Investing in real estate is a practice that’s about as old as human civilization itself. To many people, investing in and owning real property is a major goal in life, signifying financial independence and the ability to generate wealth without working for somebody else. It’s understandable that people of all backgrounds look to real estate as a gateway to living a better life, and it comes as no surprise that nearly everyone wants to get into investing in real estate without taking a major personal financial risk. Because of that, a lot of people ask if it’s possible to invest in real estate with no money down. In short, investing in real estate does require money (as does any type of investment), but we’ll cover some ways that investors can get creative and protect their own cash in real estate transactions.
Find a Financial Partner You Can Trust
If you’re not going to invest your own money into real estate transactions, you will need to have someone who can provide you with funding. Maybe you have a friend or family member who wants to invest but doesn’t have a mind for real estate, or perhaps you’ve found a member of your community who is willing to put up money but simply doesn’t want to have to do the groundwork. This person also needs to be willing to share a profit, as do you, and it’s very important that there is mutual trust in a business relationship like this one.
The good news is that this is an extremely common practice and it’s not necessarily a difficult relationship to find. However, managing these relationships over time requires both parties to be reasonable and accountable in taking the business seriously. Lots of partnerships with great potential have fallen apart after personal relationships have soured due to a poor business relationship. Make sure whoever you partner with is someone you respect and who respects you right back.
Make Sure to Have a Good Credit Score
Even if you’re partnering with someone else for initial funding, your credit will come into play when it comes to financing properties. If you want to invest in real estate with little or no money, having an excellent credit score will certainly make your life easier. Even for lenders who don’t require a minimum FICO score, a guarantor’s credit is still looked at and considered when offering loan terms. For the most favorable terms possible, you’ll want to have a credit score in the mid-high 700s, as this exemplifies to lenders that you’re a responsible borrower and will likely be able to comply with the terms of a loan without issue.
Finance Your Investments With Hard Money Loans
If you want to invest in real estate with little or no money of your own, working with a hard money lender can be a great way to conserve cash and keep your own money out of deals. Of course, not too many lenders are going to offer 100% financing with no money down, but you can at least finance 100% of rehab costs and typically 50-80% of the initial purchase price of the underlying asset. It’s also important to note that hard money loans typically come with short terms of 6-12 months, so it will be important to make a schedule, stick to it, and successfully sell the property in order to pay off the loan.
If you prefer to hold your properties rather than flip them, then refinancing out of hard money and into a rental loan is a service that private lenders like Pimlico Capital offer. This process can also help to conserve cash, and depending on the value of your rehabbed property, can sometimes mean that you receive money in a cash-out refinance after a property is leased.
Ultimately it’s Possible but Difficult to Invest in Real Estate With No Money
Without your own personal funding, investing in real estate becomes more complicated, but it is not an impossible feat. Those who will have the most success in doing so will have some form of experience in real estate, whether as a real estate agent, licensed contractor, or experienced wholesaler. If you’re completely new to real estate and you don’t have funds of your own to invest, it will be a much more difficult hill to climb. If you’re looking to break into this business, it never hurts to begin attending networking events, taking classes, or attending local REIA meetups.
Get Up to 70% LTV With a Hard Money Loan from Pimlico Capital
While we don’t offer 100% financing on fix & flip projects, we do offer up to 70% LTV on hard money loans. Pimlico Capital will cover 100% of your rehab costs and a large portion of the purchase price, all based on a property’s estimated after repair value (ARV). We want to make sure that our partners succeed, and seek to form long-lasting relationships grounded in mutual trust and respect.
If you’d like more information about our loan programs, give us a call at 410-855-4600! If you have a property in mind and you’re seeking financing, see what rates you prequalify for by filling out our online rate calculator.
