You will still need little money for making a down payment when opting for financing real estate through conventional loans. Real estate is an asset form with limited liquidity relative to other investments. Any type of real estate investment requires some amount of capital and is also highly cash flow dependent to call it a profitable investment. Investing in real estate by using other’s money is the stamp of authenticity for some of the most successful people in the real estate investing business.
1. Purchase Money Mortgage/Seller Financing
The first proven way to invest in real estate with no money is through seller financing. When buyers are unable to secure a loan from financial institutions, they may opt to seek real estate financing from the sellers. With conventional real estate transactions, the buyers will provide the sellers with the cash, to gain ownership of the property. However, with a purchase money mortgage, the seller extends finances to the buyer. The buyers will then repay the sellers, for the agreed terms.
2. Investing In Real Estate Through Lease Option
The second proven way to invest in real estate with no money is through the lease option. Under the lease option, the property owner charges the buyer a monthly or yearly premium, in the form of higher rental payments. The excess rental fee will then be channeled towards the purchase price. With this type of agreement, the investor can purchase an investment real estate using a slightly higher rental fee.
3.Equity Partnerships
A very common path in real estate investment is through partnerships. Edward Shaw, Co-Founder of Leeline Sourcing, says, “A typical path in real estate investments is by using alliances. If you lack something as an investor, another person can make up for it.” Many partnerships will entail one partner finding a distressed property at a discounted price, while the other uses their credit score and working capital to finance it. Just make sure everyone is bringing something to the table. For more experienced investors, goals, risk, roles, and returns should always be discussed before creating any partnership type
4.Option To Buy
Sometimes referred to as a “lease-option,” this method allows investors to acquire properties without initially taking legal ownership. However, the investor will sign a legal “option to buy” from the homeowner at a specific price in the future. In return, the investor rents the property out on a long-term basis with an agreement in place to purchase the property at a later date for a previously set amount.
5.Investing In REITs
Real estate investment trusts, called REITs, are a great way to start investing in real estate. Instead of purchasing physical properties, investors buy shares in a company that develops or manages properties. In this way, REIT investing is similar to stocks; however, REITS still allow investors to enjoy all of the benefits real estate offers. REITs are an excellent opportunity for generating passive income by real estate investing without having to purchase properties themselves.
