How To Buy Real Estate When You Are Broke

by Brandon · 16 comments

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Buying real estate costs money. However – it doesn’t have to be your money.  With the right mix of resourcefulness, creativity, and knowledge you can buy real estate with no money of your own. Don’t believe me? I speak from experience! Nearly every single property I have ever purchased has been without any money from myself.  The following are seven strategies that can help you buy real estate without spending any of your own money.

  1. Use Hard Money– hard money lenders are private individuals who loan on property based primarily on the value of the property (read my post on Hard Money Lenders here).  Although lenders have been tightening their standards in recent years, they still will generally lend 100% of the purchase price and possibly even repairs if the deal is good enough. They need to feel secure in their investment, so if you only need $50,000 for a property that is going to be worth $100,000 – you may not need to put in any money. Just remember though – lenders are going to be conservative on their values so don’t overestimate the future value.
  2. Use your Home Equity – Do you already own your own home? Did you know you can pull out equity in the form of a Home Equity Line of Credit (usually a variable but low interest rate) or Home Equity Loan (usually a fixed interest rate but higher) to use to buy an investment? Not only is this money relatively cheap to borrow, you may also be able to deduct the interest on your taxes (but see a CPA for details).
  3. Use a Partner – Do you have knowledge, motivation, and skill but lack financial resources? You are in luck! Much of the professional world has financial resources but lack knowledge, motivation, and skill! Use your networking skills to find others who have the missing piece in your strategy and become partners. Make sure that everything is spelled out clearly up front and everything is in writing.
  4. Raise Private Money: Similar to a hard money lender, you may be able to find wealthier individuals who want to earn more on their investments than the stock market or a savings account can pay. Many real estate investors will offer their clients a set 12-20% return on their investment, secured by a lien on the property. This creates security for the private lender and funds for the real estate investor. A true win-win.
  5. Use a Lease-Option –  A lease-option is a strategy used in real estate to buy homes from homeowners without actually taking legal ownership. Instead, the real estate investor signs a long-term lease with the house owners as well as signing a legal “option” to buy the property at a specific price in the future. The owners are not legally allowed to sell the property until the option period is up, and the investor gets to lock in his future purchase price as well. The investor can then easily rent the property out for cashflow or find a buyer to sell his “option” to.
  6. Buy properties “Subject-To” – Buying a home using a “subject to” strategy involves actually transferring legal title from the old owner to the new investor – without paying back the original mortgage that the old owners had.  While the bank may not appreciate not being paid back, as long as payments are continued to be made, usually the bank will either never find out or never care. This strategy is a bit riskier, but as long as you have a backup plan, it is perfectly acceptable.
  7. Use a Combination – Finally, you can mix and match using any of the above scenarios. Perhaps use a hard money lender to purchase the property and use a partner to refinance into a thirty year fixed mortgage after the repairs are done? Or perhaps use a lease-option until you can raise private money to cash out the sellers?

As you can see, there are a huge variety of ways to buy real estate without sacrificing your own money. If you are resourceful and the deal is a good one, you will have no problem buying real estate without any money of your own. Don’t let “I’m too broke” become an easy excuse not to invest.

About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the BiggerPockets.com Senior Editor and Community Director and owner of RealEstateInYourTwenties.com. He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

P.S. looking for hard money loans in California? Be sure to check out my friends over at northcoastfinancialinc.com. They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

P.S. Looking for more real estate investing knowledge? If you are interested in a top-notch course to help you understand the nuts and bolts of creative real estate investing, I would like to recommend Ben Leybovich's Cash Flow Freedom University. Ben is a close friend and has been my trusted adviser for years. He's a smart guy and CFFU is pretty awesome. The course is waitlisted, but while you wait for an opening Ben will send you tons of FREE content. Seriously. Click here to check it out.

(yes, that's an affiliate link!)

{ 15 comments… read them below or add one }

Nick Keesee September 18, 2012 at 9:17 pm

Hey Brandon,

I just found you blog today and I love it! I have a question for you, the type of RE investing that really interests me is purchasing multifamily properties and holding them for monthly cashflow and then being able to do 1031 exchanges up to bigger multifamilies with larger monthly cashflows and just repeating the process over and over again. I am starting like many people with very little/no money of my own so I was wondering what type of no money down strategy you suggest for what I am interested in?

I know that it can be difficult to use hard money for the downpayment of a multifamily because the high interest that those lenders charge can completely suck your cashflow dry if not into the negatives. Do you have any advice on my situation as far as what you think would work best?

Thanks so much!

Reply

Brandon September 20, 2012 at 4:22 am

Hey Nick – I love the same type. Multifamily properties are my bread and butter. A good no-money down way to do this would be either using a partner to finance the down payment (I’ve done this) or use your own sweat equity and find a property that will let you trade your labor for a down payment on a seller financed property (I’ve done this also!)

I’d steer clear from hard money if your goal is buy-and-hold. It’s rough! Other than that, read a lot of books, get to know some local investors, and perhaps learn to wholesale for those investors. This will give you 1.) Experience 2.) Confidence 3.) Cash.

