No money to invest? No problem. Here are 6 things you can do right now

Congrats! You have made the career leap into real estate! You’ve been telling all of your friends (both on and offline) that you’re an investor now. You could be dressing differently, speaking more confidently, and impressing anyone and everyone you talk to with your vast investing knowledge. Feels pretty good, am I right? Maybe you’ve envisioned having properties that cash flow every month, retiring early, driving a classic 60s Mustang wherever you go. That’s the life we all want to live!

But wait?

What was that?

You reached into your pockets and came out empty?

What are you going to do?

Well, I’m here to tell you that you’re out of luck. There is nothing you can do, you’re screwed, and really you should give up now before things really start getting bad… I’m totally kidding of course!

Thankfully, real estate has endless routes for income vehicles on the road to financial freedom! For me, Southern California, home to some of the more expensive properties in the country, is my local market. You practically need to invent teeth to have the money to put 20% down on a halfway decent property. To say that you need to get creative as a young investor in order to be successful here is an understatement.

But getting creative doesn’t mean it’s impossible. People such as myself and many others in my area are finding good deals and closing on them without any of our own money! And these skills don’t end with making good income on only the first few deals before we have money of our own. An investor can spend their whole life making money off other people’s money!

So, if you’re thinking that money is the biggest thing holding you back from financial freedom, think again! By not having money right now, you are forced to learn skills that will make your life very fruitful, both financially and personally.

Here are 6 things you can be doing right now as an investor without money:

1. Start with why

I stole the title of this point from the book Start with Why by Simon Sinek. It’s a great book if you haven’t read it, but the name speaks for itself. The most crucial decision in your investing career will be why you’re investing in the first place.

I just watched the Adam Sandler movie Mr. Deeds and there is a great scene where he is talking to a group of investors who are planning on selling the company connected to his family. To persuade them not to sell he says, “All I'm saying is, when you were kids did you dream about becoming a savvy investor one day? Who would think with his wallet instead of his heart?” He makes a great point. I doubt any of us dreamed that we would grow up to be an investor. But it is through investing that we can ultimately step away from what we have to do and into what we want to do.

I have conversations often with people looking to break into the real estate investing world, and “why” is always one of my first questions. “Well, I really want to gain financial freedom for my family and myself and I want to live without worry of unexpected things that life could throw my way. Blah blah blah.” Seems like a good answer, but it’s not. Think about it, if you lived your entire life only to make money and avoid debt or hardship, at the end of your life, what would you have to show for it other than fear?

Nothing.

People who wish to become financial free wish to do so in order to do the things they love, even if they don’t realize it. Boil your motivations down to a few specific passions tailored to you. The thing I love about Brandon Turner’s explanation for his “why” is that he knows his specifics. He wants to be a good family man and to travel (among other things, but you get it). So, when people tell me they want to be financially free, I feel inclined to press them on it.

It’s important to be honest with yourself when you ask yourself “why”, because this will help you stay on track and bring you closer to the real goal you hope to achieve through all of this. Seriously spend some quality time interviewing yourself and nailing these down.

And there is confidence found in making this decision because it is 100% personal to you. Do you want to adventure through the jungle discovering new medicines, plants, and animals along the way? Or maybe you’ve missed too many of your kid’s games, plays, recitals, etc, and it’s time to change that. There is no greater choice over the other because it is your decision, so don’t let anyone make it for you.

So, while this option will not directly make you money now, when you identify your specific “why”, you have created a clearer path for yourself that will get you to achieve your goals much quicker than had you just been focusing on how you’re going fund deals. How you get there becomes less important. Why you’re getting there is your main focus.

2. Double check your funds

Another one of my friends recently found Bigger Pockets and found the rush of investing to be enthralling much like many of us on here. He felt that his savings and income were nowhere near what it would cost to put money down on a property.

But when he finally got around to contacting a good, investment minded agent, he was put in touch with a lender and educated on his financing options. Through an FHA loan, he only had to put 3.5% down and was actually able to buy a duplex he house-hacked. And he owns it all by himself!

So, while this article focuses on investing without money, I will stress the importance of being 100% confident with physical proof that you cannot afford your own property first.

