Investing in Real Estate With No Money

Written by: David Wilkening

If you want to invest in real estate and have no money saved or set aside, sell your snowmobile or your jet ski or your sailboat.

No, not directed at you personally, but at Jim, a recently retired friend who said he wanted to get in real estate. But like so many others, he had no money to buy property. Or that’s what he told me.

So what could he do?

In his case, he had two out of the three items I mentioned. A jet ski and a sailboat. He lives in Miami, so it’s not very practical for him to own a snowmobile.

He raised a common question, however, and it’s not the simplest to answer. But real estate investing is, like anything else, an issue of choices.

To finance their “dreams,” sites on real estate are big on using other people’s money or borrowing from friends and relatives. I disagree unless that’s your only option. I believe if at all possible investors should try to save their own money and only have their own responsibility on their backs when they start taking chances with investments.

And it is taking chances.

No one wins all the time.

There are always banks, which are far more impersonal and perhaps less accountable in the eyes of investors. But it’s still money you have to pay back, even if your banker is not your brother or cousin or best friend (it might be easier for you if he was, however).

Bank loans are not that easy to get, as we all know.

So what to do when you need money to invest?

Visit some of those web sites that tell you how to make a killing in real estate without having a dime to invest, of course.

Only kidding, but here are some other options:

Jim forgot he had a US savings bond. He could have used that.

He also forgot his second car. And it was a Lexus, worth about $42,000 used. Could he and his wife get by with one car? This was an option he considered.

More formally, there are Home Equity Loans. This is often the easiest way to get cash quickly. Borrowers can typically get up to 90% of the value of their own primary residence. Typically, this is 80% on a second home. In the case of Jim, he had a home worth $350,000.

Retirement funds. Investors can borrow or withdraw money from these accounts or reduce or stop making contributions for a set period of time. Borrowing may be the best option since borrowers are repaying themselves. This is a common investment practice.

In Jim’s case, he did not particularly like any of these options. He took my own opinion serious (if you borrow money, you have to pay it back).

So no bank loans. And he (his wife, too) didn’t want to give up their second car. It was convenient to have a car whenever anyone wanted to drive it. And they had a teenaged son who could not imagine life without a car.

In the end, Jim and his wife decided not to invest in real estate. They chose to opt out, figuring it was just too expensive. Their choice.###


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Investing in Real Estate With No Money

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