“I Want to be a Real Estate Investor but I Have No Money Saved”

by | BiggerPockets.com

The popularity of the HGTV and DIY channels has made the housing industry a desirable arena to play in.  Flip That House, House Hunters, Property Brothers, etc. all do their best to really get the juices flowing for soon-to-be landlords and house flippers.  Boy, do they make it not only look fun, but easy!

The excitement of getting caught up in owning your own business can make some people do almost anything to come up with a down payment that they somehow have managed to NOT prepare for.  Many seasoned landlords have built their business from scratch and purchase the new homes with cash but most new to the game do not have that luxury.  This is where they get in a pickle.

How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties

This is the dream right? Going from zero to 10+ rental properties, providing stable cash flow and long-term wealth for you and your family, and building a scalable business model to boot! Learn how this investor did just that, in this exclusive story featured on BiggerPockets!

Click Here For Your Free eBook

Where Can I Get Money to Buy My New Investment Property or Flip?

It is common for people to find a home they want to buy before going through the pre-approval process or figuring out where they are going to get the money for a down payment.  Amazingly, only just over half of our new clients interested in buying a home actually start the pre-approval process before they view a home of interest.

What that means is determining how one might finance a new home purchase is a lagging concern for almost half of the home buyers. 

Stunning, isn’t it?

Current Home(s)

  • HELOC or Home Equity Loans:  This is typically the easiest and fastest way to access cash quickly.  The application process is not as intense as a regular, conventional loan.  You can typically borrow up to 90% of the value of the home on a primary residence and 80% on a second home.  The interest is also tax-deductible.
  • Cash out refinance:  These transactions can be done on a primary home, second home or an investment property.  The process is just like applying for a regular mortgage so it takes about 30-45 days to complete.  Both of these options require you to have equity in your homes which has been a struggle for many in the last 5 years due to the recession.

Retirement Accounts

  • 401k or IRA’s:  You can borrow or withdraw money from these accounts or reduce/stop making retirement contributions for a period of time to save money.  Borrowing makes more sense because you repay yourself.  Check with your advisor about the specific rules pertaining to your specific account.  This is very common way to access funds for a down payment these days.

Do You Have Anything Else of Value You Can Sell?

  • Savings Bonds:  Many people forget they have old savings bonds that have been sitting in a safe deposit at the bank for years.
  • Car:  Do you have an extra car that you don’t drive all the time?
  • Boat:  It may be more important to get into a new home than to have a boat that only gets used 2-3 months out of the year.  Only you can answer that question.
  • Motorcycle/snowmobiles:  These are certainly not necessities.  How bad do you want your new investment property?

Photo Credit: phantomswife

About Author

Kirk Chivas is a licensed Loan Officer with over 17 years of experience. Kirk is a co-owner of First Commerce Financial, LLC, a mortgage brokerage based in Wixom, Michigan. If you have any questions about your current or future mortgage needs, please feel free to ask Kirk a question over on his website.


  1. You mention ways to get extra money, which is great, but of equal value are ways to save the money you already have like: Cook meals at home instead of eating out. Ride a bike instead of driving when possible, cancel that gym membership you never use. Drop cable TV. Get a cheaper cell phone plan. Drop your land line. Sell your SUV and get a 4 cyl car. Etc.

    After going through crazy financial gymnastics to purchase my first two rental properties, I realized that I could get a “3rd for free” by just cutting spending. Not an actual property, but saving the amount of what one of the rentals brought in per month. Cash flow is king, pay attention to expenses as well as the income.

  2. When I started my business in 2007 (Ohio) I looked for don’t wanters, this is key. I bought an 18 unit property by creating a note secured by the 18 units for the dp. Then I simply took over the mortgage basically subject to. But here is why this deal was done. It was poorly manged (5 units rented and the owners were coming out of pocket for months) number 2 brothers owned both living an hour and a half away. One owned some rentals in his town and a landscaping business. The other was a doctor. So they were not poor, just neither had the time and it was a financial headache to them, I showed the one brother (the investor brother) I was the answer to there headache by talking to him on the phone a few times a week for about a month (earned his trust) and it made me of value to them. When it was all said and done I walked away from the closing table (his lawyers office) with a check for 5 grand and asked them to defer my payments for 3 months and all I had to pay was the water, trash and mowing. I kept the rest, totaling about 10 grand for the 3 months. I put about half the money back into the property (paint, repairs and carpet) I had 17 of the 18 rented by my first due payment. So I just explained to you how to go beyond getting the down money. The keys are don’t wanters, earning trust, showing your value and how you can solve their problems and asking for the cash. I asked them for that money and they wanted out so bad they paid me to take that property, basically.

    • Dale,

      Great story, and great advice I have bought a few building out of similar circumstances.
      I almost fell into the same category during my first 3 unit, buying the place for 1/4 of AVI in a short sale. In my case after the place was completely renovated, my new tenant (female) invited two male friends over. At 2:30 am one decided to settle an argument with 9 rounds of gunfire. This was not normal for this area of the city, as luck would have it the guy was a very bad aim only hitting his target once, but one bullet found its way to a hot water pipe in the bathroom of the rear apartment.

      The next morning when I saw the first floor apartment ceiling collapsed onto the new kitchen and a water fall of hot water still pouring from the ceiling, and all the while the police were not allowing me into the building to shut off the water.

      I called my wife to through in the towel, when she offered “Don’t we have insurance for this?”

      I went from being a motivated seller to a motivated buyer when the insurance company cleaned and dried the property, and wrote a check for $10k. The builder who renovated the place originally came back with an estimate for $4900 to fix the place. I used the $5100 as a down payment on the 3 unit property next door, the owner was a worn out landlord with 2 out of three units vacant. This fellow offered to take back 100% financing for the balance at no interest for 10 years.

      Last week I turned all of my multi units over to a professional management company when I had thoughts of having an absolute auction. My wife pushed me into this decision, she is much more practical then I ever will be.

      I tried to dissuade her from pushing this agenda, but I could not argue with her logic.
      Due to my lack of time to properly manage these buildings, the tenants have probably robbed me of twice money that the 10% management fee will cost me over the same time period.
      Plus, I have now dropped out of the category of motivated seller.

  3. Just a note to your Canadian readers. New HELoCs provided by traditional lenders in this country are being limited to 65% of equity. You can still borrow up to 80% of your equity in many cases, but that last 15% will be a mortgage.

    There are also options available for Canadian investors to access funds in their RRSP {similar to a 401K}, but the easiest of these is limited to purchasing your personal residence. If your RRSP is self-directed and substantial enough you can hold your own mortgage … but that is another topic.

  4. Gloria Dulan-Wilson

    If you have none of the above, do you have alternative suggestions? I was looking for some additional creative means for financing – Private money lenders; lease options, rent to own; owner will finance; etc. Living on the East Coast where owning a car is optional, some of these recommendations work well where those are necessities. Thanks, though.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here