{"id":90345,"date":"2020-05-24T15:00:38","date_gmt":"2020-05-24T21:00:38","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=90345"},"modified":"2021-03-16T12:29:07","modified_gmt":"2021-03-16T18:29:07","slug":"you-need-money-to-invest","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/you-need-money-to-invest","title":{"rendered":"Sorry, Newbies, But Any Real Estate Strategy Requires Significant Money\u2014Here&#8217;s Why"},"content":{"rendered":"<p>One thing is for certain and that is this: If you want to play, you have to pay. And unless you have the money, forget about anything that I\u2019m about to say.<\/p>\n<p>Go out there and hustle. Work two jobs if you have to, and save $50,000. Then consider getting started in real estate.<\/p>\n<p>Until you have $50,000 in your account, forget about it. Immerse yourself in anything and everything real estate. Learn every day about how to invest. But don\u2019t actually pull the trigger.<\/p>\n<p>Now, you can argue with me later (by all means, comment below), but in my opinion, it takes money to make money. If you do not have any money, I don\u2019t believe in any other strategy out there.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/76XhGQGGCIA?ecver=1\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Buying &amp; Holding<\/h2>\n<p>Let\u2019s talk about buying and holding. I personally don\u2019t believe in financing. If you are going to be buying and holding, you&#8217;re going to need a lot of cash.<\/p>\n<p>Now, if you\u2019re going to be buying and holding, you need to be making a lot of money in your 9-5, you need to have a ton of equity built up in your personal residence, you need to have an inheritance, you need to have a ton of cash savings, and you need to have money in your retirement account.<\/p>\n<p>I\u2019m a little bit biased here because I do <a href=\"https:\/\/www.biggerpockets.com\/blog\/2015\/12\/15\/turnkey-real-estate\/\" target=\"_blank\" rel=\"noopener noreferrer\">run a turnkey company<\/a>, and we only sell properties to cash investors. But let\u2019s forget about me right now.<\/p>\n<p>The number one reason why investors declared bankruptcy during the last global financial crisis was that they were over-leveraged. They didn\u2019t control their destiny. The financial institutions controlled them. They requested the funds to be paid back, and they called the loan on them.<\/p>\n<p>On the other hand, when you are using cash and cash only, you are the master of your fate. So work hard, at your 9-5 or whatever it may be, save the cash, and then start buying and holding.<br \/>\n<em><br \/>\n<strong>Related:<\/strong> <a href=\"\/renewsblog\/2016\/03\/02\/7-sharing-economy-side-hustles-real-estate-investor-start\/\" target=\"_blank\" rel=\"noopener noreferrer\">7 Sharing Economy Side Hustles Real Estate Investors Can Use to Earn Extra Cash<\/a><\/em><\/p>\n<h2>Buying, Fixing &amp; Flipping<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-120339 size-main-full\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/12\/woman-doing-rehab-project-830x516.jpg\" alt=\"young woman sanding planks of wood with an orbital sander in an unfinished room during DIY renovations\" width=\"702\" height=\"436\" title=\"\"><\/p>\n<p>Now, the second strategy is <a href=\"https:\/\/www.biggerpockets.com\/blog\/2014\/01\/07\/flipping-houses\/\" target=\"_blank\" rel=\"noopener noreferrer\">buying to fix and flip<\/a>. For all of you folks out there who may not make a lot of money in your 9-5 and want to jump in, once again, please remember that you can\u2019t do fix and flips without any cash.<\/p>\n<p>Please, I\u2019m begging you\u2014do not borrow money, do not take on any <a href=\"https:\/\/www.biggerpockets.com\/real-estate-companies\/hard-money-lenders\" target=\"_blank\" rel=\"noopener noreferrer\">hard money loans<\/a>. Don\u2019t go to the financial institutions; just do it the slow and the hard way. Work your butt off, save the cash, and buy, fix, and flip with your own money until you know what you\u2019re doing. Then you can supercharge your efforts by going out and using someone else\u2019s money.<\/p>\n<p>So buying, fixing, and flipping is perfectly suited for those folks who have saved the cash. They might not have a 9-5 where they\u2019re making a lot of income, but they may want to put their real estate efforts on steroids and get dirty every single day. Buy, fix, and flip as many properties as you possibly can.<\/p>\n<p>My word of advice to all of the incoming buy, fix, and flippers is this: Start out small. Don\u2019t go out there and buy a ridiculously expensive property. Use whatever cash you can scrape together after working hard to buy a rundown distressed property. Just remember to keep it simple and don\u2019t get into a full-blown structural rehab.<\/p>\n<p>Buy a property that needs a cosmetic touch-up\u2014maybe requiring paint, new carpet, re-lamination of countertops, tile in the bathroom, a new vanity, a new mirror, new light fittings, etc. Invest the least amount of money that you possibly can, and list the finished product on the MLS, on Craigslist, and on Facebook.