Most people fear venturing into real estate investing thinking they need a lot of money to start. Others fear the “No money down” scams out there. S
Can you spend little to no money investing in real estate? Let us explore this topic in this article.
To buy real estate traditionally requires that you have cash, or get a loan, which also requires a lot of cash as down payment.
If you are a real estate investor looking to do many deals, this can become unsustainable.
There are a few methods of investing in real estate with little to no money:
1) Wholesale real estate investing
Wholesale real estate involves locating a cheap property then putting it under contract. Then you sell it to a real estate investor at a discount.
You can either assign the contract to the buyer, or you can do a simultaneous closing where you buy the property, then sell it on the same table.
If you assign the deal, only earnest money is needed to put the property under contract. This is usually $100-$500.
The real estate investor buyer must produce earnest money to get into the deal, meaning you do have spent no money.
If you do a simultaneous closing, a few scenarios can happen. You can use cash from your buyer to close the first transaction. The same cash is used to close the 2nd transaction. You walk away with the difference.
In this transaction you spend no money.
In a double closing, you might need transactional cash to close the first transaction. Typically hard money lenders will not need any money from you to fund such a transaction.
Again, you spend no money of your own.
2) Seller financing
Sometimes a seller can accept monthly payments instead of all cash for their property.
Some down payment might be needed to make this happen.
You then turn around and look for a buyer who will also be making monthly payments, typically higher than you make. Of course, they will have to produce more money down than you have paid, meaning you end up spending no money of your own.
Such deals are owner financing, lease options, rent to own, etc.
In this case you will need the down payment to make the deal happen.
Your real estate investing transactions can be funded by a money partner. You spend no money of your own, but share profits.
You can use a home equity line of credit or similar credit to finance your real estate investing transactions.
Even though you pay interest, you do not spend your own money.
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