How To Invest In Real Estate With No Money: A Broker’s Proven Strategies

Every year, another book or course comes out promising to teach us how to invest in real estate with no money. The question never seems to go away, though, and I think that’s because most sources of advice on the topic don’t really know what it’s like to want an answer to the question in the first place — at least not in the way that most people are asking it. 

There really are a lot of ways to invest in real estate without money, but which strategy is right for you depends on why you’re interested in the topic in the first place. So for simplicity’s sake, I’m going to break my advice up into 2 broad categories based on experience — and I’m not talking about my experience, I’m talking about yours.

Strategies for established real estate investors

If you’re someone who already identifies as a real estate investor, then chances are that you are interested in learning ways to invest in real estate with no money for one of two reasons:

1. You’ve run out of cash: It happens to everyone sooner or later if you’re actively investing, and when it happens, the natural inclination is to seek strategies that can get you back in the game faster.

2. You’ve done some math: Another common scenario is you spent the time to define your endgame — kudos to you — but in doing so, you’ve come to the conclusion that you’re going to need to stretch your cash as much as possible to hit your portfolio targets on your preferred timeline.

In either case, you’re in luck because the vast majority of information committed to books, podcasts, blog posts, and seminars has been aimed at you. This is what I like to refer to as the “no money down” category. 

Essentially, what you need is leverage, and reams of paper have been produced on this topic, so I’m not going to go into too great a detail here. Rather, I’ll briefly summarize what I suggest you look into further based on which of the two scenarios you’re in.

For experienced real estate investors who’ve run out of cash

• 1031 exchange: 1031 exchanges offer a path for efficiently converting multiple single-family, or small multi-family, properties into larger multiunit properties by providing a path to liquidating funds previously invested, without losing a large chunk of your purchasing power to taxes. Learn more about 1031 exchange rules in our guide.

• Home equity line of credit (HELOC): HELOCs are another common way that investors can unlock the equity accrued in their previous acquisitions in order to purchase more units — in this case, while keeping the previous units. When paired with high loan-to-value (LTV) loans from a Debt Service Coverage Ratio (DSCR) lender, a HELOC can easily be used to purchase more properties without needing to contribute additional cash.

• Private money: In practice, the easiest way I’ve found to truly finance 100% of a project is by securing a mortgage from a friend or family member. Professional lenders almost always cap loan-to-cost (LTC) below 100%, meaning you’re always going to bring cash to close, no matter how good a deal you’ve found. With private mortgages, though, covering 100% of costs is rarely an issue so long as the loan stays below a reasonable LTV, typically 70% to 80%.

• Seller financing: Another option is to find a seller willing to become the lender. Instead of going through a bank, you negotiate payment terms directly with the property owner. This can be an effective way to take control of non-performing properties with potentially no upfront cash being required.

For experienced real estate investors who anticipate running out of cash

• BRRR Strategy: If you haven’t run out of cash yet, but you see it on the horizon, then you might want to consider setting aside enough liquidity to employ the BRRR strategy. This works because lenders tend to have higher LTC caps on refinances than on purchases — sometimes even allowing investors to cash out more than 100% LTC as long as they stay below their max LTV. The result is a somewhat counterintuitive strategy where using all cash to acquire and stabilize a property up front can actually lead to leaving less cash in the property than if you financed it at purchase.

• Portfolio Loans: I’ve seen many investors drastically improve their cash position simply by refinancing multiple rental properties that were originally financed one at a time, under a single portfolio blanket. This probably won’t result in a lot of cash back, like a cash-out refinance typically would, but if you’re concerned more about future cashflow issues, you’d be amazed at how much of a difference in month-to-month returns a blanket refinance can make.

Strategies for aspiring real estate investors

In my experience, the group that seems most interested in learning how to invest in real estate with no money is the novices. This is something I can relate to because I started off doing the same thing — and this is where I think not enough attention is paid to really answering the questions behind the question.

If you don’t consider yourself to be a real estate investor already — or at least not much more than an accidental one — and you’re interested in this article, then chances are you fall into one of two categories: 

• You literally don’t have any money to invest, or 
• You technically have the money to invest, but you’re too nervous to risk it. 

Either way, you’re in luck, because this is where I started myself, and I’ve got more actionable advice for you than I could possibly fit in this article.

For inexperienced investors with no money

I’ve found that the best way for aspiring investors with no money to break into the business is to take a job providing a service inside the industry. 

