A Word of Caution
There are no free lunches. When you bring nothing to the table, it’s because you’re producing something else, which is just as valuable as money. This is usually a skill, the ability to find a buyer, a seller, a strategy on how to help the seller solve a particular problem or something along those lines. You must bring something else to the table instead of money: skills, resources, or network. These are the things that you need, which will act as your share towards the money you would have brought otherwise. But as a layperson who may not have the ability to raise money, fix other property, find a buyer, or seller, then buying a property with nothing down will never happen. Just because you’re not producing money does not mean you are bringing nothing.
Four Options
Other People’s Money
This option is what most people ask about and is very popular on different platforms. It is essentially a case of using private money, hard money financing, seller financing, or negotiating a second mortgage. It is a version of one of these ideas which allows you to buy a property with little or nothing down. Most of the time, you would need to work with a private lender. A lender that will help lend you the money that is required to buy the property. This is the most simple and straightforward option of buying a property with nothing down.
The BRRRR Method
BRRRR stands for Buy-Rehab-Rent-Refinance-Repeat. With this strategy, you're looking to buy a distressed home and buy it up to 75 cents on the dollar, rehab it, rent it to a long term tenant, refinance it to pull out most of your initial capital, and then repeat the process. In this particular strategy, you are bringing something down to the table in the beginning. At the end of the refinance, the amount of money that you have left is usually considerably small. In some cases, you can even get paid at the time of the refinance.
Wholesaling
It’s a myth that you can become a wholesaler with nothing down. It takes several years of skill, experience, and several thousand dollars of investments to start getting leads from sellers and start finding buyers for the properties. While it is technically correct that you are doing the transaction with very little money, which is locked in the transaction, it is not possible to be a wholesaler with no money in your pocket and no skills that you possess. It usually takes several years of training for a person to become a wholesaler.
I spoke with a guy named Kevin recently, and he told me that he wanted to buy a property but does not have much money. He read that he can become a wholesaler with no money down. I asked him what skill he would bring to the table if he did not have the money. His answer was, and I quote,” I have no other skill and do not know any buyer or seller.” I told him that he would need to apprentice under someone, learn skills, and only then will he be able to make money as a wholesaler.
House Hacking
This strategy does not work for investors. It is a hybrid between an owner occupant and an investor. For example, you can buy a multi-family property with 3.5% down, and you live in one of the units while renting out the rest. If you have an agent’s license, you can bring very little money to the closing table. If you buy the property correctly and you can get paid to live in the property. The rent that you collect from the tenant would be more than enough to meet the debt obligation and more.
Conclusion
Buying a property with nothing or little down is possible, as long as you have the skills to make it happen.
