How To Invest In Real Estate Without A Lot Of Cash Upfront
Everywhere you look, it seems like there are real estate investment gurus who are earning significant revenues. They might own rental properties — or buy shabby homes, fix them up, and sell them for a profit. Another common strategy is putting contracts on homes at wholesale prices, marking up the price and finding buyers. You might be wondering how these investors got into real estate investing and how you can do so too. We’re going to discuss some of the preliminary costs associated with real estate investing — and how to avoid them.
Fact 1: Most Real Estate Investment Strategies Require Significant Upfront Capital
Almost every real estate investment strategy requires you to have fast access to a significant amount of investing capital, either in cash or by securing a loan. If you lack funds or credit, you’ll be unable to invest using most strategies.
You Need Cash or Credit to Make the Purchase:
Whether you’re buying a home, renovating it, and then selling it for a profit — or renting it out, you need a significant amount of cash or must take out a loan to make the purchase, or sometimes both. You’ll need more money than just the price of the home too, as you’ll need to pay closing costs and other fees.
Your cash will also be tied up for a while, so you can’t recoup your original investment or make a profit until you sell the home. If you used credit, you’re less likely to qualify for another loan to buy additional properties until you repay the loan. Having your cash or credit unavailable significantly limits your income-earning opportunities because you can only earn so much with one property.
You Need Cash to Make Repairs
If you’re “fixing and flipping” a home, you need additional cash to pay for repairs and renovations, which often cost more than most people realize. You also need to pay marketing costs such as photos, videos, ads and signage to sell the home. You will also be required to make the monthly interest payments on your loan, pay the insurance, keep the house maintained, and pay the utilities while you are repairing the house and while you are marketing the house for sale.
If you’re buying a property to rent, you’ll also need cash to repair and renovate it, as well as money on hand to cover background checks and other costs associated with vetting renters. You might incur additional marketing costs too.
If you put a wholesale home under contract, you need money to market the property effectively. You need to quickly find a buyer willing to pay your marked-up price — before the contract period expires.
Even if you inherit a home you decide to sell, you’ll incur some upfront costs to repair and market it.
Fact 2: Some Owner-Financed Real Estate Investing Requires Minimal Upfront Capital
With a real estate strategy called owner financing (aka seller financing), you typically don’t need much cash or credit. In a strategy we teach at Owner Finance Academy, our investors don’t use their cash or credit to finance homes they invest in.
Our investors take over an existing mortgage from a seller and find a buyer right away. The buyer pays our investors a down payment and makes monthly payments with interest. The monthly payments pay down the original seller’s mortgage — and the investors keep the interest as income. That down payment, plus years of interest payments, add up to significant, life-altering wealth over time.
Our investors earn steady, long-term revenue without tying up their cash or diluting their credit.
Our investors also aren’t responsible for repairs, renovations, maintenance, insurance, property taxes and the typical hassles associated with renters and contractors. Our strategy is a win-win for all parties — the seller, the buyer and the investor.
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