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How to invest in real estate with no money?

invest in real estate with no money

Stepping into the ring of homeownership may seem like a major challenge for people who have yet to build strong financial standing. If you are one of these aspiring real estate investors, the thought of making investment in real estate properties with no money might sound like an unachievable fantasy. However, with creativity, knowledge in the right areas, and a dash of discipline, anyone can find methods suitable for their unique circumstances.

One potential solution is seeking for a ‘seller financing’ arrangement. In this scenario, the owner of the property essentially acts as the lender. Rather than receiving a lump sum of cash after the sale, the owner would receive monthly payments over an agreed time period. Another avenue may be to contract a loan by putting up collateral other than the house you are buying. This could mean leveraging a credit line against your primary residence,  or procuring a loan from a hard money lender or private money lender. Some people even use cash advances from credit cards! (That is not recommended, but flippers do this a lot) 

All these options usually carry a higher interest rate compared to conventional loans, but they are quicker, easier often, and can be done much more often than conventional loans. (Good luck getting more than 1-2 conventional loans in any given year) 

Remember, each of these strategies come with their own set of pros and cons. Therefore it is important to objectively assess your position and adapt accordingly. To be a successful real estate investor, flexibility, and the ability and the will to learn and explore new ways of doing things, and actually execute on them- is paramount. 

How to be an investor with no money? Creative Finance?

To be an investor with no money, it may seem like a daunting challenge, yet there are strategies you can employ. but VA loans, seller financing, and  “subject-to” transactions are options. This is a short explanation of seller finance and subject-to (Creative finance):

Seller financing and subject-to transactions: Also known as “creative finance”, these have become very popular of late, due to high interest rates making conventional home buying much harder than it ever was. Essentially, seller finance / subject to transactions involve the buyer entering a deal with the seller directly, without any bank involved, for the buyer to make payments to the seller each month, essentially turning the seller into the bank.These transactions can be structured in many different ways- hence the name “creative finance”. A simple example is: 

Seller has house worth $500,000.00, and wants to sell for $500,000.00.

Sellers Mortgage is $300,000.00, mortgage rate is 3% (since that’s what lots of mortgages are which were obtained during low interest rate times)  Sellers current monthly payment might be around $1800.00 with taxes and insurance.

Seller equity is $200,000.00.

Under a conventional deal, buyer may need to put 20% down ($100,000) plus closing costs (maybe $20,000) then borrow $400,000.00 from the bank at today’s mortgage rates of 7%. This payment might be close to $3200.00 per month.

Under a creative deal, the buyer could:

-Simply “take over” the sellers mortgage (e.g. take the property, with the mortgage on it, and “step into the shoes” of the seller, and just start paying the mortgage, just like the seller was)

-Make a deal with the seller for the sellers equity- for example, maybe giving the seller $50,000.00 up front, then paying the seller monthly over a period of years.

-The buyers here, instead of paying $120,000 out of pocket and $3200-3500 a month, by doing a creative deal, could just pay $50,000 out of pocket, and only pay $2800 a month. A much better deal.* This is not a “no money” deal, but it certainly is a better one than, coming up with a $120,000 down payment, and then hoping that the bank decides you meet all the income requirements for a loan on top of that (not that easy if you don’t have a high income).

Real estate investment trust

Developing a successful real estate investment strategy often demands a solid understanding of various financing techniques. One such popular investing method is through the use of REITs, or real estate investment trusts. This method essentially operates like a mutual fund for real estate whereby an investor puts their money into a larger pool managed by professional investors. These trusts use your investment, combined possibly with a money loan, to buy and manage properties, thereby generating positive cash flow from the rents collected.

Real estate investment trusts offer several advantages for those who don’t want the hands-on hassle of being a property manager. Investing in REITs works much like investing in stocks, making it a good option for individuals unfamiliar with the day-to-day management of owner-occupied properties or distressed property. The upfront payment requirement is often significantly lower compared to purchasing an entire piece of real estate outright. With REITs, private money lenders and traditional lenders are not involved, which eliminates the need for loan approvals or monthly payments. As a result, investing in REITs is an excellent way to step foot into the world of real estate investment and make some extra money without having to have a significant amount of initial capital.

VA loan

A popular option among investors looking to expand their real estate portfolio is leveraging rental income to finance the purchase of new homes. This method can significantly reduce the purchase price, making a real estate transaction more affordable. However, since the majority of these deals involve private money loans, it’s critical to meticulously evaluate all potential risks and rewards.

Certain types of loans, notably the VA loan, offer notable advantages for investors. They have a sale clause that can significantly impact the terms of the sale, potentially resulting in substantial savings. VA loans are one of the few options that allow investors to engage in a real estate project similar to investing in mutual funds. This makes it possible for individuals with little to no available capital to participate in the real estate property market. As a result, potential profits from the sale of the homes could result in a positive impact on an individual’s real estate portfolio.

Home equity loans and Equity Lines of Credit

The process of borrowing against your own primary residence is a traditional method to raise money for a variety of needs. HELOC’s, or Home Equity Lines of Credit, essentially turn your primary homes equity into a credit card, that can be drawn against. This is a very powerful took–  Leveraging equity in a primary residence, can act as a down payment for a whole other property, without having to pay any money out of pocket. However, if this is done, then the money taken out of the primary residence must be paid every month, as essentially a second mortgage on the house, with a monthly payment every month.