Good luck and keep in touch! Make sure to check out my free eBook because it chronicles the exact strategy you are already thinking about!

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Dom June 5, 2017 at 11:36 am

Nick – if you are worried about cashflow and/or not having a big enough downpayment, I think you are spending too much money. Try to cut costs at every corner!

Remember – everything you use when doing your real estate work, even driving out to talk to local owners to discuss buying, etc. can be written off come tax time!
This means that you can write off your car expenses, insurance, even mobile phone that you use on these real estate calls.

That doesn’t mean you should blow money on these things. Minimize costs whenever you can if you want to be successful in real estate. I always use Gas Buddy to find cheap gas. I use Insurance Panda for car insurance ($25/month), and I use Metro PCS for cell phone (only $20/month).

Being frugal, and taking advantage of every single tax write-off is the best way to get ahead when you are first starting our in the real estate game, IMO!

Good luck!

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Nick November 12, 2012 at 7:17 pm

Thanks Bradon for that advice! (Sorry I haven’t been on your site for a while)

That is what my primary goal in real estate is, buy and hold. I do have a question though.

If a bank gave me an 80% LTV on a property lets say, would they care if the 20% isn’t technically my money? In essence isn’t that borrowing 100% of the purchase? Do banks generally allow this to take place?

I do know that many banks got burned in the recession in over-legeraged loans and I was just wondering if they allow this today.

Also, would an equity partner in some cases be better in a buy and hold than a money partner?

Thanks so much.

Reply

Brandon November 12, 2012 at 9:01 pm

Hey Nick,
If it’s from a partner most banks are fine with it. If it’s a second mortgage or something then they’ll care, but since its just a partnership they don’t know if the money came from you or your partner and they shouldn’t care. They’ll assume you and your partner are each putting up 50/50 but it doesn’t have to work that way.

I like equity partners, like splitting 50/50, for the security they provide. They should be able to get a fixed rate mortgage and provide the down payment. Thanks Nick!

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Richard Johnson March 8, 2014 at 7:27 am

Hi Brandon
I’m from the UK I’ve been living in my current rented property for 18 years the property is valued at around £120,000 I’ve been offered to purchase the property for £52,000 ( don’t have access to a mortgage through bad credit.
The property has some need of repair internal but not major,
I’m interested in using the property only as an investment what is my best option ?

Richard

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Steve McPherson December 5, 2012 at 1:47 pm

Hi Brandon, all those strategies sound great , but in my area it is very hard to find capital or partners to invest with you when you are new to investing, in fact I keep hearing that flipping homes with no money around here is practically impossible, what are your thoughts on this?, have you ever flipped a home with little to no money?

Thanks
Steve

Reply

Brandon December 5, 2012 at 5:10 pm

Hey Steve! I agree- it’s not easy. When you are new- no one wants to invest with a newbie who has no money involved. I would say that it isn’t just because of your location – it’s everywhere. However, yeah – I’ve done it a few times.

Honestly though: I’m not sure I suggest it. Flipping is hard, has a 50%+ failure rate, and really is just another Job. Unless thats a job that you absolutely love, I wouldn’t start with flipping.

Wholesaling is a good way to begin (Selling to flippers is good) but also a job.

Anyways, come connect with me over at BiggerPockets.com and hang out with me there. There are forums that get hundreds of questions a day and hundreds of answers – all for free. Come send me a “Colleague Request” there! (Everyone!)

Reply

Tia March 16, 2014 at 3:54 pm

Hi, I’m actually curious in how I find an investor to owner finance a home for me? Lease option maybe? I’ve recently lost my house trying to modify it and hiring a lawyer whom did nothing for me. I haven’t rented in 16 years and with the recent loss of my son in law my pregnant daughter has moved home. I need a bigger place and have been saving up to buy a home again when my credit allows. However, with this sudden loss I am pushed to move again. I was hoping to just fall into a home that I will buy soon. PLEASE HELP????

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victor November 30, 2014 at 6:03 am

I have no money but have big ideas I live in Charlotte nc I need help live a dream

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Rob Shepherd February 12, 2015 at 9:08 pm

The Subject to strategy is one I hadn’t heard of before but I suppose it will work given the right situation. The others are great and the title really caught my attention.

Reply

Harris April 17, 2015 at 1:07 am

Hey Brandon,

I am just starting out in real estate, I have paid a lot of money listening to seminars, but they don’t explain how to get a Cash Buyer or hard money lender. I am in the state of NC, Do you have any recommendations on companies I can use to help my business?

Reply

Brandon April 17, 2015 at 5:09 pm

Hey Harris – actually, yes – check this out: https://www.youtube.com/watch?v=MvhBsA8Dd_4

Reply

Julia June 10, 2015 at 10:42 am

How do I find a Real Estate Investor.

Reply

Danielle March 23, 2016 at 3:18 pm

Hi Brandon,

I am very interested in investing in real estate but I am not sure where to even start when it comes to learning. I am 20 years young and very passionate about finances. Any help would be appreciated.

thanks
Danielle

Reply

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