How To Invest In Real Estate With No Money

Mid adult investor showing young couple where to sign the contract for buying a house.
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Investing in real estate can be intimidating, especially if you don’t have the money. If you’re ready to buy some property, but don’t have the cash at hand, continue reading to find out 10 ways that you can start investing in real estate right now.

1. Real Estate Investment Trust

REIT companies own or finance income-producing real estate across various property sectors. REITs are similar to mutual funds, offering everyday real estate investors the opportunity to realize dividend-based income and returns. You can invest in a real estate portfolio by purchasing individual company stock through an exchange-traded fund or mutual fund.

As a REIT stockholder, you earn a share of the produced income without directly buying, financing or managing the property. If you choose to invest in real estate with a REIT, you are in good company, as nearly 145 million Americans who own homes invested in REITs through their retirement plans, such as IRAs and 401(k)s, and other investment funds.

2. Hard Money Loan

Hard money loans are also called bridge loans, short-term asset-backed bridge loans, also known as STABBL, and asset-based loans. They are used for short-term financing of mortgage loans. You can’t get a hard money loan from a bank or credit union. Only private and individual lenders offer real estate hard money loans.

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Securing a hard money loan is often an easier and quicker way to invest in real estate than going through the traditional institution financing and approval process. Plus, your credit history is not an issue because hard money loans are asset-based.

Investors who use hard money loans to purchase real estate are typically house flippers, people who renovate and sell properties for profit.

3. Government Loans

The U.S. government offers loan programs for real estate investing. Here’s a couple to consider.

  • Department of Veterans Affairs (VA) Home Loan Program guarantees loans to eligible veterans, service members, reservists, National Guard members and certain surviving veteran spouses. This loan usually requires $0 down payment and favorable interest rates.
  • Rural Housing Loan Program offers direct and guaranteed loans to buy, build and improve a permanent residence. You can finance a new manufactured home if it’s on a permanent site and was purchased from a government-approved contractor or dealer. The property must be in a rural area, and you must qualify as a low-income earner.

4. Wholesaling

Real estate investors can make huge profits in real estate wholesaling. This strategy involves wholesalers selling multiple properties to a retail seller, who then renovates and sells them to a third-party buyer at a much higher cost. The wholesaler can charge the retailer a lower price because of the volume sold to the retailer.

5. House Hacking

If you want to invest in real estate but are concerned about how you will pay your monthly mortgage, consider house hacking. As a house hacker, you become a homeowner and a landlord. How is that?

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You buy a multifamily property. You live in one unit and rent out the other units. You can also renovate a single-family home into a multifamily property, creating an apartment unit to rent out. The purpose of house hacking is to generate enough income from the rent you collect to cover your entire monthly mortgage payment.

6. Equity Partnerships

One path to real estate investing with little or no money is through equity partnerships. If you lack the funds, you can use your alliances to make up the difference. Find property for a low price that’s not in the best shape, and your equity partner can use their buying power — credit score and capital — to finance it. Each equity partner gets a percentage of ownership over the property.

7. Seller Financing

Before jumping into seller financing, be aware of the financial and legal risks. With seller financing, the seller becomes your direct lender. If you don’t qualify for a traditional mortgage loan, you might look into financing a loan through the home’s seller.

You can negotiate your loan agreement, and the financing process is usually quicker than the traditional financial institution method. The seller-financed agreement is also known as a land contract or contract for deed.

8. Home Equity Loan

When property values are high, a home equity loan could be a viable real estate investment option for you if you have no upfront money available. With more equity in your home, you can capitalize on two options: do a cash-out rewrite and refinance on the first mortgage loan, or keep the first loan and take out a home equity line of credit, also known as a HELOC.

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Be sure to shop around for lenders that allow investors to take out HELOCs on rental properties.

9. Option-to-Purchase Agreement

If you’re currently a tenant, you can enter into an option-to-purchase agreement with the property owner. This contract gives you the right to purchase the property in the future. The tenant and landlord agree that a portion of the monthly rent payment is applied toward the principle of the property over the specified time according to the rent-to-own agreement.

10. Private Money Loan

When you have no money and want to invest in real estate, a private money loan can speed up the process. The catch is that the interest on private money loans can run between 6% and 12%. Like hard money loans, funds come from individuals instead of traditional financial institutions. A good practice with private money loans is to find property that can be purchased for 50 cents on the dollar.

Your Credit Score Is Key

If your credit history is not stellar, you can still invest in real estate with no money down. You first have to know and understand your credit score. This is the number that lenders use to determine the probability of you repaying your loan on time. The higher your score, the better your chance of getting a loan.

Keep In Mind

If your credit score is less than perfect, you can still likely secure financing, but it’s always better to negotiate from a position of knowledge than a position of ignorance.

You can invest in real estate with no money using the financial tools discussed in this article. Review them and choose one that best fits your unique circumstances and needs.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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About the Author

Kathy Evans is a personal finance freelance writer and entrepreneur with a technical writing and instructional systems design background. She holds an MS in technical writing and informational design and is currently a doctoral student in instructional technology at Towson University. Through work experience in the federal government as well as commercial and nonprofit industries, she has focused her freelance writing on finance, investing and economic content with a specialization in budget coaching.  
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