Many people who might like to acquire real estate think the one thing that’s holding them back is that they don’t have any money to invest. To demonstrate how that notion is frequently not true, I asked a number of top real estate investors how much money does anyone need to do their first deal?
Overall, the responses fell into two camps: no money down and money down, with the former camp winning out by four. Thirteen investors said $0 was needed for the first deal while nine said some form of capital was required for the first deal.
I think the most interesting and educational aspect of these responses was from the winning camp (the $0 downers), who offered up their creative strategies to acquire real estate with no money down. A common theme between all of the investors who believe that one can acquire their first deal with no money down is that one’s own money needs to be substituted with something else.
There is no such thing as a no money down strategy that doesn’t require a high level of effort to offset the lack of capital. Here are the four substitutes to your own money that will allow you to acquire real estate with no money down:
1 – Knowledge
The first substitute is knowledge. Brandon Moryl said that it is a balance between money and knowledge. If you don’t have the money, you need to compensate with knowledge, and vice versa. Similarly, Harrison Liu said that getting started with no money is the easy part. The difficult part is having a profitable first deal.
In both scenarios, the investor who wants to acquire their first deal with no money out-of-pocket is required to invest in their education. That means reading books and articles, listening to podcasts, and picking the brain of experienced investors who are actively and successfully pursuing the same investment strategy they plan on implementing.
2 – OPM
The most popular substitute for your own money is OPM (other people’s money). In regards to fix-and-flip projects, Eric Kottner said you can go in with $0, but you’ll need to have access to funds to cover the down payment and rehab costs. And for rentals, you’ll need to make sure that you have at least one year’s worth of rent in reserves and the down payment money. But for both of these scenarios, the funds can be OPM.
Ryan Groene said that you can partner up with a private money investor to acquire real estate with zero dollars out-of-pocket, but you will need a little bit of cash to pay for gas to visit properties and to pay for coffee or lunch when meeting with potential partners. Adam Adams says that you need as much money as the deal costs but it doesn’t need to come from you.
Finally, Nathan Tabor says you can enter a deal with zero money down by partnering with a private money investor or partnering with the current owner in the form of seller financing. However, most of you won’t be able to snap your fingers and, poof, has access to OPM. But as an apartment syndicator myself, I have documented proven tactics for finding OPM, which you can learn about here.
3 – Leverage
Another substitute for your own money is leverage. Glen Sutherland purchased his first investment property by leveraging the existing equity in his personal residence. Elliot Milek financed 100% of his first investment property with a line of credit from a local bank. Hai Loc said that you can leverage credit cards. And Robert Lawry II said the someone can acquire their first investment property with $0, especially when all they have is $0. All it requires is leverage, learning, and strategy.
4 – Resourcefulness
The final substitute for your own money is resourcefulness. For example, click here to learn how someone was able to acquire real estate with a paperclip in one year! Similarly, Ash Patel said that sometimes hustle is better than money.
In reality, all four of these strategies require resourcefulness. But what is great about resourcefulness, creativity, and hustle is that – unlike money – they are essentially unlimited. As long as you are willing to put in the time, anything is possible.