Today’s questions come from Judy R., who wants to know about how to get into real estate with no money… which got me thinking about creative financing…
I agree about tangible assets. And I love “real” estate, I drive by mine for that very reason. I do have a question — I am struggling financially because I was downsized. I cannot find a position that affords me the money to buy and invest my own money right now. How can I keep my investment and find a way to increase my portfolio? I hear of opportunities with no money down, etc. – Judy R.
Hey Judy,
Thank you for writing in.
Judy, you might have seen ads on late-night TV about doing real estate with no money down.
These ads usually refer to wholesaling.
This is a strategy where an investor finds a property at a discounted price…
And then assigns or sells the CONTRACT to another end-buyer for a higher price.
The wholesaler then makes a profit from the difference.
It typically requires minimal capital to start…
And it could be a way for a real estate investor to accumulate capital at first…
So he or she can go on to do bigger deals.
But it is VERY difficult to scale since you have to put in lots of effort and time to close each deal.
Finding motivated sellers and buyers can also be very difficult…
And if a buyer is not found in time, the deal may fall through and result in a loss.
THIS is NOT how I would do real estate with no money down.
Think about it like this…
Real estate is a game… and just like in any game, there are certain rules and strategies you need to learn in order to win.
Those who master the game come out on top.
But first, let me ask you this:
Are you truly committed to becoming a successful real estate investor?
Investing in multifamily with no money down requires a great deal of commitment, determination, and creativity.
In fact, one of my students once managed to secure a 40-unit deal with very little money of his own.
*Results not typical. See full disclaimer below.
He could even have achieved this with no money down.
Why?
Because so many of my Real Estate Club members loved his deal SO much…
That this student managed to raise the down payment within 5 minutes.
THAT’S the power of creative financing.
So instead of focusing on scarcity, let’s be CREATIVE when it comes to financing.
Let’s think of ways to access the abundance of money in this world.
So how would I do it?
#1 – Believe in myself and my abilities.
Yes, investing in multifamily takes CONVICTION.
I don’t need a lot of money to invest in real estate…
But I DO need to believe in myself and my ability to make it happen.
#2 – Identify GREAT properties with the potential for forced appreciation.
These are properties with low rents and the potential to increase them.
And remember, I’m not looking for buildings that are falling apart.
My market research STILL matters here.
I’m still looking for great deals in great locations.
I’m looking for deals where the owner bought the property dirt-cheap and paid it off years ago…
Which is why he’s still able to make lots of money with rents that are below the market average.
I’m also looking for properties that require minimal Capital Expenditure (CapEx).
This refers to one-off expenses used to improve a property…
Such as replacing roofs, improving driveways, and updating appliances.
This multifamily property should already be great with minimal CapEx.
#3 – Approach the seller with a creative financing offer.
Instead of doing the traditional down payment and bank loan…
I could ask the seller to give me a loan for the property.
Then, I would increase the rents (more on this in a second).
I would use the property’s income to repay the seller every month, just like I would with a bank loan.
The seller would still get money for the property over time…
And I get to buy the property without having to go through a bank.
This is known as seller financing or owner financing.
That said, good deals in the market are unlikely to be available through seller financing.
So here’s an alternative.
I could use a master lease with an option to purchase.
This means renting the property for a period of time…
But with the chance to buy it later.
I would pay the owner every month…
And still have the option to buy the property at a later date.
This allows me to delay the sale and potential taxes for the seller*…
It also gives me a great opportunity to increase the rents and value of the property.
When the time comes to buy, the property could very well be more valuable than the originally agreed-upon purchase price.
#4 – Raise the money I need.
I would find partners who have money to invest and tell them I will split the profits with them.
This could be an investor, a private lender, or even a friend or family member who is willing to invest in your real estate deal.*
*Always work with a licensed professional before investing in real estate. See full disclaimer below.
If I have a GREAT deal that I love…
And get in the right rooms with the right people…
I could very well raise the money I need in minutes, just like the student I mentioned earlier.
#5 – Increase the rents and value of the property.
This is known as forced appreciation.
Forced appreciation is the key to potentially creating a profitable investment.
Remember, this property was already profitable with below-market rents…
So even a conservative increase in rents can go a long way…
And potentially increases the income and overall value of the property.
(And no, I don’t want to jack it up too high immediately.)
#6 – Use the increased value of the property to secure a loan from the bank.
I would go to the bank and demonstrate the property’s income potential and increased value.
This means showing them the property’s T3, T-6, or T-12 statements… the new income… and the expenses.
By showing them that the property’s new income can potentially cover the loan…
I could potentially secure a new loan based on the new value of the property.
#7 – Pay back the seller for the original amount offered.
I would use the new loan to pay the seller for the original amount I offered.
This will not only fulfill my agreement with the seller…
But also demonstrate my credibility and integrity as a responsible investor.
#8 – Walk away with cash in my pocket.
After taking out the new loan, and paying the seller back…
I could likely still have cash left over in my pocket, because of the property’s increased value.
THIS strategy is why I say it’s NOT really about how to buy with no money down…
It’s about HOW to buy a deal with creative financing and walk away with some cash.
#9 – Repeat the creative financing process.
Once I’ve successfully invested in a multifamily property with no money down…
I would take my profits and look for other great deals.
#10 – Look for like-minded individuals and expert guidance.
I would join a real estate club or mentorship program.
This can provide me with valuable resources, networking opportunities, and expert guidance…
And put me in the right rooms with the right people for my deals.
So Judy, mastering the strategies and rules is key to the real estate game.
Are you ready to level up and get in the game?
Be Great,
Grant Cardone
Disclaimer: This content is intended to be used for educational and informational purposes only. Before investing, you should always do your own analysis based on your own financial and personal circumstances before making any investment. Grant Cardone is an industry expert who has been investing for over 30 years and his opinion is based solely on his own personal experience and circumstances. Individual results may vary. You should perform your own due diligence and seek the advice from a professional to verify any information on our website or materials that you are relying upon if you choose to make an investment. Investment involves great risk and there is no guarantee of performance or results.
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