My 2,000 Hours - Beyond Significant Frustration!

35 Replies

This post/subject, is to help the new guy, and keep him/her from wasting thousands of hours to achieve nothing!  

So to begin:  Is anybody else tired of the "You can start investing in real estate with 0 down" garbage yet? 

I know I am!  I know that at the conclusion of 2015, I calculated a loss of over 2,000 vested hours trying to make something happen!  Multiple banks, multiple loan applications, multiple offers, multiple approaches, and what did all of 2015 get me?  Behind on other things that require our time, and Beyond Significant Frustration!  

Who else has put serious time into this and managed to get no-where?   Am I missing the broad side of a barn, or am I hitting the nail?  Numbers are simple!    Yet if you try to talk to anybody who would consider lending you money, they get a deer in the headlights look, and say "no" because they are uncomfortable at best! 

As far as 0-down goes:

1)  Banks: Wont work with you!  Unless you have an 875+ credit score and a favorable underwriter, this is coming from my experience with 4 different major banks, and 2 local banks.

2)  Other Peoples Money (OPM): Unless you are already well established as a real estate investor, OPM does NOT exist!  Don't waste your time with your hopes and aspirations on this subject, it is trash, and you wont use it until you are already well established.  Unless of course, you spend $20,000 at some guru's seminar for them to "give you a reference" for something entirely worthless to begin with.

3) Crowd Funding: Unless you want to blindly throw in $5,000 of your own money, forget about it!  I didn't go any further than that with this, because my gut feeling was: this is a total scam!  And I was not going to waste anymore time on it.

4) "Creative deals":  Sounds great!  I will just use a public records search on a house I think will make everybody involved some pocket change!   Next, I will contact the seller directly - bypass the realtors, and hope the sellers don't mind that I essentially stalked them so I could speak with them about making a sort of an offer that I already know they won't understand (Because if you're new, you hardly understand it yourself!), and then somehow someway I just know they will handover the keys to the kingdom, and everything will be hunky-dory, everybody makes their money and goes-home happy, healthy and wealthy!   -  False.  Stalking is illegal, and at best it is shady and discourteous to by-pass an employed realtor! 

The other part of all of this?  Somebody prove me wrong here!  I am sick and tired of wasting my time, energy, and money chasing this false promise of "0 down investing!", And I promise you, more than half of the registered users here, quit coming on to discuss great idea's and common issues, because most people can't even get in the door!    I can't count on 1 hand how many inactive users I find by just browsing the "search bigger pockets"!  

So please, somebody prove me wrong, or make a legitimate effort to be blunt up front with people who are "brand new" to the game, because odds are, if they have $25,000 in their hip-pocket to play with, they aren't wasting their time on here looking for advice.

Bravo, I figured this out the hard way as you did. So I anchored down and started working more overtime to save more money. 

You speak the truth!

@Craig C.

Very negative post.  I would encourage you to change your mindset.  If I thought like that when I first started I would have never gotten started.  This business can make you extremely wealthy but you have to want it bad enough and realize it's not going to happen overnight.  I started with very little money and purchased one of my first properties with CC debt.  Best of Luck!

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@Account Closed

I bought my first 4 unit with no money down and a 16 unit with only $5k down(could have borrowed it but had money so I used what I had). I don't have partners and I cash flow about $2k a month right now and live for free. I bought my first place last June so am only 11 months into my investing.

I have used lines of credit, commercial loans, seller financing and private financing to close deals. Its possible and working for me. By the way, I did it right out of college getting approved for my loans signing a personal guarantee and having an employment contract. My credit score fluctuates around 725.

Calling around I have found half a dozen banks in my area and North Eastern Wisconsin who will lend on commercial loans with no money down by the buyer. Its all about cash flow, mitigating risks for all parties, and showing you know what your doing and are ready to take on the challenge. And its not luck my friend, its all about working hard, and working smart. If you have only called 6 banks after 2000 hours of work you need to work smarter. The other week I called and vetted a dozen banks in 2 hours of calling and found 3 who could work with me under my buying structure in an area I am looking at investing in.

