Today on REITV, we are gonna be addressing probably one of the most commonly asked questions in all of real estate which is,
“Can you actually invest in real estate with no money?”.
What do you think – Buying real estate with no money? I think it’s stupid. A lot of people claim you can. There’s a lot of seminars and there’s a lot of programs. And today, I’m gonna get to the bottom of it and I’m gonna share with you that yes, it can be done. But I’ll even more share with you exactly how I did it. So let’s talk about how to get started in real estate with no money.
There are obviously many ways of doing it. For this video, I’m gonna hone in on one. And what better way than actually the very first property that I did, which is that property right there. Many many years ago, this was the very first property that ended up leading to my hundreds of homes that I now own nationally around the country. And the reality is most of the real estate I buy, I don’t use any money. In fact, I don’t even use any credit. Eric, what about you? You think it’s possible? I think it’s possible. I think you can have like a bank can help you something like that I guess or a friend, I don’t know. But I think it’s possible.
On this very first home I’m gonna actually share with you a strategy though where I actually use $3,000 that took me 14 months to save up. Now, why would I refer to that as a no money strategy? Well typically in real estate, if you’re gonna put 20% down that can be $30, $40 maybe even up to $50,000 that you need for buying a single family home below the median, $3000 compared to $40,000 – I’m practically gonna call that no money. You could use a credit card, you could use mom and dad, a friend, you could borrow it, get a loan on it; it’s a very small sum of money compared to the big game of real estate.
Well tell you what, my very first mentor told me that there’s some things that I needed for me to make this strategy work. He said I needed a 2-year work history, a basic credit score, and that I need enough time on the job. So what I ended up doing was waiting 14 months, saving up $5000 in the bank, $3000 of which for down payment and I have to tell you that was me eeking by because I was making less than $25,000 a year.
But 14 months later, I’d established my three trade lines of credit, meaning, three credit cards that I was responsibly using and I found this house with the help of my mentor. Now, what makes this house unique? If you take a look at it, it’s got a basement apartment AND this house was worth at the time about $150,000 and I bought it for $110,000. That’s a $40,000 equity position.
So the day I bought this house, I was able to rent the basement, have the basement actually cover my entire mortgage, AND I walked in to $40,000 of equity. Now, this house was bought with just the traditional FHA loan which even less than average credit scores can qualify for. And so I bought this first house this way. I lived in it for 12 months and even though it was my home, I considered it an investment because I bought it with that equity. 12 months later, I was able to harvest the equity in it that I could use it to buy this next house that I’m about to show you. This is the second house that I bought.
One of the things that’s great about this house like my first house is it also has a mother-in-law basement apartment, which essentially means that I was able to rent out my basement and have it pay for 80% of my mortgage. Now, how did I buy this house? Well I got a home equity line of credit from the bank because of that huge equity position on my first house and basically that’s what did my down payment to buy this house.
Now my first house turned into one of my first official investment properties paying me over $500 a month of residual income meanwhile living in this house, and you can see it’s a significantly nicer house.
Well the equity in both of these properties were leveraged to buy my third house, my fourth house.
And now let me introduce a second strategy today for how to buy real estate with no money. I use the equity in these homes to buy these four houses but I had developed a new type of asset.
It was a relationship asset. It was a capital asset where I was able to go to my relationships and say “Hey, look at what I have done here in real estate!” and they’ve chosen to partner with me. My first partner was my father-in-law. In fact, when I started buying my homes, I was so young, he thought I was crazy because I was a college kid.
Four homes later though, he looked deeper into it and he said “You know what Kris, you’re outperforming my 401K! What if I use some of my money and we partner up?” You use your money, you use your credit, and I just keep doing the deals? Hey, that’s a win-win. Well, I got up to that 10 properties as a senior in college and I started thinking to myself “You know what I really need? I need more father-in-laws.” I went and found more father-in-laws, so to speak.
I went and found a doctor in the community that had been tracking my results, an executive for a company, a couple of other individuals, and had a chance to take them out to lunch, show them my track record.
And you know what, they all said “Sure, we’ll put up the money, we’ll partner with you because you got a track record.”. Ultimately, that’s what led to hundreds of homes. So those are my two favourite strategies for doing real estate with no money. This is the third house that I’ve ever lived in. Those first two houses built that entire portfolio and made this possible.
Eight years ago, my wife and I custom-built this 10,000 square-foot house and our real estate has taken care of us to this day, basically getting into real estate with practically no money and it all came down to having a game plan. Now this is just one way that I know of to do this and some of you watching this, I hope you steal it, I hope you copy it, I hope you use it, but there are many other ways of doing that.
The whole point is yes you can do it and have a very concrete game plan and then act out that game plan, stick to that game plan because in the world of real estate, this isn’t something that happens overnight.
This is something that you chip away at; it’s something that you work at for years to ultimately get to that place where you have enough residual income coming in, that you’re retired, and it’s covering all of your needs. Thank you for watching REITV. For more weekly videos, be sure to Subscribe..
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