A lot of people are attracted to real estate investing because there is a ton of money to be made. The problem is that many of those same people have no money to invest. The good news is that investing in real estate with no money down is a real thing. Real people do it everyday, and I will give you a glimpse into how that is done. My mentor students are frequently pushed to make no money down offers even when they are sitting on a pile of cash. The reason for this is simple, you need to preserve your capital at all time. No money down real estate is not just for broke people. Some of the most successful real estate investors in American use these techniques.
Let me be 100% clear. Investing with no money down can mean two different things. It can mean that you didn’t put any money into the deal at all, or it could mean that you didn’t put any of your own money into the deal.
Let’s start with the deals where you put other people’s money into a real estate deal. Let’s imagine that you have located a motivated seller and he will owner finance most of the purchase of his property. That seller still want $10,000 down and you don’t have enough money to buy a happy-meal. This is where you enter the world of private lending. No bank will make a micro loan like this. Credit unions are out. You might be able to get a line of credit if you have good credit to start with, or you can pull money out of your home equity with a HELOC. Let’s pretend that neither of those options are open to you. You can still use other people’s money in the form of a private loan to get the money. You may be under the impression that you don’t know anyone who has $10,000 to lend, and you are wrong. I don’t care where you live, you know someone with 10k. That money is most likely sitting around in a bank CD or better yet in a self directed IRA account, just waiting to get a high rate of return. All you have to do is to show them your deal, explain how you intend to make a profit, and offer them a better rate of return than the bank is offering. On a CD that rate is so low that you will be ashamed of your self if you only offer to double what they are getting now. There are some legal nuances here, so if you are not well versed in private loans, you will want to tag a lawyer in early in this process.
The next, and in my opinion more interesting option is when you have zero money in the deal and you wont or cant borrow the $10,000 that the seller is stuck on. You could get the property under contract with purchase terms of 10k down and X per month, and either assign or release your rights to that contract. You wont do this for free. This is an advanced form of wholesaling. You get paid because you negotiated a deal that someone else wants. Usually your fee shows up right on the HUD-1 when the property is sold. If you have a good deal, it wont be hard to find someone else who would be willing to put 15-20k down to secure it. The big trick here is to negotiate a monthly payment that will allow for positive cash flow every month.