How to Invest in Real Estate Without Using a Dime of Your Own Money

So you’re interested in going into real estate investment. One thing most people fail to realize is that there are successful real estate investors who achieved their success without much of a capital outlay of their own. How can you succeed at real estate investment if you will not use your own money? That sounds too good to be true!

Most successful real estate investors use several unconventional but legal methods to invest in real estate with no money down coming from their own pockets. Some of the workable and profitable schemes to buy real estate properties with no money down are:

• Securing a pre-approval regardless if you are buying for your own or for investment purposes. Having a pre-approval certification makes it easier for you to buy a house and work out a profitable deal since it shows your serious intent in closing the deal.

• Assume the homeowner’s (seller’s) existing mortgage ensuring that the mortgage has no due-on-sale clause of any kind. This can only be done with the concurrence of the original mortgage loan company and having a pre-approval (even if it is from a different company) comes in handy in these types of deals.

• Look for properties where the owner/seller offers self financing for a higher monthly rate or an increased interest rate.

No money down does not really mean no money down, all it means is not using your own money but instead utilizing your home equity line of credit or a home equity loan to pay for your down payment for a real estate investment. When engaging in these types of loans, it is always best to use the services of a mortgage lawyer and seek their advice so that all the fine print is clearly explained and is not to your disadvantage. You are investing in real estate to make money, not to lose your house!

Unless you have tons of money, this is the most advisable way of getting started in real estate investment. Pouring your liquid cash reserves in to real estate investment deals is something you do not want to do when you are first starting out. Typically it takes quite a while before you can realize any investment returns – sometimes as long as 36 months or more!

Sourcing the funds for your real estate investment becomes easier if you use the following strategies:

• Utilize the owner’s/seller’s existing financing for part of the purchase price so that you only have to fund the money for the seller’s equity.

• If you have a cash buyer, do a simultaneous close (between you and the seller and between you and your buyer) and flip the deal to your buyer for a cash assignment fee.

• You can opt to sell your contract to another investor for a cash assignment fee.

• Borrow the money from a private party lender at an interest rate higher than a bank CD and secured by a first mortgage.

• Tap into a home equity or other line of credit or refinance one of your current properties to get your down payment amount and borrow the balance from a mortgage lender.

• Optionally, you can bring in partners (friends or relatives) to fund the deal and split the profit with them on the resale of the property based on the amount of their investment while the rest goes to you.

The key to getting started in real estate investing is to find the funds from external sources as much as possible before putting in your own hard earned cash into the deal. This keeps you liquid and puts you in a better position to buy properties where paying up front with your own cash may be necessary in order to make a profitable turnaround in a short period of time.

In your real estate investments, here are some tips you may want to consider when working on cash deals:

• You can over borrow with no bank qualifying
  • when paying cash or
  • when buying with owner financing or
  • with owner financing and with substitution of other equity as collateral, if necessary.

• Close a deal only when you find a ready buyer, not before.

• Require the seller to pay when you buy the house (motivated sellers often pay real estate brokers to take a property off their hands in the shortest time possible).

• Buy and sell for cash simultaneously!

Investing in real estate is not a get rich quick scheme, it takes a considerable learning curve regarding market conditions, mortgage planning and quick and timely decisions - but it is a very profitable business venture if you take the time to learn the tricks of the trade.