A reader, Simone, recently asked:
“Is it really possible to get started with no money down? I want to get started but I have no money. What should I do?”
Let me start by giving you a definitive “yes, it is possible”. I know it’s possible because I’ve done it myself but it’s not necessarily as easy as many of the gurus would have you believe. Let’s examine why and what to do about it.
The first thing we need to discuss in answering this question is the definition of “no money down”. Money is nearly always needed for a real estate transaction to take place so I think most people’s understanding of “no money down” is that you, as an investor, don’t need to contribute any of YOUR OWN money towards the down payment on the property.
Now, there are actually many different ways in which this can be accomplished. Robert Allen has put together a list of FIFTY no money down techniques here which you should definitely check out. But the interesting thing is I guarantee you there are even more techniques than these.
As such, what’s more important than the fifty techniques is the thinking process in creating such a list. Creativity in putting together a deal is an invaluable quality for a real estate investor. So in Robert’s article, I’d suggest that the list of 10 possible sources of money at the top is actually the thing you should focus on.
The lesson here is to start thinking with a problem solving mindset and asking yourself good questions:
– how can I invest with no money down?
– where might I be able to get the down payment?
And Robert Allen has given a pretty thorough answer to that second question:
1. The Seller
2. The Buyer
3. The Realtor
4. The Renters
5. The Property
6. Hard Money Lenders
7. Underlying Mortgages
Now, at the beginning of this article I said no money down isn’t necessarily as easy as some people would have you believe and yet some of these techniques are quite simple. So where is the problem? Some of you may not like this but the difficulty lies in your own belief.
For example, my first nothing down deal involved the use of an investor but when you are just starting out it can seem like a super-human feat to convince someone else to give you some money to invest in a property.
So, the trick is to “dumb-down” the process to match your belief levels until your confidence rises to a point that you can apply something more advanced. For instance, my first investor just happened to be my brother – now that’s a little easier for a beginner to believe, right? Convincing your brother to invest isn’t quite as scary as convincing some hot-shot investor.
Okay, for some it will still be too scary and for others they won’t have a brother who can invest. So what else can you do? You must find a technique that you can honestly see yourself doing; that matches your self-belief. At the most basic level you could consider something like bird-dogging.
Bird-dogging is where you find good real estate deals and take them to a seasoned investor and he pays you a finders fee. Some people would say that’s not “no money down investing” but so what – it’s a way to get started earning some money (and experience) in real estate with NOTHING DOWN.
And if you don’t know anyone who will pay you such a finders fee – get creative. Advertise the deal you find online – Yahoo Groups, a classifieds site, or a multitude of other places. See how it’s all about trying things you’ve never done before. Just don’t quit if it doesn’t work out the first time. Try something, learn from it, ask questions of others, and try again.
If you have any questions just add a comment below.