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Real estate investing

28th November 2020

If you’re like many first-time real estate investors, you’ll look for ways to jumpstart your real estate investing career without spending much. That’s where this article will help. Start finding the right opportunities for you and your growing business, even if you’re low on capital.

Do you know how much money you really need to start investing in real estate? It’s probably less than you think.

The goal is to help you generate income from real estate investing now. With many of these approaches, it’s easy to flip your first deal in weeks without putting down anything. If you have the time, the talent and the desire to excel, you can start flipping properties for massive profits and use those profits to fuel your business and your lifestyle.

There are plenty of real estate investors who slide right into one or more of these methods and stick with it for the long haul if it’s not broke why fix it, right? There are plenty of others who use these low and no-cost methods to build up meaningful capital and credit and, with that, dig into some of the more advanced, higher cost methods for building a real estate investing fortune.

The choice is yours but, for now, focus on these methods for driving serious revenue without serious cash in the bank.

ASSIGNMENTS

Assignments also called “wholesaling” is a common first money-making step for new real estate investors. With this strategy, the wholesaler finds a property and negotiates the final terms, including sale price, contingencies and closing timelines.

Once the property is under contract, your job is to find a cash buyer usually a rehabber or landlord to assign the contract to. That end buyer takes over the exact terms of the contract, puts down any required deposits and sees the deal through to close.

At close, the cash buyer takes ownership of the property and you get an assignment fee for your work. Often, these fees are in the $5K to $10K range but can easily be more depending on your location, the property sale price and how well you negotiated the pricing and terms.

HARD MONEY

“Hard money” isn’t hard to come by at all. If you have a solid deal on the table, you’ll have no trouble finding a hard money lender to back your deal. Because hard money functions like an all-cash transaction, it’s easy to find a seller or wholesaler willing to cut you a serious deal in exchange for a quick cash close.

Hard money comes from hard money lenders. These organized lenders are licensed to loan to real estate investors and rehabbers.

Hard money lenders look specifically at the equity in a property versus digging into your finances and credit history. If you can show there’s significant value in this deal, hard money lenders will gladly hand over the cash.

That said, there are some specific terms to getting hard money loans. In most cases, hard money lenders will only loan 60% to 75% of the property’s after repair value (ARV). This is the estimated property value after repairs and rehab work is complete.

SELLER FINANCING

Also called “owner-financing,” seller financing means the seller is acting as the bank. As the buyer, you’ll make monthly payments to that seller, just like you would a traditional bank or lender.

Many investors with limited capital are hot on this approach because it’s private. The seller can set the terms as far as down payments, loan duration and interest rate. In most cases, the buyer will assume the second mortgage on the property, helping the seller get out from under the property while creating a consistent revenue stream for that previous owner.

SUBJECT TO DEALS

Similar to seller financing, with a “subject to” agreement, the new buyer/investor assumes ownership of the property and takes over the terms of the existing mortgage or loan. However, the seller remains on the title and remains the mortgage holder until you’re able to pay off or refinance the loan in full.

While the mortgage lender can call a loan due, it’s not common. At the end of the day, a lender wants their money. They definitely don’t want to take ownership of a property should the owner not be able to pay in full.

When structuring subject to deals, look for distressed sellers someone who needs to get out of their property and financing ASAP that also wants to avoid a short

RENT-TO-OWN PROPERTIES

As the name suggests, in these investment scenarios the renter becomes the owner. Ideal for investors or retail buyers with limited or no capital, rent to own agreements enable the buyer to rent from the current owner for a set period of time. Typically, this time period ranges from 12 to 36 months. At the end of that period, the tenant can exercise the baked-in purchase option and move to purchase the property.

In most cases, the renters pay a non-refundable “option consideration” when they sign their rental agreement. If they opt to buy at the end of the lease term, that fee is applied to their down payment. If they choose not to buy, the owner keeps this deposit.

ASSUMABLE LOANS

Assumption mortgages or “assumable loans,” are similar to subject to deals. The difference is that with assumptions, you take over the seller’s existing mortgage. You’re legally assuming the mortgage and ensuring it’s 100% in your name.

Depending on when the property owner secured the loan, assumption mortgages can be a great way to get a below-market rate.

LINES OF CREDIT

A line of credit functions almost exactly like a credit card. A bank or lender offers you an often-flexible credit amount and you can access those funds as needed. When you have credit outstanding, you’ll make monthly payments with interest. When your line of credit is paid in full, you won’t.

When you launch your real estate investing business, you’ll be a full-fledged business owner. With that, you’ll be able to leverage your business to take out a more substantial line of credit. That credit can be withdrawn as cash, or you can access it via a debit card- or check-style system.

While you’ll likely pay more than with a traditional real estate loan, the flexibility and versatility can’t be beat.

RETIREMENT ACCOUNTS

The majority of Americans have retirement accounts. However, while many think their retirement accounts are meant to sit, often that’s not the case. Many IRAs and 401Ks have a “self-directed” option. With these accounts, you’re able to move the funds from your existing fund-based structure to something you want to invest in for the long-term (like real estate).

Self-directed IRAs and “solo” 401Ks can be used for virtually anything, from funding the purchase price of an investment property to rehabbing it. Depending on the structure and limitations of your accounts, you may also be able to invest in tax liens, gold, notes and other less traditional investments. If you don’t have a flexible account, contact your employer or account holder to find out about rolling your funds over to a self-directed option.

PRIVATE MONEY

Private money can be any funds from anyone as long as they don’t come from a bank or traditional lender. You could easily tap a spouse, parent, auto or uncle, sibling, friend or neighbor to act as a private money lender and fund your next deal.

Because private money lenders are using their own capital, they get to set the terms for the deal. Because these lenders are typically using cash in the bank, your deals can move as quickly as your funding source does. If they can write you a check right now, you can close immediately. Compare that to the 30 to 60 days it takes to close a traditional bank-issued loan, and the benefits are immediately clear.

So ... What Next?

The next step is to TAKE ACTION. With these insights and intel under your belt, it’s time to really assess your lifestyle, your goals, your available capital if any and where you see yourself in the next 30 days . . . and 30 years. From that broad vantage point, you’ll be better able to hone in on a real estate investing strategy that makes sense for you right now, while identifying exit strategies that could be ideal in the not-too-distant future.

As you’re developing your initial strategy, remember that nothing is cast in stone. For example, it’s easy to start as a wholesaler and assign contracts until you’ve built a solid cash buyer base and have cash in the bank to jumpstart your rehab career.

You might go the traditional route and take out bank loans or hard money loans, then parlay your single-family investing into apartment buildings or commercial properties, all funded by your personal private money network. You might find your fortune with one of these niche methods and keep on going.

In this business, the choice is yours because the real estate investing landscape is broad and lucrative. There’s something for everyone here, whether you’re an experienced investor with endless cash reserves or have never even glanced at a listing. That’s why this is an optimal path that drives you straight toward lasting success and lasting financial freedom.

I hope now you know how start buying properties with or without capital.

Comment Below and Let me know, and of course feel free to contact me any questions you might have about getting started.

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