The limit here is really your imagination, and it’s a great way to check three boxes at once: you’re making money, gaining valuable experience, and making connections. Even if you aren’t making much money, you’re building credibility as an industry insider, and this will pay dividends in the near future when you’re ready to start looking for private money or partners.

For inexperienced investors with doubts

Finally, it’s time to address the most common case of all, the novice investor who has money to invest but who is paralyzed by doubts. For these individuals, the problem isn’t money – it’s a lack of confidence. In this case, time spent researching “no money” strategies is actually a form of procrastination. 

If this is you, don’t beat yourself up. You’re not alone, and there is a way out.

You start off aware and interested in real estate investing to some degree. Maybe you’ve seen a video from Grant Cardone or know someone who flips houses, and then you begin imagining all the success you could have as a real estate investor — but you don’t really know much about it yet. You only really know what real estate investing has to offer, not what it truly costs. 

Next, you hear a whisper, or read a headline discussing strategies for “investing in real estate with no money” — suddenly it clicks. That’s what you need. That’s your ticket to getting started.

Now, a rationalization is beginning to form; you’re beginning to believe that you’ll pull the trigger on a deal as soon as you find a strategy that delivers to you a pristine A-class rental property without you having to put any skin in the game at all.

Shaking off the doubts

If this is you, you don’t need to learn more about “no money” strategies. You need to address the doubts that make you uncomfortable with risking any money at all, because there’s no investing without putting some kind of skin in the game. Yes, you can invest time or energy instead of cash; but if your real issue is fear, then risking your time and energy won’t sound attractive either.

So what do you do? You tackle your doubts one by one until you’re ready to jump. That means investing time and energy into building your confidence, instead of looking for loopholes.

Imagine you’re standing at the edge of a creek. You’ve seen others jump across, so you approach to jump across too. But, when you get to the edge, your body hesitates, and you don’t jump. Why? Your body doesn’t really believe you can clear the gap — it doesn’t matter that you’ve seen others do it. Don’t wait around to see if you feel better tomorrow. You’ve got to shrink the gap until the hesitation fades away.

Steps you could take

There are small steps you can take daily to increase your preparedness. I mentioned a tried and true method in the last section — taking a job that builds exposure. However, people who get stuck in this scenario are typically already locked into careers. 

So here are some other steps you can take each day to increase your comfort with the idea of pulling the trigger on a deal:

• Analyze more deals: Everyone likes to talk about analysis paralysis, and I had a lot of analysis paralysis when I first went out on my own, too. Know how I got over it? I designed and built a system that could analyze every home in my local market each day. Sometimes, the solution to analysis paralysis is actually more analysis — particularly when we’re talking about real estate investing.
  
  Start off by picking an obviously distressed property off a sheriff sale list or MLS aggregator, open a spreadsheet, and analyze it. Don’t use a calculator or someone else’s analysis template — build your own. When you find yourself having doubts, write them down and come up with a way to address them through math. Do this each day until you can do ten in a day without doubt, and you’ll not only overcome your paralysis but also gain a great deal of intuition regarding your market of choice.
• Read more books: Risk is mitigated by knowledge. Beyond the normal fare of real estate-specific books, I highly recommend reading Jane Gleeson-White’s book “Double Entry: How the Merchants of Venice Created Modern Finance,” particularly if you don’t have a degree in finance and pay someone else to do your taxes. Why? Because business models and thus, investment analysis, is done in the language of accounting — so it pays to understand it fundamentally. 
  
  I also highly suggest “Thinking In Systems” by Donnella Meadows, particularly if you have no idea what I mean by “market dynamics.” Obtaining a systems-level perspective of the real estate market helps address common concerns and questions, such as “where do distressed properties come from?” and “are they going to dry up?”

Final thoughts

Investing in real estate with no money is possible, but it means different things to different people in different situations. If you feel that learning how to invest in real estate with no money is something you’d benefit from, begin by figuring out why. 

Ask yourself: what benefit do you see in the proposition? Maybe you imagine you’d be more comfortable buying your first investment property if you didn’t have to put any of your money in the deal. Maybe you’ve been expanding your portfolio and you’re looking for ways to keep going as long as possible. Maybe it’s something completely different.

Either way, there’s almost always a way to proceed, and that’s one of the beauties of real estate: it’s everywhere, and everyone has physical access to a market and all the opportunities for investing time, energy, or other assets that come with it. Those opportunities will remain hidden from sight, though, until you clarify what’s driving your interest.