13 Oct How to Invest in Real Estate with No Money
Many people dream of investing. Whether in the latest blockchain technology, mutual funds, bonds, or real estate, most people hope to make money quickly and easily. One of the proven methods of investment is real estate. This begs the question, “can I learn how to invest in real estate with no money?”
People often believe real estate investing is out of their range simply because they don’t have enough liquidity in their portfolio to invest. But did you know that you can invest without having cash on hand?
It may be difficult to believe that real estate, which, unless you’re a cash purchaser, requires tax records, proof of employment, lenders, attorneys, brokers, and other terms that may sound scary, can be done on a budget and even without any money down.
How, you ask?
Keep reading to discover how to invest in real estate with no money.
Can you invest in real estate with no money?
Many people want to invest in real estate but are discouraged because they don’t have the funds to put money down on investment properties. But did you know that you can purchase investment properties with no down payment? Today, we’re going to teach you just how to invest in real estate with no money.
To create a real estate deal with no money down, a structured agreement needs to be made. This often means you will have to use this owner financing deal that uses principal-only payments.
For example, our real estate company has a structured deal where we make payments of $1,540 a month for 24 months that only cover principal expenses with no interest. After we made this deal, we sold the home to a buyer for $499,000 on a lease-purchase, rent-to-own.
The buyer, our renter, will pay us $2,100 a month with no credit and principal. It’s just a straight lease payment, so we're paying out this. Our company is getting principal credit with each payment, and they are just on a lease at this point.
To do this rent-to-own, the buyer had to come up with a down payment–earnest money that helps to ensure the renter will buy at the end of the lease period. Without this earnest money, we would simply have a renter.
In this case, the buyer put down a $64,000 non-refundable down payment–this money is what will ensure they will not break our contract and buy at the end of the lease. Without the earnest money, the renter could simply walk away, and we would have to find another person to rent or purchase the home, putting us at risk of losing money.
This down payment made by the renter is what we call payday number one. In total, we will have three paydays on all deals of this nature.
Payday number two is the difference between what we're collecting in what we're paying out after 24 months. For the example we’re talking about, that comes to a little over $13,000.
So what is payday number three?
Well, at the end of the lease, our company will have paid for 24 months of principal, so we only owe $383,000. You take the $420,000 minus the payments made. We owe this to the seller.
It's going to bloom out in two years. The buyer owes us what? Their $499,000 purchase price minus their deposit, which comes out to be around $435,000. This is what I call payday 3, where we receive about $50,900.
Get a fuller picture of how to invest in real estate with no money by watching this video:
Is it really possible to invest in real estate with no money?
The short answer to this question is yes. The reality is that investing in real estate doesn’t require deep pockets or tons of liquid assets.
Many of the necessary steps needed to invest in real estate, you can do yourself. You don’t always need to hire people to do all the work for you. While it may be easier to handle with assistants calling potential sellers and other employees, you can start slowly and do the majority of work yourself.
Now, that said, you may not know how to build a website–or maybe you do but hate it–so you may have to hire someone for small tasks like that.
You may also have small fees come up from time to time. But the important thing to keep in mind is that you can get started in real estate for little to no cost. Plus, once you have your first investment sold, you will make enough that you can spend more money on the next investment!
That’s the beautiful thing about real estate. You can often make good returns with little to no money down, which allows you to scale your investments even more quickly.
Don’t Forget These Tips as You Learn How to Invest in Real Estate with no Money:
- Make a structured agreement to fit your needs
- Incorporate earnest money in to the agreement
- Complete the process yourself as you are able
- You may have small fees, but you can get started for little to no cost!
If you want to learn more about how to invest in real estate with no money, be sure to check out our resources page.
Don’t forget! Get your free copy of our Real Estate Investor’s Blueprint. Just fill out the form to the right and we’ll email you our step-by-step guide to getting into investing and owning more homes without using your cash or credit.