Related: Investing in Real Estate With No Money Is Feasible, But Is It Recommended?
In this blog post, we will talk about six proven ways of how to make money in real estate with no money.
#1 Wholesaling
Real estate wholesaling is the process of:
- Finding distressed real estate properties that are for sale under their market value
- Negotiating a deal with the property owner
- Putting the property under contract with the intention to transfer that contract to a final buyer
This way, the real estate investor can make money off the sale by simply charging a fee. Doing so requires no money at all.
However, pulling off a successful real estate wholesaling deal requires some experience in negotiating contracts and the ability to vet the property purchasers. How are they going to pay? It’s your job to secure this end of the deal.
Even though you don’t plan on using the investment property as a rental property, due diligence is still necessary. You want to make sure that the property will attract a buyer and won’t require too many repairs to scare buyers away. You also need to prepare a wholesale agreement to ensure everything goes smoothly. So even though wholesaling is a great way for how to make money in real estate with no money, that doesn’t mean it is going to be a walk in the park!
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#2 Fix-and-Flip
Fix-and-flip real estate investing is a simple idea to grasp. All you have to do is find a distressed property, renovate it, then sell it to make a profit. You might wonder how this is possible without having money to finance such a project. Well, it is possible to do a fix and flip without money from your own pocket.
One option is to apply for a fix-and-flip loan from traditional lenders like banks or look for investment property financing offered by private money lenders. Flipping a real estate property with no money seems difficult to pull off, but the goal here is to negotiate a good deal, finance, renovate and sell for profit.
For beginner real estate investors with no experience in fix and flip investments, it is easier to get hard money financing from private lenders. This will be discussed more in detail in the following point.
Learn More: What Are Your Options for Financing a Flip?
#3 Hard/ Private Money Lenders
Financing real estate investments with hard money loans is a popular way among real estate investors. Unlike traditional bank loans, hard money loans are easier to obtain as lenders are more flexible.
Hard and private money lenders are not exactly the same. A private money lender can be a friend or a family member or another investor, while hard money lenders are businesses with certain investing criteria.
Related: A Real Estate Investor’s Guide to Hard Money Loans
Using hard/private money loans to invest in real estate with no money can be profitable, but it comes at higher costs as these loans come with high interest rates and loan fees. So even though this is technically a good way for how to make money in real estate with no money, you’ll need to secure payments along the way. Still, it can be better than one large upfront payment.
#4 Home Equity Loans
If you have no money to invest in income properties, you can go for home equity loans. These are basically a line of credit from your own property or primary home. These products are offered by many banks and other financial instruments, allowing you to capitalize on the equity you already have.
However, this can be a risky investment as you are putting your own property as a liability, and if all goes down, you might face foreclosure and lose your home. So, it’s best to weigh the risk and your other options for how to make money in real estate with no money.
#5 Become an Owner Occupant
One of the easiest ways to start investing in real estate without money is to rent out part of your house as a long term or short term rental. Vacation rental websites, such as the infamous booking platform Airbnb, make it easy for real estate investors to find occupants. Next time you wonder how to make money in real estate with no money and you have an extra room to rent out, then you already have the solution.
It is even possible to get an owner-occupant loan to buy a rental property under the condition that you rent out part of it. These loans are suitable for those who have little funds to invest in real estate since a down payment for such a loan is much lower than that of a standard mortgage. This real estate investment strategy is referred to as house hacking. Read our full guide to learn more: The Ultimate Guide to House Hacking.
#6 Seller Financing
Seller financing, also known as a purchase-money mortgage is a proven way to invest in real estate with no money, especially in situations where the real estate investor cannot qualify for a mortgage through traditional lenders. The property seller would then transfer ownership of the investment property under a purchase-money mortgage with agreed terms. This security instrument is recorded in public records to protect both parties from future disputes.
Final Thoughts
So, how to make money in real estate with no money? It is honestly not an easy thing to do, but if done correctly you can start making money in real estate in no time.
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Now that you know different ways of how to make money in real estate with no money, which will you pursue?