At the end of the day I would challenge you to focus on building relationships with property owners, investors and bankers. Present yourself professionally, positively, and make sure you can speak their language. Get them out for drinks, or coffee. If you want to make it you can make it but its not easy, I can tell you from experience.

It is not easy ! if it were easy, anyone could do it.

It takes a plan, time, perseverance and persistence . Mostly you need  a realistic plan and stick to it.

Don't overthink it and mostly please do not be hard on yourself .

Good Luck...

I only invest with money Ive saved up. Ive never done a zero down deal. However I do know people that have. I do think however saving up money for a down payment on a property is a lot easier than trying to do zero down.

Hey Tracy, I'm from North Eastern Wisconsin. Can I ask what banks you have used? I'm barley have my toes in the water yet. I have been studying this on line, been to seminars, and have bought and sold my own residence homes 5 times, and I really hoping to actually start making some money investing this way. Could we meet for coffee sometimes. You probably don't consider yourself a pro at this all yet but I'd sure like a mentor here to help me get my foot in the door. I'm willing to get you a cut of my first deal or something. ;) congratulations on your success so far.

oh boy I feel like this is going to be a hot subject!! I do tend to agree with you though.

doing real estate without any cash is really hard. Much, much harder than having cash. If you have no cash and no credit, you're chance of success is somewhere between winning the lottery, and zero. I know it's really popular on this site to sell the idea that it can be done with no money, but the disclaimer that it'll be the hardest thing you'll ever do should always come with it.

Real estate is hard WITH cash, I tried to do it without any money and ended in the same boat as you. so I took quite a few years off and I scorched earth stockpiled cash (on my measly below average income) and now things are going nicely. If you think living poor as dirt for half a decade is hard, how can you think doing it without cash is feasible?

with all that said, I think the problem is a bit more complex. If you want to invest with no money because you never have any money....because you're bad at managing money, then you don't stand a chance at wealth creation of any kind. personal financial responsibility must be learned and practiced first.

I think many real estate investors speak of $0 down more in theory and slang for low $ down or low risk getting in.  The closest I've come was my first property years ago.  I had cash and was ready to use it. This was early 2000s which offered exotic loan programs. I found a loan program that was very low down and penciled out better than me dropping 20% down so I took a leap of faith went the exotic route.  I bought a $275k house for an out of pocket of $8k.  Some of it is timing.  Those crazy loans are mostly extinct and should be.  I too worked hard to save and build a bucket of cash that gave me leverage.  So the idea of $0 down is real.   Often to obtain that magic of Zero it takes showing that you have cash otherwise.  Its leverage and it shows that if push comes to shove, ya, you got it.  Strong credit ratings and reserves are built over time by hard work and sacrifice and patience.   Leverage is the operative word.  Whether that's creating a relationship that translates to someone willing to take on risk on your behalf, loan you money or otherwise further a deal, that's how you can put together a deal with little to nothing.  Its a group effort that takes some kind of underlying value on your part.  If you lack real dollars, identify what you can bring to the table that someone sees value in and use that as best you can.

Thanks for sharing your frustrations, Craig. I hear ya. 

While researching creative options in RE because I didn't have money either, I worked and saved all I could to have some when I was ready to see opportunity. . I bet your education so far will allow you to see it better as well. Just a matter of saving a DP for a house hack plex or something.

Mixing what you've learned so far with $ or a lender will take you far. I haven't had a w-2 since '02. Don't give up on changing your life!

Well let me chime in here.  

First off, anyone who is in the business has gone down the same frustrating road you're on now.  It's sort of a right of passage.

Having said that, you're also facing a poor timing issue.  When I first started as an investor in 2009, business was great and it was easy (on a relative basis) to do deal with no money.  I was buying short sales and doing back to back closings with none of my own money using 100% transactional funds from easy to find transactional lenders at 1.25 points only.  Most times, we were the only buyers for those short sale, so the banks had little choice but to sell it to us at a great price.  And, by the time we received an approval, we already had a buyer in tow. Those were the days.

Fast forward to today and all the short sales and REOs are competitively bid up to retail value and banks are not likely to discount.

Then, as the market improved over the last couple of years, seller expectations have changed so if you're doing direct mail, you're finding it more difficult to find sellers willing to discount their properties for a quick cash transaction.