<\/p>\n<p>I mean, you have to absolutely hustle to get this property sold and then use that one property as an example of what you\u2019ve done so you can potentially go out into the market and raise more funds to supercharge your efforts.<\/p>\n<p>Personally, I would use your own cash for as long as you possibly can. Buy something for cheap, renovate it, sell it, and do it again. And if I were you, I would do between five and 10 buy, fix, and flips myself before I would actually buy, fix, and hold. So buy, fix, and flip for as long as you can, generate those cash profits, and use them to supercharge your efforts.<br \/>\n<em><br \/>\n<strong>Related:<\/strong> <a href=\"\/renewsblog\/focus-on-cash-flow\" target=\"_blank\" rel=\"noopener noreferrer\">Why You Should ONLY Invest Based on the Cash Flow<\/a><\/em><\/p>\n<h2>Wholesaling<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-114144 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/08\/sell-house-702x336.jpg\" alt=\"young man placing sale sign in front of his house\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<p>And last but not least is the <a href=\"https:\/\/www.biggerpockets.com\/blog\/ultimate-beginners-guide-real-estate-wholesaling\" target=\"_blank\" rel=\"noopener noreferrer\">strategy of wholesaling<\/a>. Remember, when I started this vlog, I said that it takes money to make money. Yes, hypothetically you do not need to have cash in your account to wholesale a property, but let me ask you this: What\u2019s going to happen if you put a property under contract and you\u2019ve got 30 days to close on it, but you don\u2019t have the cash in your account to close?<\/p>\n<p>At this point, you may not be competent enough to find a buyer who is going to buy that property for more than you\u2019ve got the seller under contract for. Not only will you throw dirt on your reputation, but you&#8217;ll have to deal with a very sticky situation. That&#8217;s a situation I&#8217;d never want to put myself in.<\/p>\n<p>Have I bought awful properties in the past? Yes, I have. Some I didn\u2019t inspect properly, and others I pulled the trigger on too soon. Still, I sold the properties even if I lost money on them because my inner peace was at stake.<\/p>\n<p>I cannot look a seller in the eye who needs that money. You shake that person\u2019s hand, and when they need you to perform, you have to perform. Everyone out there looking to wholesale without any money in your account is going to be letting a lot of sellers down. You\u2019re going to lose your reputation.<\/p>\n<p>Is that what you really want?<\/p>\n<p>If you want to do it the right way, this is how you do it: Find an absolutely amazing, undervalued, bargain property. Have the cash in your account as a backup to close on it if you have to. Then start marketing that property for whatever your margin is.<\/p>\n<p>Of course, leave enough meat on the bone so whoever wants to buy it can fix it and flip it. Then, if for whatever reason you do not find a buyer to purchase the property from you, but still it\u2019s a spectacular deal, close on the transaction yourself. Buy the property with cash, then either fix it and sell it yourself or continue marketing it. If the deal is that good, someone will buy it from you.<\/p>\n<p>I\u2019m not going to get into the legal side of wholesaling. A lot of people say it\u2019s legal, and a lot of other people disagree. I\u2019m just saying this: Have the cash in your account as a backup so you can perform on the transaction. Depending on what state it&#8217;s in, you might even have to buy the property with cash and double close on it.<\/p>\n<p>I strongly believe the first thing you have to do is go out there and work hard to save enough money to start your real estate investment endeavor. Any one of these three strategies can work really well. I\u2019ve used all three in my real estate business, and I\u2019ve done very well implementing all of them.<\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>What do you think? Does starting out in real estate require significant cash reserves?<\/em><\/p>\n<p><strong>Share your thoughts in a comment below.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>One thing is for certain and that is this: If you want to play, you have to pay. And unless you have the money, forget about anything that I\u2019m about to say.<\/p>\n","protected":false},"author":1672,"featured_media":113771,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-90345","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/90345","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1672"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=90345"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/90345\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/113771"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=90345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=90345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=90345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}