I am a hard-core multi-tasker, in life and in business. For better or worse, I am happiest when I have several objectives to handle at once. So I like the idea of having multiple streams of (potential) income. I have a variety of really strong skills and I enjoy finding ways to grow and use them.
Last year I attended a very impressive seminar on real estate investing. It was held over 3 days in 8-hour-long sessions. The purpose was to show attendees how to become financially independent by investing in real estate, but at a higher level. The scope of the information and the extent of the detail provided was stunning, and frankly a bit overwhelming. So exceptional was the training and the skill of the trainer that a ballroom full of hundreds of people remained transfixed from the first minute of the first day to the last minute of the last day. Some attendees were seasoned renters, rehabbers and flippers who found themselves blown away by the eye-opening education.
One of the biggest take-aways from the seminar was that it is possible to get started in real estate investing with little to no money out of pocket. Even some of the most successful real estate investors began with hardly any money to their name. Below are a handful of ways that cash-poor self-starters can begin their journey to financial freedom through investing in real estate.
Wholesaling is a popular way to get started in real estate. A real estate wholesaler is someone who helps investors locate the types of properties they are interested in buying. The warehouser builds a database of homeowners who are looking to sell their properties as soon as possible, as well as active investors who have the funds to grab the right opportunity when it presents itself. When you see a sign on the road with an offer like, “WE BUY HOUSES, ANY CONDITION” that person is a wholesaler. A wholesaler is a type of real estate investing intermediary.
2. Creative Financing
This is for someone willing to take on a bit of calculated risk. There are quite a few ways that a budding investors short on funds can find money to get started. These methods may sound irresponsible because they contradict conventional wisdom. For example, if investing for retirement standard guidance is to invest for the long-term and NEVER make withdrawals so you don’t miss out on gains. But I have a saying, “It’s not the ‘what’, it’s the ‘how’.” In other words, it’s the ‘how’ in what you want to accomplish, not the ‘what’ itself that counts. With the right information and training, what may look like a questionable decision to someone else could be the best decision you will ever make.
One way to begin investing in real estate is to tap the equity in your own home through a home equity line of credit (HELOC). I won’t go into too much detail here but with the right amount of planning and skill to do it properly this can be a relatively safe way to begin investing without having to come up with cash out of pocket.
A similar method that successful real estate investors have used to get started without having to come up with extra money is by taking a short-term loan from their retirement accounts such as the 401K.
Private Money Lenders
Real estate investors must always have a Rolodex (so to speak!) of sources of money to acquire more properties. I call them the ‘investors’ investors’, but the official title for individuals who will lend their own money is ‘private money lenders’. A private money lender is anyone you may know – a family member; wealthy associate; property owner; etc, who has money that they are looking to lend to others with the expectation, of course, of a certain return on that investment. This is one way that individuals seeking to grow their portfolio can do so without having to go into the stock market, where value is largely arbitrary. Private lenders include people who lend from their HELOC.
Long gone are the days when people could park their money in a savings account and watch the interest pile up, and not even conventional investing wisdom from the stock market gurus are panning out as they did in decades of the recent past. Today there is a new paradigm. In this new world of constant uncertainty and upheaval it is imperative, in my opinion, to have a backup plan for our financial survival that is well-rounded and smart; calculated investing in real estate should one of the tools in that tool box.