5 Ways to Buy Real Estate with Little Money
A real estate investor's guide to Creative Financing 101
What’s the number one reason people don’t invest in real estate?
They don’t have the cash.
But here’s a secret…
You don’t need tons of cash to start investing in real estate.
The best real estate investors I know are skilled at using little cash, especially early in their journey.
What’s their secret?
👉 Creative Financing 👈
The goal of creative financing is to buy or finance a property with the buyer/investor (you) using as little of your own money as possible. Aka leveraging.
And it’s not just for big real estate players.
Creative financing can help new investors, too.
So I created this guide for you.
5 Ways to Invest In Real Estate with Low or No Money
🚨 Disclaimer: there are pros & cons to each strategy. Do your own research and consult with a professional. This is not advice and is meant as education only.
Let’s dive in…
1) House Hack w/ FHA Loans
What is House Hacking?
House hacking is when you buy a multi-unit property. You live in one unit of it while renting out the remaining units for rental income.
Why is it worth considering?
House hacking can be a great way to reduce or eliminate living expenses while building wealth through real estate investing.
The core benefits of house hacking:
Monthly cash flow
Build long-term equity
Qualify for tax benefits
Reduces your living expenses
Low down payment with FHA loans
How do you get started?
If you’re a first-time homebuyer, you can become an investor at the same time by using an FHA loan to put down as low as 3.5%.
2) Partner with a Capital Backer
What is partnering with a capital backer?
Partnering involves teaming up with another investor or group of investors to purchase and manage a property together.
Why consider this strategy?
This allows you to pool your funds and expertise to purchase larger properties or take on more complex deals than you could on your own.
You bring expertise, research, and deal flow. Your friend brings the capital. This can be a great way to start with low money down and help others invest in cash-flowing real estate alongside you.
How do you get started?
There are a few ways to find partners to co-invest in real estate with you.
Friends and family
Building a social media brand
Networking at real estate events
Emphasize what you bring to the table. Look for a long-term partner who wants to become a real estate investor without doing all the work.
3) Private Money Lenders
What are private money lenders?
Private money lenders are individuals or companies that provide loans to real estate investors (like you). They can be an alternative to using a traditional bank.
Why consider this strategy?
Private money lenders can be a good option for real estate investors who need quick access to funding or who may not qualify for traditional financing.
Benefits include…
Access to funding: Private money lenders can provide real estate investors with access to funds that may not be available through traditional lenders, such as banks.
Faster processing: Private money lenders can typically process loan applications faster than traditional lenders, which can be important in competitive real estate markets.
Flexible terms: Private money lenders can offer flexible terms that may not be available through traditional lenders, such as interest-only payments or shorter loan terms.
No credit check: Private money lenders may not require a credit check or have strict credit requirements, making it easier for real estate investors to secure funding.
How do you get started?
To get funding from a private money lender, you need to find a lender who is interested in investing in your project.
The lender evaluates your project and negotiates the terms of the loan, including the:
interest rate
repayment terms
any collateral
4) Seller Financing
What is seller financing?
Find a property you really like? But you don't have the cash...
❌ The bank won't give 100% mortgage.
✅ But the seller might act as the bank.
Seller financing is when the seller agrees to finance all or part of the purchase price of the property for you, the buyer.
Why consider this strategy?
Seller financing can be a good option for buyers who may not qualify for traditional financing or who want to avoid the traditional mortgage process.
Benefits of seller financing in real estate:
Easier qualification: Buyers who don’t qualify for traditional financing due to credit or income issues may find it easier to secure financing through seller financing.
Faster closing: Seller financing can often result in a faster closing process since there is no need to wait for the approval process from traditional lenders.
Flexibility in terms: Seller financing allows for greater flexibility in terms, including interest rate, repayment schedule, and down payment amount.
Potential tax benefits: Sellers who finance the sale of their property may be able to spread out the capital gains tax liability over a longer period of time.
How do you get started?
To get seller financing, the buyer and seller negotiate the terms of the financing, including the interest rate, repayment terms, and any collateral.
The buyer makes payments directly to the seller until the loan is paid off.
Negotiating terms: The buyer and seller negotiate the terms of the sale, including the purchase price, down payment, interest rate, and repayment schedule.
Drafting an agreement: Once the terms are agreed upon, an agreement is drafted that outlines the details of the financing arrangement. This agreement should be reviewed by an attorney to ensure compliance with all applicable laws.
Closing the sale: The buyer provides the agreed-upon down payment and the seller transfers ownership of the property to the buyer. The seller retains a mortgage on the property and the buyer makes payments to the seller over the agreed-upon period of time.
Repaying the loan: The buyer makes payments to the seller according to the terms of the agreement. Once the loan is fully repaid, the seller releases the mortgage and the buyer takes full ownership of the property.
5) Wholesaling
What is real estate wholesaling?
Wholesaling involves finding distressed properties, negotiating a low purchase price, and then quickly reselling the property to another investor for a profit.
Wholesalers connect motivated sellers with cash buyers.
Why consider this strategy?
Wholesaling can be a low-risk way to generate income in real estate investing since it doesn’t require the investor (you) to hold onto the property for an extended period of time.
Benefits of wholesaling in real estate:
Minimal capital: Wholesaling requires minimal capital to get started since the investor does not need to purchase the property outright.
Fast turnaround: Since the goal of wholesaling is to quickly assign the contract to a buyer, it can result in a fast turnaround time and quicker profits.
Low risk: Wholesaling can be a lower-risk investment strategy since the investor does not hold onto the property for an extended period of time.
Potential for high profits: Successful wholesalers can make a significant profit from each deal, often in the range of $5,000 to $20,000 or more.
How do you get started?
Here’s what the process of wholesaling can look like.
Find a distressed property: The investor finds a distressed property that is priced below market value. This can be done through a variety of methods, including direct mail campaigns, driving for dollars, or networking with other real estate investors.
Put the property under contract: The investor negotiates with the seller and puts the property under contract at a discounted price. The contract should include a contingency that allows the investor to assign the contract to another buyer.
Find a buyer: The investor finds a buyer who is interested in purchasing the property and assigns the contract to them for a fee.
Close the deal: The investor and the buyer go through the closing process, with the buyer paying the purchase price to the seller and the investor receiving their assignment fee.
Whenever you're ready, there are 3 ways I can help you:
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Thanks for this helpful guide Marc! Keep ‘em coming