Because the money needs to be paid back, this powerful tool must be used responsibly; if people start taking out money from their primary home and buying cars and boats, which do nothing but cost even more money, then disaster could ensue. However, if a homeowner takes $125,000 out of their primary, converts the garage to an ADU which rents out for $2500 a month, but the extra mortgage payment is only $1250.00 – well, then that was a smart investment. That homeowner is now making $1250 in extra cash every month. 

The key to taking money out of a primary residence to invest in other things is – make sure those other things will generate enough income that you can cover your extra mortgage payment- or, in the alternative, you need to know that regardless what happens, you will always be able to make the extra mortgage payment.

While it can seem a little scary, the reality is that, taking money out of existing properties to buy more properties- aka leveraging- is the way that real estate fortunes get built. Most people, real estate investors included, do NOT have the income to keep on saving up huge downpayments and buying one piece of property after another after another. They tap into equity they have built in previous properties, and use that  to buy their new properties.

Option-to-purchase agreement

One favored method among those who can’t afford the traditional mortgage loan is turning to an agreement that enables you to secure a property with promising prospects. Known as an option-to-purchase, this agreement essentially starts out as a lease, but the tenant and the owner agree that the tenant has an option to purchase the home at a certain price which is agreed upon at the start– and the option must be exercised in a certain amount of time, or it expires (and the agreement turns into just a regular rental agreement). This enables the would-be buyer to “test out” the property, and also, to get their financials together during the lease term.

And, if the property is worth significantly more at the end of the option period than it was when the renter moved in, most likely the option price is far lower than the actual property value. At that point, financing would be much easier for the renter / buyer to get, because when the value of the property is far in excess of the purchase price, a buyer can get money from just about anywhere to buy it (See “Hard Money Loan” below).

This strategy is a great deal for would be buyers-the only downside being that, sellers know how good this is for buyers, so they typically do a few things to make it more expensive: (a) Charge an “option fee” meaning the renter/buyer has to pay a one time fee, which they can never get back, just for the privilege of being in an option agreement; and (b) Typically, the “rental” agreements are much more onerous on the renter/buyer than if the renter was a normal renter. For example, it is typical that renters who are renting pursuant to option agreements need to do all their own repairs on the property, and often need to pay things that normal tenants do not (Sometimes they even have to pay property taxes).

Hard money loan

Drawing from the concept of flipping, house flippers seeking a quick turnaround of properties for sale find this type of loan quite appealing.

These are quick loans at high interest rates, where the lenders do not look much at the credit or financials of the buyer, so much as the property itself, and the buyers plan for it. So, if you are a buyer who wants to buy a distressed property, and you have construction experience or other investment experience, you may convince a hard money lender to lend you money to buy the property, and even to do the construction on the property.

These loans are typically short term, and buyers need to either refinance into a conventional loan afterwards, or, need to sell (usually “flip”) the property. A nice thing about hard money lenders is that there are so many of them, and they are very versatile in what they can do and under what circumstances they will loan money. These are options for people who do not have traditionally as “strong” of finances as others, but who have construction/rehab/sales experience in real estate.

Private money loan

Private money is similar to “hard money” except these lenders are not banks or lending institutions, they are private individuals, often lending funds out of IRA’s or other investment accounts, to be used by real estate investors, usually for short terms.

These loans can be very beneficial for investors, because the terms are as flexible as the private money lender is willing to be, and every once in a while, a buyer can find a private money lender who is very easy on terms and who will lend money for rates and terms that are far better than market rates and terms.

There are entire courses and guru-seminars dedicated to how to find these types of lenders, where to go, and what kind of relationships need to be established to get contacts like these. A good place to start would be your local REIA (Real Estate Investment Association) meetups, or other meetups/networking events of real estate folks..


When looking for ways to invest in real estate with little to no money down, numerous strategies present themselves, one of which is wholesaling. Known as a practical means of financing deals, this method primarily attract cash buyers, who are often experienced and successful investors eager for a new opportunity. One major appeal of this method is the potential for generating extra cash without the need for private money or loans. Indeed, this approach is known for attracting professional investors who have built up a sizeable rental portfolio and are looking for new additions.

Wholesaling can be described as an intermediary process, where a smart investor finds a promising property, locks down the deal for a certain amount of money, and then sells it to investors for – and pockets an “assignment fee”.

This is a good place to start for many real estate investors who are looking to build up some funds, and there are entire courses on how to get started doing this. Astroflipping by Jamil Damji, is probably the most famous.   Wholesaling does not require big cash outlays, and can yield quick money- which money can then be parlayed into the wholesaler buying his/her own real estate.

*: All these numbers are just estimates. Creative finance deals sound easy, but they are not for the faint of heart, and there are many pitfalls and legalities (and illegalities) associated with them. Creative finance deals should only be done using a team of people, including agents, transaction coordinators, and lawyers, who are familiar with the laws and procedures for them. Laws regarding these are also always changing, and due diligence should always be exercised.

For more information on how to invest in real estate with no money contact Big Town Real Estate today.

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