How to Make Money in Real Estate With No Money
Each year, thousands realize that there is no better way to build wealth than real estate investing. A large portion of these new believers never gets started in real estate because they have little to no money to invest.
Fortunately, that’s no reason to avoid investing.
In this tutorial, we will touch on several ways to make money in real estate with no money. Each mentioned method could easily have its own tutorial, but this article is just an introduction.
Method #1: Learn How to Wholesale
If you have any experience in real estate, there is no doubt you have heard of wholesaling real estate. Wholesaling is a form of arbitrage in which you put a property under contract with the seller, and then you sell the contract to a cash buyer for an assignment fee. The great thing about wholesaling is that you can literally start with no money and still find a deal.
For example, a property that looks vacant on your street is worth $250,000 once it’s repaired. After researching the county records and a getting $1 skip trace, you find the owner’s name and phone number. The owner agrees to sell you the property for $100,000 because they are out of state and have no intention of fixing it and selling it traditionally, and they owe taxes. You have an investor who is excited to pay $125,000 for the property in its current condition. You then sell the contract to the investor for a $25,000 assignment fee at closing.
Wholesaling is simple but not easy. It can also be expensive when you try to jump in with both feet and jump-start a deal pipeline. Although you can start with next to nothing by networking with agents for pocket listings or driving for dollars, getting your first deal these ways can take time.
The quickest way to find deals is by marketing directly to sellers via Google Ads, SMS messaging, and mailing cards and letters. A realistic budget for finding your first deal is around $2,000 in marketing costs using the above-mentioned techniques. Although $2,000 is a lot to many, it’s still not much compared to other business startup costs. In addition, the first $2,000 you put into your marketing might yield multiple deals down the road.
Wholesaling is a great way to earn your chops in real estate, and many investors now begin their investing careers as a wholesaler. After gaining some experience, the savvy real estate investor can use wholesaling as another exit strategy.
Method #2: Seller Financing
Another great way to get started investing in real estate is through seller financing deals. These deals range from super complex to very simple. Typically, a seller allows the buyer to purchase their property while holding the note, essentially acting as the bank. The seller gives enough credit to the buyer for the purchase price of the home, and the buyer signs a mortgage at closing with the seller.
Sellers who are willing to take monthly payments from a buyer are typically distressed sellers in one way or another. My team’s favorite sellers are landlords with tenant problems they don’t want to deal with. We explain that we will make all the problems go away by becoming the new landlords and taking over the mortgage and tax payments. All the seller has to do is cash our monthly checks. They have a first position mortgage to secure their interest and a small monthly cash flow as well.
In our last deal in Palm Beach County, our seller had a property worth $250,000 rented to tenants who were no longer paying rent, plus a mortgage payment of $750 per month. We agreed to pay the seller $1,000 per month, evicted the current tenants, and placed new tenants in the unit for $1,800 per month. After monthly expenses, we are cash flowing about $800 per month while the seller is cash flowing $250 per month and no longer worrying about dealing with his out-of-state rental unit.
For the cost of an eviction, we are now cash flowing almost $800 per month — or $9,600 per year — and control $250,000 in real estate.
Seller financing deals can require no money to a small down payment. It all depends on your negotiating skills and how motivated the seller is to sell the property. In some markets, seller financing is a common way to sell a property. In other markets, it can be much more difficult to find a seller financed deal. Learning how to negotiate with sellers to buy real estate with little or no money out of pocket is an art form, and you will use this tactic many times over in your investing career when you learn it.
To make money in real estate with no money is not only possible, but simple and easy when you become an expert investor.
Method #3: Real Estate Crowdfunding Sites
Over the last five years, technology and real estate have begun to converge in amazing ways. One of the coolest things to rise out of this new convergence is online real estate investing platforms.
Real estate crowdfunding has technically been a thing for decades, but it was simply called old-school terms like “syndicates” before. The biggest difference is that you can participate in institutionalized real estate investing without needing to be an accredited investor. The other great feature is that you can begin investing in real estate for as little as $10!
These sites pool together thousands of investors and use their money to fix and flip houses and lend money to other investors on their projects. Many have a good track record of about 10% returns per year to their investors over the last five years.
Like with any investment, there are downsides to investing in real estate crowdfunding sites. First, you have fees to watch out for — depending on the platform, they are 1–3% annually. You are open to both the gains and the losses, so a bad year in real estate will affect your returns or lack thereof. Last, you are locked in for a certain amount of time, typically 6 to 12 months, before you can withdraw your investment, so don’t invest money you will need access to in the short term.
