Getting Started In Real Estate With NO money? What is the Reality here?
A question that comes up ALL THE TIME on BiggerPockets is this:
"How do I get started in Real Estate without any money?"
I think that it's fantastic that people are ambitious and want to change their lives for the better by getting involved in real estate.
It's equally fantastic that so many members of the community are willing and able to help these folks discover strategies for investing in real estate with no money. There is endless advice and practical strategies for investing with other people's money and creating win/win/win scenarios for everyone involved.
Our own @Brandon Turner is a wonderful case study for this type of person. He has been investing in real estate with other people's money, to the net benefit of all parties involved, for years!
But I believe there is a problem that with using other people's money. That problem is that when one invests with no money down, they are by definition using someone else's money to start a business. That business must then produce cashflow to pay back the people that invest with you or lend to the owner.
Brandon Turner, and investors like him, have a GREAT reason for using other people's money - they've found a GREAT deal, but might not CURRENTLY have the cash to invest in it. So they take this great deal to another investor, who gives them money to buy, fix and hold the property, to the net benefit of all parties involved.
On the other hand, a lot of would-be investors here on BiggerPockets seem like they are looking to get started investing in real estate because they have no money. Unlike Brandon, this isn't because they just invested in a great property and are looking for the cash to fund their next deal. These "investors" don't have money because they have never been able to accumulate any savings at all.
For some of these folks, their issue appears to not so much be a a cash crunch problem, but a lifestyle problem - a basic inability to manage finances. It seems that it is often these folks who often ask the question, "How do I get started in Real Estate with no money?"
I am of the opinion that I am certainly not ready to invest in real estate using other people's money if I am not even able to accumulate basic savings in the course of my life on a consistent basis. How on earth can I expect to handle someone else's money intelligently if I am unable to even accumulate personal assets consistently - this is especially true for folks in older age groups. If I can't even handle the basic finances of my personal life, I would feel totally unprepared to invest in real estate.
I'm not talking about the person who started a business and lost everything in the crash, or the guy who has been out on his luck with a major medical expense or similar emergency. I'm talking about folks who to this point in their lives have been unable to accumulate assets and credit history significant enough to purchase a primary residence. I think that this person should be focusing on basic financial strategy and building a respectable savings rate, not thinking about investing in real estate with other peoples money!
I'd like some feedback on my line of thinking here. Am I being unreasonable? Is this something that we see frequently on BiggerPockets? How can we convince people that are looking to invest in real estate with no money that if the reason they have no money - and never have - is due to high spending and a basic inability to manage personal finance, that they should focus on steadily improving their personal financial position before considering real estate, and especially before investing with no money down, risking the hard earned money of others.
