So many people want to get into real estate these days, and it’s no surprise given how hot the real estate market has been lately. In the third quarter of last year, U.S. markets saw home price increases in the double digits.

But for many first-time investors, getting into the real estate investing game is not easy. Putting together enough cash for a mortgage down payment is a huge hurdle.

The median down payment on a house in 2021 was $27,850. That’s a lot of money when you consider the median income among households with a single earner is just $52,557.

Then there are closing costs to consider: appraisal, home inspection, and other loan-related fees. Together, they can add another 2% to 5% to the overall cost of buying a property. Once you own the property, you’ll have to pay for utilities, repairs and maintenance, property taxes, homeowner’s insurance, and more.

And that’s all assuming you took the steps to find a good property deal. Before you can walk through the finish line at closing, you need to get pre-approved for a mortgage, search for houses that meet your criteria, make offers, run home inspections and appraisals, negotiate, and sign lots of paperwork.

It’s no wonder most would-be investors give up before they get started. Yet it doesn’t take as much money to get into real estate as most people think. You just have to get a little creative with how you invest.

Let’s go over different ways you can get into real estate without breaking the bank.

House Hacking ($0+)

House hacking is deriving extra income from your primary residence — property you already own. It could mean renting out an extra unit in your house, like a basement apartment or an accessory dwelling unit (ADU), or even renting out a spare bedroom.

So long as you follow local zoning laws, you’re allowed to lease out part of your house. What’s best about this strategy is that you can start doing it for free!

Try out house hacking by listing part of your house on a short-term rental platform like Airbnb or Vrbo first. If you find you don’t mind giving up the extra space and managing tenants, you can then try out month-to-month and year-long leases.

The beauty of house hacking is that there are so many ways to do it. You can even rent out extra storage space with peer-to-peer (P2P) storage platforms like Neighbor or Store At My House. Then you don’t have to deal with tenants at all!

If you plan on renting out a room in your house or your garage, you will need to make it appealing if it isn’t already. This is where the money comes in — the nicer it is decorated with appealing furnishings, the more in demand your space will be. Spending a few dollars on some fresh paint, linens, beds, etc. can go a long way.

REITs ($3+)

You can also invest in real estate investment trusts (REITs). These are often large companies that own and manage property across the country. What’s nice about them is that they can be traded like stocks on the stock market.

Many of these REITs are publicly traded companies in the stock market. Many of these REITS are priced at $10 or less per share. This is an easy way to expose yourself to real estate returns and hedge against more traditional investments like stocks and bonds.

Real Estate Crowdfunding ($10+)

Ever since the 2012 JOBS Act, real estate syndication companies have been allowed to use crowdfunding as a way to raise capital. This means you can pool your money together with thousands of other small-time investors to get in on big real estate deals that you wouldn’t have been able to otherwise.

An easy way to get started is by signing up on a real estate crowdfunding platform like Fundrise. They allow you to invest for as little as $10. Just select an investing portfolio you like among various long-term growth and short-term dividend options, and for 1% in annual management fees, they’ll do the rest. It’s not a bad deal if you consider their average annual returns of 7.31% to 16.11% from 2017 to 2021.

Fix and Flips ($x,xxx and up)

If you’d rather buy a property outright, there are still affordable ways to do it, but you usually have to make up for your lack of capital with networking and experience. One strategy you can try is the fix and flip.

A fix and flip is typically a property that you buy at one price, renovate, and then sell for a profit at a higher price. You’ve probably seen it done on reality TV shows, where it was first popularized.

The key to a successful fix and flip is timing. You want to renovate and resell the property quickly to limit how long your money is tied up in it. As with any type of property purchase, there are costs to owning the property. There might be monthly HOA or condo association dues, or bills like electrical, water, and gas.

For many flippers, the running cost of the interest on loans they are using to buy and rehab the property accrue daily, so completing the job and selling as quickly as possible is of the utmost importance to profit on a project!

A common strategy in flipping is to buy a distressed property. This could be a house owned by the government, one that is under (or on the brink of) foreclosure, or one that has simply been neglected. Whatever the case, distressed properties have some underlying financial issue that allows you to buy them at below-market prices. Use our foreclosure property search engine to find one today!

If the property needs a lot of work, you’ll need to have the handyman skills to renovate it or a reliable team of contractors who can do the job. As a rule of thumb, count on the rehab costs being about 10% of the purchase price.

Now, to finance a fix-and-flip with limited capital, you have a few options. For example, you could use a hard money lender. These are private investors who specialize in non-traditional short-term loans at a higher interest rate. Usually, they allow you to use property or another asset as collateral for the down payment.

