard for you at all.

Just call one of the credit UNION out there and apply for a VA loan. Then look for new construction home . They will ask you for a GOOD FAITH deposit most likely $200 to $500

In the new construction home buyer don't pay

Closing cost SOMETIME , saler does.

So at the closing they will keep $1 from your good FAITH deposit and give you the remaining.

[Daniel St cyr]

@Sheila Campbell

Call the bank let them know that you want to buy another home because your neighborhood getting bab or house to small or .. I mean give them a cause.

You will be able to put it on rent and qualify for another one.

That's what I do.

[Ron Hall]

@Sheila Campbell,

Hi Sheila, there are a lot of different ways to come up with the down payment. One option is to wholesale a few deals to other investors, not the easiest thing to do. A few other options, would be borrow from friends and family, or use a cash advance against a credit card to cover down payment. Another approach would be a heloc (home equity line of credit), if you own your home. Hope this helps, starting out is hard work, but the pay off is awesome.

Good luck

Ron