Like many people, you probably have dreams of becoming the next millionaire real estate investor. You may also believe that you need tens of thousands of dollars just to get in the game. In some circumstances, this may be true, but it’s not always the case. Real estate investors often use a variety of strategies to pay for properties with little or no money down that a person who is new to this business may not know about. Here are a few little to no cost strategies that you can use to launch your real estate empire.
Find a mentor
If you have no real estate experience, then finding a mentor is key to your initial success. Buying a primary home for yourself doesn’t count having real estate experience because the mindset of buying a personal home is a lot different than buying an investment property. A mentor will help you to see a property as a money-making opportunity, which forces you to look for ways to get the most return on your investment. A good mentor will also show you how to build your business, generate referrals and leads on properties for sale, and guide you through your first few real estate deals.
Your mentor may start you off with doing a few real estate wholesaling deals. As a wholesaler, you will approach someone who is trying to sell their property, you will both sign a purchase contract with an agreed upon price, then you will sell the contract to your mentor or another buyer for a fee. The fee can be several hundred or several thousand dollars. You are not buying or selling the property, and you can generate an excellent income while making business connections and learning how to find great deals on properties.
This strategy is also known as lease-purchase or rent-to-own, it involves a little money, and it initially doesn’t involve a bank or mortgage company. For example, tenants recently moved out of a single-family investment property that your mentor owns. Now that you’re making good money through wholesaling, your mentor offers to lease the property to you for an agreed upon monthly rent. At some point during a certain amount of time, usually 3 to 5 years, you must buy the property at a previously agreed upon price. Your mentor can’t sell the property to someone else during this period because you already have the option to purchase.
If you decide to buy your mentor’s property as your first investment property, you can go to a bank or mortgage company and get a traditional loan. If you have a self-directed IRA, you can use this IRA to purchase the property. This retirement account allows you to invest in a variety of assets like stocks, bonds, mutual funds, small businesses, and real estate. You should consult with your attorney and accountant before opening this type of IRA because there are a lot of rules and regulations that you must deal with. As an owner of this type of account, you will need to hire a trustee or custodian to manage the account and file all the necessary paperwork with the IRS.
Investing in real estate can be financially rewarding, and it doesn’t require a lot of start-up capital. There are other low-cost ways of getting into real estate investing such as crowdfunding, forming a partnership, or working with a private lender. Always do your homework before choosing how you will get into this business.