So, some of this is not your fault at all ...just a timing issued.

Remember, the best of times are the worst of times and the worst of times are the best.  That adage has never been more true as it is relative to real estate.

I've bought a ton of properties creatively with no (or low) money down by working directly with sellers.

What you need to understand is that ALL business is sales on some level. You have no money...your job is to sell you. In order to sell you, you have to marketable. Does that mean you need a ton of experience? No you need one seller to believe in you. Then you follow through. Then you have one "reference" to sell to the next seller and so on.

Banks are a waste of time. Do some seller financed deals and then take them in to local portfolio lenders (commercial banks) for refi after a few years.

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Well I managed to buy 19 separate properties since last April and we are just starting out with about 1 years of previous experience ( I own 21 total now). I had no money then and still have no money now but are looking to buy another 20 before March 2017. I've very glad I put the time in to learn how to do this as it is a very lucrative business and I love creating deals! I also have several banks lined up ready to work with us if my current bank decides to stop doing cash out refinances. Yes, they want to see at least a 725 credit rating . . . . when you say 875+ credit that makes me wonder what you spent those 2000 hours doing?  In all honesty, if you don't believe you can do it you are absolutely correct and I would recommend looking into a different area of focus. The people who don't think it's possible or just want to "try" and see if it works tend to be the ones to get burned the most as they don't fully invest themselves into actually making it work.


@Chris Heeren There are also differences in markets, so if he's in a very competitive area, he may find better deals in areas that may be less competitive or secondary to whatever main market he's in.  That's where I've found the most success more recently as my market is extremely competitive.   Secondary markets.

@Craig C.  much of this is so regionalized.  you can do nothing down in the very weak markets of the US.. in the strong markets no money no credit as you state is 99% of the time a non starter.

one of the best things I think one can do is spend the 400 bucks on a RE license pre licensing test get your license and go to work in the industry... you can earn money as you learn.. for whatever reason in todays day and age.. people just want to go from nothing really nothing about real estate and all of a sudden make money when they have no money.. the two do not correlate other than in the movies.

A real estate investor in my mind is one who has great credit capacity ( cash) and ability to find buy and then either value add or rent out for long term holds.

I know I started with nothing at 18 got my real estate licesne and I did not buy my first property ( other than my personal resi ) until I was a few years into the business and had proper funding and credit and knowledge to know what a deal was and was not and ability to deal with the public in a positive manner.

And I agree 1000 %  95% of those that come on sites like these and introduce themselves as an "investor I am going to wholesale becasue I have no money then when I get money I am going to be a buy and hold investor " never make it and just fade away.. just look at a 2 year old thread on this site you will see very few people that are still here contributing.. they are gone working their day jobs.  And real estate is a day job and tough one one of hte toughest.. for some reason its glamorized... most folks would do far better saving up some money and buying a subway sandwhich shop or some other money making venture.

Jay is right. Most that come in with no money flame out. I've seen it here in my market first hand.

And then you have different markets, with different people in different situations financially. So it's hard to categorize. 

But I will I was one of those people with wanting to wholesale then buy and hold. But I didn't flame out, I'm just taking a different approach now.

@Mike Wire  I don't have the computer stuff they need.. I am going to go up to Brandon's studio in the next 90 days hopefully if its OK with Brandon and just use his equipment. 

Plus not sure what they will want to cover.. 

I am going to write a blog on a alternative investments something I think is pretty cool for younger investors and or very wealthy investors looking for generational wealth and estate planning. And has never been mentioned on BP at least that I have seen.. not sure if it will get much attention but It will be different .. I think how to buy and sell homes and how to run rentals is pretty well covered here on BP :)

I could not figure out how to do it on the site so Mindy and Allison were so kind to let me just write it and they will publish it on this site.. 

Other than that J martin is doing a west coast meet up in SF the end of Aug. and I committed to come and spend a few days there. and will be happy to net work and sit on some Q and A panels. 

Originally posted by @Tracy Selfridge:

Jay is right. Most that come in with no money or experience want to wholesale and flame out. I've seen it here in my market first hand.

