Young, No Money, No Credit? Work for Experience
I’m young and eager to start investing. But I have no money/bad credit/no experience. How do I get started in real estate?
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If I had a dollar for every time I read that question in the forums, I’d have enough money to pay cash for just about every property on the market.
It’s a valid question. Real Estate can help you grow your wealth, retire early, and live the life YOU want to live. But if you don’t have any money, it’s outside your grasp.
Education will only take you so far—eventually you’ll have to get out there and do it. But HOW do you get started if you don’t have any cash? Double Edged Sword. Throw in no experience and a young age, you’ve got yourself quite a few obstacles to overcome.
But they aren’t impossible obstacles. Brandon Turner wrote an awesome book called How to Invest in Real Estate with No (and Low) Money Down. Brandon covers about a dozen different strategies to help you get started investing, even when you have little to no money of your own.
Here are the top three things you can do to break these barriers down.
Work on Your Credit
Having bad or no credit right now doesn’t mean you have to have bad or no credit for the rest of your life. Actively work on repairing your credit—starting right—is something you can be doing while you are looking for deals, working a different job, trying to find funding, etc. (You’ve probably heard me say this before, but that doesn’t make it any less valid. If your credit is bad, you need to improve it. It’s that simple. A good credit score will only help you.)
Get a copy of your credit report. www.annualcreditreport.com is the site set up by the three reporting agencies to honor their legal obligation to provide you with one free copy of your credit report each year.
Go through your report with a fine tooth comb and make sure that all the information it contains is factual – and follow the steps that each different reporting agency requires to dispute any incorrect information.
No credit? Having a low score is worse than having no score. You’ll still want to change that, though. Opening a credit card – then making payments on time every month – is an easy and inexpensive way to create a good credit score. A store credit card, like a department chain, is perfect for this. They are fairly easy to qualify for, even with no credit. Watch the interest rate, store-issued cards typically come with a high rate.
A bank-issued credit card is a better option if you can qualify for one. They have a more stringent approval process, but bank issued cards are accepted in far more places, and typically have lower interest rates than store cards.
Make payments on time: 35% of your credit score comes from on time payments.
Keep Balances Low: 30% of your score is made up of your credit utilization. You want to keep your utilization below 30% maximum, and the lower the better.
What is keeping you from being able to make a large down payment? Where does your money go every month? If you’re serious about becoming a real estate investor, you’re going to have to be able to put money down for the purchase of a property, and have still more money available for repairs.
Cutting expenses sounds like a no brainer. Most people have SOMETHING they can cut out of their budget. Take the money you were spending on that line item, and put it into your saving-for-a-property fund. But let’s be honest, that $100 a month you just saved from cutting your cable bill isn’t really going to make much of an impact in your savings account. Even after a year, that’s only $1,200.
Increase your income. Have you thought about getting another job? Cutting expenses is one way to grow your cash pile, but actively adding to the pile will grow it much faster. Is there something you can do at your current job that will reward you with a raise?
If making more money at your current job isn’t really an option, add another job. There are so many opportunities to bring in a second income – working on your schedule rather than theirs. From Brand Ambassador to Voice Overs to Stadium Workers, here’s a list of more than 60 side jobs to help you add to your income.
Work For Experience
Work for experience – do you mean work for FREE?!?
Sounds completely counter-intuitive to making money in real estate, I know. But hear me out.
You need experience, right? You have none, correct? Banks are not going to give you the opportunity to lose their money. Hard Money Lenders won’t, either. If you’ve got no money of your own, AND no experience, find someone who is doing what you want to be doing, and offer to help them.
Do you want to be a flipper? Find someone who is already doing it, and ask to help them out. Offer to do anything they need done, and be prepared to do it with a smile on your face, no matter how menial. Flipping isn’t like those TV shows. There’s a lot of gross and ugly that goes on in real life. But for every house you trash out, every disgusting toilet you remove, every cabinet you help hang, you learn something. There’s a lot of boring work involved in flipping a house—work that doesn’t need brainpower to accomplish. Talk to the person you’re shadowing during these down times. Ask open ended questions and then listen to the answer.
Maybe you aspire to be a landlord? Find a landlord in your area, and offer to help them with whatever they need done. Ask if you can tag along during the course of their regular day-to-day or offer to do anything they need on the weekends. Be happy when you do this. Nobody wants to work with Debbie Downer. If you offer to help, and act like it’s the worst thing you’ve ever done, chances are excellent they won’t call you back again.
Where’s the best place to find people to follow? Your everyday life. Have you noticed a home being rehabbed in your neighborhood? That’s the perfect place to start. Go up and ask if there’s anything you can do to help.
Local meetups are a great place to network with investors in your area, but the best relationships grow gradually. At your first meetup, just talk to people. Ask them how they got started, and what sort of real estate investments they like best. When you’re done asking your questions, sit back and L-I-S-T-E-N.
Working for experience is better than paying for education
I’m surprised at how many people balk at working for free, but will extend the limit on their credit cards to pay for some get-rich-quick course that promises the world, yet delivers very little.
Paying $999 for a weekend of “learning” doesn’t really teach you anything. Oh, you might gain some knowledge, but none of it is hands-on. And most of that can be learned right here on BiggerPockets.
If you’re in a “class,” but the only thing they keep talking about is how much more you’ll learn if you pay more money for the next level course, your money has been wasted. Chances are very good that the next level course will also try to sell you on the level after that.
There is value in paid real estate education, but it doesn’t come with a $40,000 price tag. The best way to learn is by doing. There is no better teacher than experience.
There’s no Get-Rich-Quick in Real Estate
Real estate is not the get-rich-quick idea that is portrayed on TV. There isn’t a class you can buy that will teach you everything you need to learn in one weekend. There are no shortcuts.
Real estate investing takes work, plain and simple. On-the-job experience is the best teacher there is.
Have you worked for free, or had someone offer to work for you for free? What was your experience?