Most new real estate investors get held back by lack of finances, with the assumption that they must have a lot of money to get started. This assumption is wrong. There are lots of deals you can do spending little to no money of your own.
With the tightening of lending procedures by most banks, most people cannot access this money for real estate investing. If they can qualify for these mortgages, they are required to put down as much as 20%, and are allowed just a few investment properties.
In this article, we explore how to invest in real estate using little to no money of your own.
My favorite model of real estate investing is wholesaling and investing with little to no risk. In wholesale real estate investing, you locate distressed houses below market value and flip them for a profit to other real estate investors.
This can involve assigning a contract to a buyer with cash. Your buyer closes the transaction and buys the house on the same terms you agreed with the seller on the contract. You walk home with an assignment fee at closing.
Or it can involve simultaneous closing where you buy and sell the property on the same closing table. This means there are two contracts – one to buy the house, an one to sell it to your buyer. Of course, you sell it higher than you buy and walk home with the difference, less fees and expenses.
Until recently, most lenders could allow you to use money from your buyer to close the first transaction. In recent years, this has changed, and most lenders will not allow you to use their money for the first transaction. But this should not slow you down.
For this you need transactional funding. Transactional funding is a short-term loan that allows real estate investors to fund up to 100% of undervalued properties including closing costs, which they then turn around and sell for a profit.
By short term, both transactions can be close as close together as is practical, even within a few minutes of each other.
Transactional funding is usually available within a few days. Your personal qualification is not necessary. It does not require that you to have good credit, have money in the bank or a steady income. All they need to see is a qualified buyer lined up for the property.
Qualified buyer means someone with verifiable cash such a real estate investor, or someone approved for a loan.
There are lots of properties you buy as a real estate investor using this method. You end up investing with little to no risk – no tenants, repairs, etc. And you can move as many properties as you can find as long as you can find a steady source of wholesale properties.