How much money does it really take to invest in real estate?
Can you invest if you don’t have a lot of cash?
Isn’t that a big scam?
Well my name is Brandon Turner, author of The Book on Rental Property Investing and The Book on Investing in Real Estate with No (and Low) Money Down, and today I want to share with you the truth about no (and low) money down investing.
So let’s do this thing.
So first of all, let me tell you a story of a 21-year-old kid.
This kid decided that real estate investing was going to be his ticket to avoiding a life of slaving away at a nine-to-five job.
But he had one problem:
He had no money.
He worked a dead-end job, didn’t have great credit, and had no experience whatsoever.
But this kid didn’t let that stop him. He figured out a way to make it happen.
He used a variety of different strategies to acquire more than $2 million of real estate in the next several years, including a 24-unit apartment complex purchased with practically no cash out of pocket.
Well, if you haven’t realized it yet — that kid grew up some, grew a beard, and turned into… me.
Yes, that’s my story.
In fact, of the more than 40 units and dozens of transactions I’ve done in my life, I’ve hardly ever used my own money.
Related: When the Bank Cut Me Off, I Had to Get Creative With Financing: Here’s What I Learned
So to give a broad answer to the question of whether it’s possible:
Yes, you can invest in real estate if you don’t have a lot of cash.
But should you invest in real estate with no money?
Should You Invest in Real Estate with No Money Down?
Well, that’s a more difficult question.
For me, it’s not as much about the amount of money I put down as it is about the kind of deal I can get.
If you think back to 2008, a lot of people lost their homes because they obtained no or low money down loans on properties, and then when the values dropped, they owed more than the house was worth — so they gave up.
I don’t believe in putting oneself in a risky situation like that.
Instead, I want to hustle to find a deal so good that I can use creative strategies to buy it and still have a ton of breathing room for security.
Here’s an example of what I mean.
Let’s say there was a house worth $200,000, and you used your own money and put a $50,000 down payment on that property, so you have a loan for $150,000. Nothing wrong with that — and that’s what most people do.
But now, what if I hustled and was able to buy that same $200,000 property for only $150,000 and I used a no or low money down strategy to buy it?
At that point, both you and I would have a house worth $200,000 and a loan for $150,000. But you put $50,000 of your own money into it, and I put nothing.
So who’s at greater risk?
I would argue we are both at the exact same level of risk, but you actually have a lot more to lose if something terrible happened because you have so much of your own, hard-earned money into the deal.
This is why I value getting a good deal far above the question of “how much should I put down?”
If you want to buy a deal with a large down payment, more power to you.
Just understand that it’s not the only way.
Next, understand that investing with no money down is NOT about being broke.
You see, if you are flat broke and hoping that some quick and easy no money down way to build wealth is going to be your financial salvation, think again.
Creative investing is about leveraging other people’s money so you can do bigger deals.
The irony is, for many investors, the more experience they gain and the richer they become, the less money they put into their deals.
So creative investing is for anyone, no matter how much money you have in your checking account.
Creative investing truly is a mindset.
(Click to read on BiggerPockets…)