Not many new real estate investors enter the game with unlimited funds. Most of us need to figure out how to invest in real estate with little money.
In fact, some people start investing in real estate with just $1,000.
But that limits your options, so how do you invest in real estate with no money, or with little money?
We have plenty of our own thoughts on the matter, but to broaden the ideas, we polled a series of expert real estate investors on their tactics to invest without much money.
Why Invest In Real Estate?
With the broad range of financial instruments available to people—stocks, bonds, derivatives, deposit accounts, etc.—you might be asking why bother with real estate specifically?
Well, that’s because real estate offers multiple benefits that don’t inherently come with other financial instruments. Here are some of them:
| Reason | Description |
|---|---|
| Passive Income | Rental properties can generate steady cash flow, providing a consistent income stream. |
| Appreciation | Over time, real estate values generally increase, offering potential for capital gain. |
| Tax Benefits | Real estate investors can take advantage of various tax deductions and benefits. |
| Leverage | Investors can purchase property with a relatively small initial investment. |
| Diversification | Adding real estate to an investment portfolio can reduce risk through diversification. |
| Inflation Hedge | Real estate often retains value and purchasing power even during inflation. |
Notice number 4 on the list: leverage. As indicated, real estate investments allows investors to get into the game with little to no money.
Doing that, of course, requires further discussion.
Ways To Invest In Real Estate With Little To No Money
There’s a big world of creative financing available to you when you get into real estate. So, let’s look at your options:
Live-in Flips
You know all about flipping houses. But have you ever considered moving into the property while you renovate and flip it?
Liz Hulz from The House Guys explains how she got into flipping: “Finding the seed money for your first project is the first and often the most challenging hurdle to overcome. A good solution is to make your first investment property your temporary home. This method works well for youngsters who have yet to get on the property ladder.
“Living in your investment property can cut down costs significantly. The money saved on rent and costs associated with renting a property can boost your renovation budget. Being on site cuts travel costs to and from the property. It also means you will be readily available to answer contractor questions avoiding delays based on communication.
“Having more time in the property, you can tackle easy DIY tasks yourself. Every small task you complete yourself reduces expenses and increases the return on your investment. Certainly, for the first investment you will find yourself counting every dime. After several investments, finances become easier and you have the confidence to take on more challenging projects that have a higher return on investment.
“My partner Andy and I bought our first house just after college, and it was so successful that we ended up starting our own real estate investment business! We love flipping houses and living our best lives together.”
As an added bonus, you can take out an owner-occupied mortgage, such as through Credible. That keeps both your interest rate and down payment lower than they would be with a hard money loan.
House Hacking
Deni and I are huge proponents of house hacking, and have each used several house hacking tactics over the years.
The classic house hacking technique involved buying a small multifamily property, moving into one unit, and renting out the others. You can use conforming mortgage loans for properties with up to four units, and again take advantage of lower down payments, lower interest rates, and lower minimum credit score requirements. Check out this duplex house hacking case study for details on exactly how it works.
But multifamily house hacking isn’t the only way to skin that cat. I’ve rented out rooms to housemates, covering the bulk of my mortgage payment. Deni has rented out storage space in her garage, and even went so far as to host a foreign exchange student for four years. The stipend covered most of her monthly payment.
You can also rent out an accessory dwelling unit (ADU) to cover some or all of your mortgage.
And if you don’t like the idea of sharing part of your property with long-term neighbors, no one says you have to sign a long-term lease agreement. You might prefer renting to short-term guests on Airbnb, and possibly earn higher returns to boot.
Real Estate Wholesaling
Also known as flipping contracts, wholesaling real estate involves putting a property under contract at a bargain price, then selling that contract to another investor — with a margin built in for you.
“For example, suppose you locate a $85,000 home and put it under contract for $55,000,” explains Corey Tyner, founder of Buy Yo Dirt. “You then sell the rights to that contract for $65,000 to another real estate investor. At the closing table, the seller receives $55,000, you receive a $10,000 finder’s fee, and the real estate investor gets a fantastic deal on a home.
“If everything goes right, you will never have to take title to any properties. You do, however, make a healthy profit.
“It won’t cost you much money; all you’ll need is a bit earnest money deposit to pay the seller, which might be as low as a few hundred dollars. Many first-time real estate investors begin by wholesaling to learn how to invest in real estate with little money. After a few wholesale deals, they have enough wealth to start retaining properties for themselves.”
Real estate wholesaling requires you to master two skills: scoring great real estate deals and building a network of real estate investors to sell to.
Borrow the Down Payment: Business Credit
Who says you have to come up with a down payment out of your own savings?
One way to invest in real estate with no money is to borrow the down payment from a business credit line or credit card. Because they’re not secured by collateral, they tend to come with relatively low credit limits and high interest rates. But you can combine many different credit lines and business credit cards to come up with the down payment, and then quickly pay it off with the flip profits or cash flow from the rental property.
In fact, many business credit cards come with an introductory 0% APR period ranging from 12-24 months. As long as you pay off the balance before then, it’s an interest-free loan.
Check out this video on how to open unsecured business credit lines as a real estate investor, using credit concierge service Fund&Grow. And while you’re at it, read up on other creative ways to come up with a down payment for a rental property.
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