How to Get Started in Real Estate with Very Little Money
One of the best and easiest ways to build wealth is through real estate investing, but as the saying goes, “it takes money to make money.” While that may be true, you don’t have to be a multi-millionaire to get into real estate investing.
You can become a real estate investor with a little out-of-the-box thinking and some legwork. Here are a few ideas to help get you started.
Buy a Home Through a Tax Deed Auction
Tax deed auctions can be complex. Each state has its own way of doing a tax deed auction, and some states don’t allow them at all. Here in Florida, properties that have had delinquent taxes for at least two consecutive years can be auctioned off to the public to cover the cost of the missing taxes.
The auction takes place online, and you need to register in advance to receive information about the properties. The opening bid will start for taxes and fees that are owed and will go up from there. With tax deed auctions, it is not uncommon in some counties to walk away with a property for as little as $10,000.
There are some things to keep in mind with a tax deed auction. One is that the property comes with a clouded title, which will prevent you from selling it. You can clear the title by getting a “quiet title” done, which costs $2,000-$4,000 depending on the complexity.
Another is that there might be a redemption period for the original homeowners. In some states, the homeowner can pay the delinquent taxes plus any late fees and penalties within a specific time frame to get their house back. In Florida, if the homeowner can repay their taxes and fees before the successful bidder gets their payment turned in, the homeowner can keep their home.
Become a Passive Investor
You don’t have to own property to become a real estate investor; instead, you could invest money in a REIT. A Real Estate Investment Trust is a company that owns or finances investment properties. These properties are most often commercial properties like shopping malls or hotels or multifamily dwellings.
REITS are known to have solid returns, and many will pay out dividends. You don’t need a lot of money to get started — $10 or $20 can get you in the door. Most REITS are traded on the stock exchange, so opening an account to get started is easy.
The best part is that you don’t have to do any work! REITS make money through real estate development and rental income, which is then passed on to investors.
If you need more cash before purchasing a property of your own, you could consider wholesaling. You will not own any property with wholesaling, but you will still make money. It’s a pretty simple process but does require a lot of work upfront on your end.
First, you’ll find an off-market home to buy. This home should be in less-than-desirable condition, one that an investor would want to pick for house flipping. Next, you’ll need to track down the owner of the home and convince them to sell it to you. You and the property owner will negotiate a purchase agreement and go under contract.
Instead of closing on the home yourself, you will find an investor to buy the contract from you. The investor will end up closing on the house, and you make a quick buck for an assignment fee of your choosing.
How do you make money wholesaling? Let’s look at an example.
Let’s say you agree to purchase the home from the owner for $200,000. You find an investor who agrees to pay $208,000. The $8,000 difference will go to you at the closing. You’ll have to work with the title company to get all the specifics of how payment is dispersed, but at the end of the transaction, you’ll make money for finding a house. You don’t technically even have to put down any of your own money to get the contract signed and executed.
Shadow, Intern, or Partner with an Experienced Investor
If you’re brand new to the real estate investment world, it is wise to work with someone who has reached the level of success you are hoping to achieve or at least is getting deals done and knows more than you.
For example, you could work with an experienced flipper to help with their deal. You could possibly work out a deal with them where you would be their “boots on the ground,” and in return you’d get a cut of their profit after closing the deal. This would help get you in the door without having to spend any money, plus you’d gain valuable experience and insight into the dos and don’ts of real estate flipping.
Some experienced flippers value this type of service and will pay you a 10% cut of the profit for basically doing whatever they need done on parts of the project.
Just about anyone with reliable transportation and a phone is qualified to help an experience real estate investor. On day one of your real estate investing career, you would probably be qualified for jobs like making phone calls to vendors, reporting back to the investor with daily pictures of his work crew’s progress, staying on property to meet with inspectors, calling seller leads, and much more.
Finding an investor who will be willing to give you an “internship” or starter job can be done through networking events or online investing forums. Plus, building relationships with other investors is a great idea for later in your career. Sometimes it takes a village to get a deal done.
Buy a Home at Foreclosure Auction
Once you’ve done a few deals and have a little more money to spend, you may want to consider buying a home at a foreclosure auction. Foreclosure auctions are usually held online or at the county courthouse and occur before the foreclosure process of a property has completed.
Every state has different rules pertaining to the starting bid, reserves, and the type of funds that are accepted. County foreclosure auctions are cash only, so that means you need to be able to wire the money in full, most likely within 24-48 hours of the auction.
We recommend doing as much research as possible before placing a bid on a property. Something to keep in mind is that while you may be able to drive by the property before making an offer, you probably won’t get to go inside to see the condition of the home, which could lead to expensive repairs. These properties may also carry liens which would become your problem once you take ownership.
All these factors need to be considered before coming up with a maximum bid. There are many articles on PropertyOnion.com about figuring out what to bid on a foreclosure auction property.
Ready to Get Started?
Home values may be increasing, but that doesn’t mean the average person can’t find a way to become a real estate investor. Whichever route you choose to go, you will need to do some research first. You’ll want to look up things like tax liens and title issues before bidding in an auction and jumping into Florida real estate investing.
If you wholesale, you’ll need to find contact information for the owners of the property you’re interested in, preferably their phone number and email address. PropertyOnion.com can help you find all this information with our skip trace services.
PropertyOnion.com also has all the information you need about Florida tax deed auctions and off-market properties and can connect you with a community of other real estate wholesalers. We can also help you find telephone numbers for foreclosed properties. Get in touch with us today to start your real estate investing journey!