How to Invest in Real Estate with None of Your Own Money
Lots of people invest without having their own money. How? I have two words for you:
Private money refers to any money that you borrow from a non-bank. It could be from a friend. It could be from a hard-money lender. It could be from your awesome Uncle Richard. Private money is money you borrow on your own terms.
There is a whole world of money waiting to be invested out there. You just have to know where to look. We learned about this from Susan Lassiter-Lyons' book Getting The Money and her awesome online course. She was on Episode 34 of my podcast and she's got an amazing story. One of the most inspiring things she teaches is that you don't need any of your own money to get invested in real estate. So please don't let that stop you!
Here are a few different private money roads you can go down. This is just a crude summary. Please read the book and/or take the course if you're serious about getting started. Which I assume you are or else, why the heck are you reading this??
OPTION 1: HARD MONEY LENDERS
Hard money lenders are like bankers but they set their own rules. They lend money with less strict standards than the banks because they are not regulated by the government. They don't care as much about your credit score and they don't limit you to one investment at a time. They lend on the merit of the deal and they can close funding MUCH faster than a traditional bank.
Their terms are much different than a bank too. They typically want to do shorter-term deals with higher interest rates than a bank. Interest rates can be between 6 and 12 percent so make sure your deal can accommodate this kind of debt service. These terms may or may not be a deal breaker but a lot of times it can help you get into an investment faster. Some investors like to re-finance out of these loans after they buy them or re-negotiate the terms down the road. It is one option.
OPTION 2: FRIENDS/FAMILY
Another option is a private note with someone close to you in your life. Of course you and this person must have a strong trusting relationship but it could potentially be a win-win for both of you. Uncle Richard doesn't want to invest in real estate but wants his money working hard for him. You DO want to invest in real estate and can put Uncle Richard's money to good use. Both of you make money. You get started with a real estate portfolio. Everybody wins!
Listen to Episode 37 of our podcast to hear us talk about private notes. These can be structured however you like. How many years do you want to carry this note? What interest rate works for you and Uncle Richard? You two decide this. Because the terms are private. You must dot all of your i's and cross all of your t's but if you do, this is an awesome way to get started with your first deal.
OPTION 3: EXISTING REAL ESTATE INVESTORS
If you go to a local real estate meetup you will meet lots of investors looking for partners. They may want to finance deals, they may want help on existing deals. This is a great way to get started and find some money partners. All it takes is for you to work up the courage to walk into a meetup and start to befriend strangers. Yes that is hard to do. I've done it. It takes courage to say that you're a real estate investor, especially when you're just getting started. But the same can be said of any career. You have to start somewhere.
These are just a few options in the vast world of private money. I hope this can inspire you to learn more. I talk to investors all the time that are fired up to get started but have no money of their own. These people inspire me because they have not seen the lack of funds as an obstacle to give me a call. I love that! It should not be your obstacle either. The road to wealth has many paths, my friends!