3. Find a mentor to fund your deals

From what I can tell on the forums, people have the hardest time finding a mentor to work with, so I am hoping to clear up any confusion for people as someone who has had success working with a mentor. Again, it starts with why.

Why do you need a mentor? What are the specific benefits to having them on your team? Honestly, in most cases, having a mentor is unnecessary. And most people seek them out to have a scapegoat should their deal turn sour.

While this may bring you great knowledge along the way, many, if not all of the concepts or insights any guru, partner, or mentor is going to teach you can be easily found in the many books, podcasts, and webinars that are available right here on Bigger Pockets for free or a small fee. There is nothing that a guru or mentor can teach you that isn’t already out there. And a partner is going to take away from your own return on the investment!

So, if you have the money to invest, why spend it anywhere else than on your own personal investments? A good agent and property manager can help you find properties and maximize your cash flow. The only time a mentor makes sense is when you need funding for a deal. And if you’ve found this post, let’s assume that’s you. So, how do you find the right person?

I know a guy who was down on his luck because of COVID-19 and recently moved back to his parents. He heard about Bigger Pockets and got so excited to begin his investing career, but money was an issue. Not even a week after discovering that real estate rentals could help him make passive income, he approached his parents and a neighbor about partnering up with him on deals.

How do you think that went? Terribly? Correct! They not only told him no but told him that his plan was totally insane. And it was! But for a young, eager investor, hearing that can completely crush your spirit and the feeling of hopelessness can creep in.

So, should you approach a potential investor with money, whoever they may be, come overly prepared. Come to them already a master of the areas you believe to have investment potential. Prove to them why a particular property would make a better investment than any other investment in the entire world. And most importantly, come to them knowing what you’re talking about. Nothing turns someone off quicker than a person who asks for money without a clue as to what they are talking about.

As someone relying on that person’s money to invest, your sole focus should be helping them maximize their return. And this can cause tension if you are hoping to come out of the deal wealthy. In most cases a 50/50 split with that investor is rare. A lot of investors who fund newbie deals feel that their expertise is enough compensation for you. And it might be! You’ll have to decide on your niche and connect with people who are having success in it. But if you’re relying on this partner-funded deal to make you good money, your selfish motives could cause a riff and then the whole partnership is ruined.

But, when your focus remains on the benefit of your investor and you produce crushing results, suddenly YOUR expertise becomes more valuable. When you consistently produce positive deals, people with money will start to seek you out and you can expect a much higher cut of the deal.

This may be the best option for many people who read this, so knowing the reality of the partnership is very important. I also have read a lot on the forums about people who put their partnership agreements in writing to prevent anything from becoming a complete disaster.

4. Private money lending with the BRRRR strategy

I think this is the coolest strategy for no or low money investors. That’s just me though. I have always found it fascinating when a distressed property in my neighborhood is bought and fixed up. The beauty of the new property brings in great tenants who contribute to the neighborhood’s success. It has this very special, meaningful impact on a community and could even kick start a total neighborhood revival. Oh! And investors have the potential to make a great income with no money of their own down.

If the BRRRR strategy is still unfamiliar to you, let me some up quickly. You buy a distressed property with cash, so you own 100% of it without a loan. You then fix up the property adding value along the way. After the “rehab” portion, you rent out your new and improved beautiful property. Then, after a while, you refinance to a conventional loan to pull out the equity and start the process all over again on another property!

This works well for us poor, newbie investors because there are plenty of rich people in the world willing to put up the money if they are going to make it back and then some at the end of the day. They fund the deal, you are the “boots on the ground”, meaning that you handle all the repairs and check for their thoroughness and completion. Your ability to stay savvy and develop relationships will prove to be crucial here. Once the rehab portion of the process is finished, you work to get the property rented at which point you’ll have strong cash flow without a mortgage payment just yet. Once you can pull the cash out during the refinance portion, you pay off your partner and suddenly you have your own totally updated rental property all to yourself!

Understanding the ins and outs of the BRRRR strategy though can be more complicated than my quick overview. Calculating the After Repair Value (ARV) may seem like a shot in the dark if you don’t know what you’re doing, but thankfully you’ve found a website with thousands, if not millions, of people who have been in your shoes. I’m sure it won’t be hard to find someone to look over your calculations.