And then you have different markets, with different people in different situations financially. So it's hard to categorize. 

But I will I was one of those people with wanting to wholesale then buy and hold. But I didn't flame out, I'm just taking a different approach now.

And to further his point of people in this day and age wanting it all for nothing...I think that most have gotten away from the hard work mentality. Myself included to an extent. Working hard is where it begins, trying to bypass this step is building your business/portfolio/REI out of straw. Got to work hard FIRST! Fruits of your labor will come later.

@Jay Hinrichs , can't wait for that blog post!

@Chris Heeren , how has the GM plant closing affected your market? I was in Monona when it closed, and Janesville took a huge hit for a long time. Has it recovered yet?

@Craig C. , you're right, it isn't easy to invest with no money. It isn't impossible, but it isn't easy. What it is, is work. 

You are absolutely right that a bank won't work with someone if they have bad credit and no money. They want you to have skin in the game. Your credit score is a history of how you use credit. If your history shows that you haven't used it correctly in the past, why should they take a gamble on you now? If you walk away from the property, they're stuck with it. They already read that book in 2008, 9, 10, 11...

Let's look at Brandon Turner, who wrote the book on investing with low and no money down. Brandon started off slow. He combined house hacking and flipping on his first property, because he didn't have enough money/credit to buy multiple properties.

Fast forward about 10 years, and he has 6 deals going on this month alone, including one property that he is picking up for $42K, putting about $42 into the rehab, then selling. ARV of $130K. He has found a private lender on BiggerPockets to put up 100% of the money for everything - his out of pocket is $0.

Of course, he is Brandon Turner. He has an extensive track record of successful flips and rentals. He's the co-host of the BiggerPockets Podcast. He's a proven entity. His lender knows that he will be paid. Brandon isn't a risk. 10 years ago, that wasn't the case. 

What is your current living situation? Can you rent out a bedroom to bring in a little extra cash? Can you add a second job or a side gig? What does your budget look like? Is there any place you can decrease spending?

No money isn't a myth, but it is difficult. If your market is too hot for a no-money deal, start saving your money so you can jump in eventually.

Excellent post @Craig C.  I feel and share your pain.  I've resolved to shorten my 2000 hours to frustration by option to go the apprentice route. I think it helps to work with and participate in deals as an intern or apprentice to understand how to get over the first few deals. I'll be shameless and offer to intern for any seasoned professional on this post in the DMV area.

@Mindy Jensen "You are absolutely right that a bank won't work with someone if they have bad credit and no money", 

 I don't mean to sound snide, but how is anything short of 875 a bad credit score?    And even if you have that score, it still takes a favorable underwriter is what I was trying to say.   And "No money", we're not talking about high-school kids quitting college, I really believe most folks here are mid-career, middle-class folks.  With that in mind: if somebody mid career managed to save $10k, it would be wreckless for them to put $10k down on a $50k investment property.  Maybe I am unique in this outlook, but for me, this simply an unacceptable proposition. 

My situation?   I have enough "disposable income" to swing the monthly on a completely vacant rental and still be fine. 

Other posts I am reading seem to be suggesting that I am broke, and have poor credit, or that I haven't put in the 'planning, time, and persistence' involved.  A Textbook would tell you: I have done everything right, legally, and correctly. 

I want to clarify something: I do realize this is a public forum, and just any Joe can get on and post, but I am not an unintelligent individual, an irresponsible individual, or some highschool kid looking for options after dropping out.  I am somebody who hit absolute 0, and within 2 years time jumped 5 years ahead of his peers with no support, insider influences or handouts having been involved.

Further to that, I do not believe that those who are having the same experiences as I am are somehow unintelligent, or irresponsible either.  But I can tell you that the last thing we care to hear is "You have to want it bad enough", because I promise you very few have put in as much effort as us into this as somebody who vested hundreds or thousands of hours their first year into their investing experience. 

Side note:
I want to apologize if I am coming off as being either snide or brash to anybody, but some of the responses I am seeing are equivalent to asking a hunter if he's certain he put the right end of the rifle to his shoulder.  

I also want to apologize for not taking recognition of the excellent responses that I have seen as well!  There are many excellent ones for sure!