If you’re confident you can flip the property in a short time frame, a hard money lender may be a good option, but they will require “skin in the game,” meaning some of your own money invested in the deal either as a down payment or in the fixing side of the deal.

Fix & Flips with No Out-of-Pocket Money to Start

If you don’t have any down payment, you could find a real estate partner to help you. This is where you join hands with another investor or multiple investors who help provide the cash for the mortgage down payment and the fixes in exchange for a share in the returns.

You could get creative and also look into seller financing, where you take out a mortgage directly from the seller. Sellers aren’t bound to the same financing rules as traditional lenders, so they can let you buy the property with a low down payment or none at all.

If the seller is motivated and has a mortgage, you can still get that property for next to nothing by using a wrap-around mortgage. With a wrap-around mortgage, the seller keeps the existing mortgage on the home, offers seller financing to the buyer and wraps the buyer’s loan into the existing mortgage. This is an advanced method and needs to be thoroughly researched and executed correctly to stay on the legal side of things.

Sometimes you can even find land and fixer-uppers for free in some interesting places. There are many ways to finance a real estate deal with little to no money. It’s all about knowing the right people and the right strategies.

All of these strategies basically get you in the door with no money out of pocket. When it comes to fixing anything, you will need to come out of pocket, and typically the minimum for “fixing” about any property is around $3,000 but is typically around 5% to 10% of the purchase price.

If you have no money for fixes, don’t worry! Real estate investing has something for everyone in any financial situation. If you are a good negotiator and you bought the property from a motivated seller at a great price, you can do a minor rehab job for nearly free. You can use some “elbow grease” and a bucket of paint (you can even get free paint free in some areas) to clean it up, freshen it up, and then put it right back on the market ‘as-is’ for a smaller mark up and try to make money this way.

Sometimes painting a few trouble areas, pruning back bushes and trees, and cleaning up garbage on the property is all it takes to flip a property for $10,000 profit. The money is made when you buy the property, so negotiate a great price up front!

Buy-and-Hold Properties ($5,000+)

If fixing properties as fast as possible to sell is a daunting task for you, you can also try the buy-and-hold strategy. It allows you to benefit from steady rental income and property appreciation over time. But again, many never try because they don’t have enough cash for the initial down payment. Here are a few more creative ways to avoid putting down much or any cash.

Get a government-backed mortgage for a low-down payment or none at all. The federal government offers special loan programs for properties with up to four units if you make it your primary residence. That means you can live in one unit and still rent out the others.

Eligible veterans and active-duty military personnel can get a VA loan, which requires no down payment. Otherwise, if you have a credit score of 580 or higher, you can apply for an FHA loan, which requires only a 3.5% down payment. Just be prepared to pay a higher interest rate and private mortgage insurance (PMI).

Theoretically you can get the house this way for no out-of-pocket money and have your tenants pay all the property’s yearly expenses if the rent is high enough. Even then, it’s nearly unheard of not to need a few thousand in costs over the first year to fix the property, screen tenants, and keep the books, so it’s best to have at least $5,000 in an account to start.

As with any loan, the better your credit, income, and debt-to-income (DTI) ratio, the better the terms of your mortgage will be.

Wholesaling ($900+)

Finally, another way to get into real estate without much money is wholesaling. Wholesaling is the process of finding great property deals, putting them under contract, and then selling the contract to an interested investor for a fee.

Wholesalers never actually invest in the property itself. They just act as intermediaries between the buyer and seller.

Of course, finding good deals that investors are willing to pay for is hard. Wholesalers need to have good marketing and networking skills (or budget) to be successful. Still, you can start by creating a wholesaling business website on platforms like carrd.co or sites.google for free.

To wholesale you will need a way to get leads to call, email, and send marketing mail to. This is not free — at the bare minimum, you will need at least $300 per month for these recurring expenses. Landing one deal that closes should be able to pay for a year’s worth of expenses, but it can take three months to a year to close your first deal.

The Choice Is Yours

At the end of the day, anyone can get started in real estate without much money. All you need is a creative mindset and the drive to learn.

If you’re really trying to bootstrap your way up, you can start house hacking, wholesaling, flipping, and finding property for very little. But having a little capital on your side definitely makes things easier.

And if you don’t want to put in any work at all, you can invest in REITs or crowdfunded real estate deals for just a few dollars for real passive investing.

As you leverage your way up to bigger and bigger deals, you can eventually amass a giant real estate portfolio. That’s the secret to succeeding in real estate with little money at the start.