5 Ways To Buy Real Estate With No Money Down
By JD Esajian on May 19, 2017
In a perfect world, you would have piles of cash available for every offer. If you saw a property you like you would just blow your competition away and acquire the property. As ideal as this scenario sounds it may not be very realistic when you are just starting out. A more common scenario is having some available capitol but not enough to pay cash for the kinds of properties you desire. Instead of slowly building your nest egg you don’t have to wait until you have all the funds available. There are ways to use other people’s money to get started in real estate. These methods are quite popular and much more of the norm than the exception. You don’t need to have all your own capital to purchase an investment property. Here are five ways you can buy real estate with no money down.
- Home Equity Line Of Credit. (HELOC). If you have an existing portfolio you may be sitting on more capital than you think. It is no secret that home prices have continued to climb in recent years. A property you purchased years ago may have enough equity for you to tap into. As necessary as available equity is it may not be enough to qualify. A HELOC is like any other type of loan in that there are guidelines and qualifications needed for repayment. With some lenders obtaining HELOC approval is just as difficult as a new first mortgage. However, if approved you are given an open line of credit to use any you like with low interest only repayment options. Since you only repay what you use with the line you can wait until you see a property you really want to make an offer on. If you own real estate you should do some homework on property values and existing equity. You may just have enough to open a line of credit and acquire real estate.
- Hard Money. There are more hard money lenders than ever before. In the past if you explored a hard money option you were either facing foreclosure or were in the middle of a desperate situation. Today, hard money lenders are more prevalent in every market than ever. They have websites, business cards and attend networking meetings. For many investors, hard money is the only way they will make an offer. The right relationship with a hard money lender can make it quicker and easier to acquire real estate. However, hard money does not come without some drawbacks. There are increased fees, rates and costs with hard money. Some investors scoff at the notion of possibly seeing a reduced bottom line on every deal. The goal of working with any hard money lender is to build up enough of capital to have your own funds to offer. As you work to that point utilizing hard money is one of the best ways to help you get there.
- Partner. There are thousands of investors on the sidelines just waiting to get started in real estate. Many of these people are in your inner circle without you even realizing it. If you have a passion and knowledge for real estate finding a financial partner is actually the easy part. You can find a partner by sending out an email to the people you know. Explain that you are looking for someone to potentially partner up on a deal down the road in the right situation. If you email fifty people you can bet that at least five will show some type of interest. In addition to your inner circle you should tap into your professional contacts as well. You will be surprised at just how many mortgage brokers, real estate agents and contractors have capital to invest but don’t want to be involved in the day to day operations of a deal. You can send a similar email to your contacts asking them if they would be willing to work together on a deal. There will be a few inquisitive email responses but there will also be more than a few interested partners.
- Private Money. Some of your contacts may only want to partner up on a single deal or in the right situation. There are other contacts who want to put their money to work for them in real estate. These people act as hard money lenders but without the rigorous hard money fees and guidelines. You can tap into their financial resources to make offers and run any rehab properties you find. On your end, you are required to control every aspect of the property and give your partner their cut of the profit. While you may not make a lion’s share of the profit this is an ideal situation to learn the business and still make money using their capital.
- Seller Financing. There are times when you will come across a seller who simply wants to move away from the property. They may be having trouble making the payments or simply just want to move on. In the right situation, they may offer seller financing or hold the note. This means that you take ownership of the property and assume the payments and any liability. They get out from the monthly debt and may even realize a small monthly profit. This typically happens with out of state landlords or landlords who have recently gone through an eviction and are tired of the process.
As popular as real estate investing has become there are also numerous ways to find capital. You don’t need your own funds to get started in real estate.