Investing with little income

[Ben Giddens]

I make $34,000 a year and am wondering how people start investing in multiple properties without having the active income to sustain the mortgage in a scenario where the units might be vacant

[Chris Seveney]

@Ben Giddens

They may start investing but it doesn’t end well.

They will end up getting foreclosed on and ruin their credit for years.

[Eliott Elias]

Creative finance, you can be $0 out of pocket on deals, find sellers who bought for too much and have little to no equity in their home. 

[Nathan Gesner]

Quote from @Ben Giddens:

I make $34,000 a year and am wondering how people start investing in multiple properties without having the active income to sustain the mortgage in a scenario where the units might be vacant

A lot of people say you can invest in real estate with no money down, but it's a fool's errand. It takes money to invest. If you borrow the money from someone else to get started, you are over-leveraged and likely to fail.

Wise investors will increase earnings, reduce expenses, sacrifice, and save up. As you gain experience and increase income, then you can take greater risks and increase leverage.

[Joshua Matthews]

Relying on income generated by the first few rentals is not only risky, but dangerous. Most landlords will assume some degree of vacancy and repairs/maintenance (and taxes) each year. And none of those numbers are ever firm. Having a 3-6 month emergency/mortgage fund in case a house becomes and stays vacant would be wise; with a separate account for separate accounts. 

Check the episode "Rookie Reply: How to Estimate Rehab Costs and Where to Find the Right CPA" on Real Estate Rookie, just listened to the episode this morning and they address this question almost specifically. 

In line with @Nathan Gesner : The fastest way to make money is slowly...at least at the beginning. Good luck, and feel free to reach out to me privately. 

[Jonathan Greene]

You don't want to focus on investing right now if you have no savings and make 34k/year, you want to focus on learning and building relationships with other investors in your area. If you try to buy something now, you will get high-leverage, garbage, or sign up for something that you can't support. There are creative finance deals to be had, but they are rarely done by new investors with no money. Most no-money-down deals are done by people with plenty of money to use, if they wanted to, that's the leverage.

[Jack Montague]

I think borrowing all of your money to first get into real estate is a dangerous game, especially in this market. Money is expensive and prices are going down. 

If I were in your shoes and your goal is to get into real estate, I would find the deals and acquire equity by finding good opportunities. You can find the money if you can find good deals, but this also helps you to analyze deals which will guide you in the future. 

But as @Nathan Gesner mentioned... You have to try your best to increase your income, lower your expenses, and save up some money. Try to create other income streams.