There is a free BRRRR guide under “Guides” in the “Education” tab above to get you started. It is written by David Greene, author of the BRRRR book, which is another excellent, and cheap, way to learn this method.

Also, there is free digital and audio versions of Brand Turner’s Investing with No (and Low) Money Down. You can find this under the “Bonus Content” page.

Finding that first person to trust you may take a significant effort, but again, it goes back to why you are doing this and what can you bring to the table. If you have something valuable to offer to someone, you’ll get what you need in no time. And, if you have beautiful success with the first deal, you’ll begin to develop a reputation as someone who can produce cash flowing deals, and the overall process becomes much easier with time.

5. Wholesaling

There are a lot of people who use wholesaling to make quick cash to save up for their first investment property. Despite the success many wholesalers have, there is great debate over the morality involved with it. It depends on how you look at it. I’ll explain.

Wholesaling, at its essence, is when an investor finds deals on or off market through various methods, buy or go into contract on it, and then quickly turn around and sell it to make a profit. Usually not a way to earn six figures on one deal, but you may be able to make $20,000 or more. If you do that a few times, suddenly you have enough to put 20% down on a home the traditional way.

Sounds pretty good so far. Here is where people have problems with it. Most cases of wholesaling involve a seller who is in a bad, even desperate, spot in life. Maybe they lost their partner who supported the family, or they lost their job due to COVID. While going through an extremely difficult time in their life, they aren’t able to afford their house payments anymore, they go into pre-foreclosure or are issued a Notice of Default. Because of this, they want to sell but can’t on the MLS because they can’t afford listing fees, closing costs, etc., so they decide to sell to a wholesaler for pennies on the dollar compared to its market value. While they are working out the deal, the wholesaler is working on selling that property immediately to an investor for more money than they’re buying it for, making a profit.

So, you can look at my little story in a number of ways. Some people look at it as saving the distressed seller from foreclosure which would’ve had a drastic impact on their credit score, deepening the hole they found themselves in. Other people though look at it as taking advantage and making a quick buck off someone who is down and out.

It is all going to depend on your moral compass. I have met plenty of agents who vehemently disregard wholesalers, but then again, I can probably write a post or two on questionable actions some agents have taken too. I’m not here to persuade you in either direction, only to present the options. I will say though that your reputation is solely dependent on the actions you decide to make or not to make.

6. Nothing

I may have been joking about it earlier in this post, but now I am not. The truth of the matter is that even with millions and millions of dollars, successful real estate investing is much harder than spending 20 minutes on Redfin searching the MLS and running a few calculations. Even when your numbers add up on paper, there are still so many wild card factors that vary from property to property. Being an expert in the multiple layers involved in a successful real estate deal is going to pay dividends over time.

Thankfully, unless you are in a tight spot right now, there is plenty of time to invest down the road. There is no rush at all. I know how intimidating it can be though to listen to a podcast where a 16-year-old was able to own 100 doors and cash flow thousands each month, but realistically, there is a reason they are on a podcast. Their story is both very impressive, but also very rare. To compare yourself to them would be like me comparing my writing to Ernest Hemingway’s. He was just a better writer, but that doesn’t mean I can’t write and write with wild success. The same can be said for real estate. Plus, with COVID-19 having the effect on rates that it’s having, the prices of properties have sky-rocketed and inventory is very limited making it prime time to absorb as much knowledge as possible.

So, if money is holding you back, formulate a strategy to increase your income, and while this plan is taking action, start building your real estate knowledge. It’s going to help you no matter which route you choose to take. I analyzed over 100 deals in the areas I liked before I bought my home. I became a master of those zip codes, understanding good price points based on square footage, number of bedrooms and bathrooms, the surrounding area, how much rent I could get, and more.

I am also reading as much as possible, gaining any bit of knowledge I can. There is a tremendous selection of books to choose from in the Bigger Pockets bookstore. I do not believe that reading them in any particular order is needed. Start with what sounds interesting to you. It’ll help you stay motivated and interested on your path to realizing your dreams.