To illustrate how you can make a lot with very little on your own plan, consider this: If you invest $1,000 in one of these real estate crowdfunding sites, and then contribute just $100 per month to this same account, you can potentially grow your investment to a whopping $23,364 in 10 years. This is assuming you are getting the 10% returns they advertise. That is a big return for such a small investment in real estate.
There are many services that offer different forms of crowdfunding deals. Although many of the popular ones will show you that their investors earn 9–12% each year, that is not a guarantee. When the market drops, so will the returns to their investors. We suggest researching reviews of these services on websites like investorjunkie.com.
Method #4: Sweat Equity Partnerships
Even if you do not have a dime to invest in real estate, you can still use your most valuable resource to begin making money in real estate — your time. Time is the one thing every successful investor covets and is willing to pay for, either with cash or equity. In this case, you will want to convince another investor with money to trade his money for your time. You have to first convince an investor that your time is worth the percent of equity you are negotiating for in the deal.
Yours truly has done all of the following deals in real estate without spending a penny of my money.
I negotiated with another investor to give me 25% equity in his deal by acting as a foreman and showing agent on a condo flip he was doing. All I had to do was make sure the contractors were showing up each day and report back to him each week on the progress of the jobs. Once it was completed, he listed the property on an MLS flat fee service, and I was the contact on the listing. I showed the property to buyers and agents, and then locked up the place after. I also cleaned the property a couple times a week and kept it in show condition.
Both of these jobs took at most three to four hours of my time each month over a five-month period. When the property sold, I got a check for $7,500 for my time, and a great experience to use in my own investing career.
Even better than the check was the relationship I created with this real estate investor. We went on to do many deals together in the next few years.
Method #5: Bird Dogging
Another way of investing in real estate with no money at all is by “bird dogging.” A bird dog in real estate is someone who brings deals to investors for a quick finder’s fee. We had a bird dog that we would pay $1,000 each time he found us a vacant or distressed property we closed on. This guy also delivered coupon books door to door, so he would come across these properties frequently. In his best month, he got five checks from us just by giving us lists of properties each week. Eventually, we taught the bird dog how to wholesale his deals to us, and he went on to do very well as a wholesaler.
Many of you reading are wondering where to find investors willing to exchange your time for equity in their deals. They are EVERYWHERE — all over the internet, and most likely in your neighborhood. The best way to plug yourself into an investing scene is by going to your local Real Estate Investors Association (REIA) meetings. Most markets have anywhere from one to four REIA groups that meet monthly, and most cost next to nothing to join. You can easily search for a local REIA group on their website.
Other options include online forums like BiggerPockets.com. BiggerPockets is an active real estate website with many like-minded people posting daily.
Another place to meet investors is one of the thousands of real estate Facebook groups. Just be careful to avoid guru traps, which is when a so-called expert lures you in with the promise of free tips and training only to corner you into a $10,000 course on how to wholesale. No one should spend that much to learn how to begin in real estate.
Method #6: Rent Out All or Part of Your Existing Home
Short-terms rentals are one of the hottest real estate trends of this millennium. It is an incredible opportunity for anyone who controls any real estate to make rental income even if they are living in the property. Not only can you easily rent out your entire house, but also any room inside your house while you are still there.
If you have an extra room, you can list it for short-term or long-term rent for a few hundred or more per month, depending on the market and your property. This is a great way to create some monthly cash flow from real estate you already control with no additional out-of-pocket costs.
I have a friend who typically goes out of the country with their family during Christmas break, and they rent out their property on Airbnb for the entire month at around $180 per day. Without vacancies, they can make an extra $5,000 after expenses in just that month. That doesn’t count the other weeks of the year when they go out of the country on their own vacations.
Unfortunately, many students and lower-wage employees are unable to afford their own place. With the rental market being so hot in many Florida markets, it’s exceptionally difficult for these people to afford a one-bedroom location.
An employee of ours got a great deal on a two-bedroom condo. Instead of using the second room as an office, he now rents out that room to a local college student for $500 per month. Our employee uses that $500 to pay down the mortgage and has plans to move and rent the entire unit out when it’s paid off.
Short-term rentals and house sharing have their downsides as well, and they’re not for everyone. First, you have to make sure you are legally allowed to do a short-term rental; many HOAs, condo associations, and cities have specific laws against it. If you are renting your place, it might be against your lease to rent out your room without landlord approval. It also takes a lot of trust to allow strangers to rent and live in your home short or long term.
Nothing Can Hold You Back from Making Money in Real Estate
You can find many ways to make money in real estate with no money out of pocket. While some are simple and easy like dropping $100 into a crowdfunding site account, others — like closing your first wholesale deal — are a bit more difficult.
Regardless, there is no reason not to educate yourself on how to succeed at any of the techniques described in this article. All of the real estate education you need should be easily affordable, and the only significant cost will be your time.