Invest in Real Estate Without Money: How?

Often, when I tell people to invest in real estate, I am asked, “Out of all investment options, why real estate?”

And then there are those who say that investing in real estate takes too much time, effort, and stress. I then thought perhaps one thing has been overlooked. There is a way to invest in real estate without money. Yes, you read that right. How? Keep reading.

How could investing in real estate without money be possible? Nothing worth having comes easy. Everything that is worth having requires time, skills, sweat, equity and good rapport or relationships.

A real estate deal can be structured in various ways, and if money is off the table, you then ask, “What is there for me to offer?” What you can offer is time, your people-skills and your ability to find an investor. Yes, that is one thing that people do not think of, an investor. Find people who are willing to invest in a real estate deal, without having to be the buyer or the seller. Be the facilitator of a real estate deal.

Method 1: House Hack

A primary property may be a bit costly, thus requiring a reasonable amount of cash up-front. However, there are properties that are located in areas that are eligible for USDA or VA loans. Even so, these days, as long as we are resourceful enough, we will come across conventional loans that will only require 3% down payment. To add, if you can negotiate with the seller to cover the closing cost, this will leave you with no additional out-of-pocket cost. This method is most preferable than going to a lender who will require a 20 to 30 percent.

Essentially, you’d have to find a home that you’d want to buy and actually live in - for at least 1 year. This way, you not only have a home but a property that you can invest in through renovation or improvements. Lenders often require property owners to live in their purchased homes for at least 1 year before the homeowner can turn the property into a rental. However, this clause will not and should not stop a homeowner from renting out rooms to friends or borders. Renting rooms out is a great way to gain from your without having to sell. It will also help cover the mortgage. Buying a duplex will also help achieve the same goal. Live in one side of the duplex while you rent out the other side.

Method 2: Find an Equity Partner

If you found a great deal, but don’t have the money for a downpayment, consider forming a mutually-beneficial partnership with an investor, one that would be willing to purchase a house and you as the industrial partner. If you are actively participating in the field of real estate or related groups, you will eventually meet professional groups who belong to the field of construction, investment, decoration, renovation, and even those who flip homes as a means of investment. If you prove you are a hard worker and offer value, there are plenty of investors with more money than time and would be willing to partner with you on a good deal.

You can negotiate terms, and often, this would be a 50/50 trade/partnership. You being the industrial partner, bring the deal to the table for the investor, manage the deal if you get the investor to say yes, and finally, have the investor see the worth of putting his money on the table. Needless to say, the investor’s job is to just bring in the money while yours is the rehab and the eventual sale of the property.

Method 3: Hard Money Lenders

Compared to banks, “hard money lenders” usually have less stringent underwriting requirements. They will loan you money for both the purchase and rehab under the trade of higher interest. Of course, how else can they make money, right? Usually, they will lend up to 70% of the after repaired value, so if you can find an exceptionally priced property you could get away with no money down. You can also try the “personal loan” approach. Find an equity partner as per method 2. With a private loan, the negotiation is a lot more flexible, including loan amount, interest rates, and payback terms.

Method 4: Seller Financing

Everything in real estate is negotiable! If you find a property you want to buy but have no money to invest, you can see if the seller would be open to selling it to you with seller financing terms. f you have no money to invest in real estate, why not get the seller to finance their property to you? This is very similar to a private money loan, it’s just in this case the lender is the seller. Often, the seller doesn’t need all the money upfront, and if you can figure out what they really want to get out of the sale, then they may be able to help you by spreading out the payments over time. Of course, this only applies to sellers who are not in need of the money straight off and are open to this kind of investment deal.

Method 5: Wholesaling

Wholesaling is HARD WORK. It is more like a job as opposed to an investment, but there is good money to make from it. The ultimate goal is to locate motivated sellers, get in touch with them, knock on doors, you may even have to place some cold calls, or send a direct mail or email if possible. If you do get in touch with the seller and you are able to present your deal or proposal, put the house under contract for a price lower than what another landlord or rehabber would pay. Once that is all sorted, you can then sell the contract to another investor for a higher price, ultimately collecting the difference as an assignment fee.

The challenging part about wholesaling is that you will have to spend a lot of time in research in finding very good deals, more time than what an average investor would spend on a deal. The tipping point is to also know how much the rehab will cost and compute the run no the costs (don’t forget to mark it up by 20 percent as a fallback plan in case you go over budget on the renovation). The above-mentioned skills anyone can certainly learn along the way, but, it takes time. I would not recommend this method to those who are new to real estate investment. Take your time, study, and please do not wholesale if you do not have the solid foundation of support network that you will need to make it through this method.