“I want to invest, but I don’t have the money or knowledge to get started. Where do I even begin?” This question ponders many in the beginning stages of their journey towards financial freedom. Some let this question stump them and never search for an answer to it, while others take the initiative to find creative solutions. The most successful people realize they need to acquire the knowledge and mentorship necessary to reach their goals, and make it their mission to actively seek it out. This description was not too long ago the shoes that I stood in, and through determination, I was able to find so many creative ways to make money work for me. Remember, it’s not always about the strategies themselves, but more so about the people you meet along the way. I can say with conviction that adding the power of people to your pool of assets is the most valuable thing you can go out and do. The wisdom and knowledge you need to succeed are not always found in a book although books are a pretty damn good place to start. Success is about the action of learning and applying what you learn immediately. There are no secrets, there is only drive.
Investing in relationships
I know what you’re thinking, “Relationships? I thought I clicked this article to learn about some creative investing.” Stay with me here! Relationships are the biggest asset you can add to your success. They give you knowledge and confidence all while inspiring you to take action all at once. For me personally, relationships have been the biggest avenue to any success or win I’ve been blessed to have. I’ve met amazing people in mentorships such as Subto where I am able to connect with people who possess a limitless knowledge base and passion for real estate, and add value to their business in any way I can. Because of relationships I’ve been able to build, I’ve put millions of dollars worth of real estate under contract over the past 6 months and used creative financing to do it, gained access to various forms of funding, and expanded my knowledge base tenfold! The more time you invest in relationships with the right people, the better off you’ll be in the long run. Join groups, reach out to people online, attend meetups, and do your part to start connecting with as many like-minded people as you can. Your quality of life and your wallet will thank you!
Creative real estate investing strategies
In my opinion, real estate is the best investment vehicle out there.In this asset class, you benefit from appreciation, cash flow, tax benefits, and so much more. The best thing about real estate in my opinion is the ability to invest in it with little or no money! Take it from me, someone who does it regularly even when at first it felt like I had no business doing it. First and foremost, to do this and be successful, you must be constantly learning and building up your network to help you along the way. The journey is a bumpy one, but these two things can help you cross the finish line indefinitely no matter how many bumps you hit along the way. There are many great strategies I use in my own real estate investing business that work in any economy. I will share a few below.
Wholesaling
Wholesaling is an amazing way for someone with no money to get started in real estate. The value you bring is the deals you find for other investors to close on. To be successful, all you need is extreme drive, commitment, and the hunger for more knowledge as you progress. The basics of wholesaling are to find deals for other investors and lock them up under contract while leaving enough cushion between the purchase price and what an investor will pay for it to make what is called an assignment fee. These fees can add up quickly and are what I currently use to generate active income. This is active income because if I stopped pulling lists and making calls deals would stop coming unlike passive income that comes from cash flow from rentals whether I work or not. Wholesaling is not without its challenges. It can be extremely difficult to find the right property to put under contract and sell to what is called an “end buyer” if you don’t have any end buyers to sell deals to. This was a huge problem for me that I had to learn quickly when I put my first deal under contract with no end buyer lined up. I went from thinking I was going to make $10,000 to sitting on the contract 2 months later with a pissed off seller and eventually settling for a few hundred bucks for my time and effort! Don’t make this mistake! Go find buyers on Facebook, and pull lists of buyers from websites such as BatchLeads. Join real estate investing groups and work together with others to close deals. This will help you learn the ropes and build businesses with people who you share commonalities with. Wholesaling is an amazing option for anyone looking to break into the investing world with little to no cash.
Seller finance
Seller financing is a creative strategy I use when I buy properties from sellers who typically own their homes free and clear or without mortgage (You can also do a subject to seller finance hybrid. We will talk about the subject to strategy below.) Typically in a seller finance deal, you are able to negotiate with the seller a down payment followed by monthly installments scheduled over a predefined amortization period. The great part about seller finance is that you get to decide on your own terms with the seller without needing the approval of a bank. You don’t need credit, long and tedious paperwork, other investment history, or anything else you would typically think of. Sometimes, you can get into deals with no or an extremely low down payment, or negotiate a deal with no interest rate. Typically how I do this is I increase the purchase price so the seller gets their price and we get our terms with the ability to pay down the principle with every payment with no interest. Seller finance deals can be more difficult to come by sometimes, you just need to be looking for them in the right places. One of my favorite types of people to contact are what we call “tired landlords”. These people typically own a property clear of mortgage or with little mortgage left for ten or more years, are older, and have tenants currently. These people appreciate the idea of passive income but no longer want to endure the hard work of being a landlord. Seller finance for them is a perfect option because they get the best of both worlds by collecting that monthly payment without any of the hassle or headache. If you look for them, these deals are out there to be had! Start searching as this could be a great way for you to get into your first investment!
Pro tip: You can wholesale seller finance or subject to deals as well as cash deals. Investors love creative terms as it often gives them more opportunity for more cash flow. Simply tack on a wholesale fee and you’re good to go!
Subject to
Subject to investing is an amazing strategy that many savvy real estate investors use to their advantage under any market conditions. Essentially, a subject to deal is the purchase of a property subject to the seller’s existing mortgage meaning their mortgage will stay in place and the buyer will continue to make payments to it. The buyer catches up the mortgage until payments are current and anything else the owner is behind on such as taxes and in turn gains possession of the property without having to apply for a new loan to pay off the old loan! Sellers in foreclosure love to work with this strategy as they often don’t have the option of listing on the market due to time constraints or their home being worth less than they owe. In comes subject to to the rescue! When you purchase a home subject to, you take over a loan with whatever interest rate was given to the seller. This can be a great way to get 3% loans even when the going rate on the market is around 6% or higher as they are currently. Sellers also get the benefit of keeping a foreclosure off their credit and in turn keep an up to date mortgage in their name. In a few months’ time, the seller’s mortgage will no longer show up on their debt to income ratio and they will be able to apply for a new loan if they so choose. To keep this simple, this is because the lender recognizes the payments are no longer coming from the seller and are instead coming through a third party. There are so many benefits to subject to investing, however I can’t end this section without talking about the due on sale clause. The due on sale clause is held by many lending institutions. It basically states they have the right to call the current note due on the sale of the property. What this means is that if you do a subject to deal and the lender finds out, they reserve the right to call the note due. Just because they have this right doesn’t mean they execute it a lot, and most of the time it goes unnoticed and uncared about as long as the debt is being paid. However, it is a risk for some investors as they may not have the capital to pay back the note in its entirety at any time or want to sell if this happens. Luckily, there is what is called due on sale insurance even though it is slightly difficult to find. The premise is that you pay 1% of the purchase price upfront to the insurance company and if the bank calls the note due they finance the home to you under the same terms as the bank. I have not had to do this myself, but knowing the option is out there is surely comforting! There are always risks to investing, but you have to weigh them with the rewards and do what is best for you.
How investing with little or no money can open the floodgates of freedom
In the sections above, we barely scratched the surface of investing with little to no money. The idea was to open your eyes to what is possible to motivate you to go out there and take action! The only thing holding you back from your dreams is your fear of failure, procrastination, and inaction. Take the above strategies and add them to your toolbelt for your future endeavors. Focus all of your energy on making relationships and add value in any way you can! Make connections, build your network, continue to learn, and take action consistently and success will find you!