Where do I get started with little to no money down?

Question

I want to further researching ways to get started into investing that involves little to no money down - I know the obvious private money lenders, other's people money, etc. But can anyone who started off with little to money down, explain what they did to get started and how it went?

I would consider house hacking with an FHA loan (3.5% down) but the cost of the properties near me are sky high and the tenants, based on where I live, would not be able to afford rent - AKA I will still pay equally as much as those I rent to.

Was just hoping for some opinions on the best way to leverage my first deal to minimize risk.

Nathan Gesner · Answer

Plenty of people have got started in markets more expensive than yours. Instead of saying, "I can't" try asking, "How can I?"

You should read "Set For Life" or "The House Hacking Strategy" in the BP bookstore. Set For Life is my favorite because it includes sound financial management strategies, side hustles, and more.

If you can't afford 3% down for a house hack, come up with some side hustles or take a second job and save up. If you're not willing to work hard and save up, then maybe you're not ready to invest yet.

Jim K. · Answer

@Jordan Davis

Glad to hear about the healthy salary. All too often people new to this hear "no money down" and think "zero money." It doesn't work that way.

Jonathan Roldan · Answer

I will echo @Nathan G. comment. If you cannot afford 3% that should be your priority. Begin with a budget, see where your money is going and find out if that is a reflection of your values. Try paying yourself first, as many say here. By that once you have tracked your budget for a  few months create two new categories 1) your emergency fund, and 2) for your future home (or any other goal at that). See if you can move your money from any of the categories you do not agree with and move them to your those previously mentioned. If you cannot, get a side hustle (like Nathan said).

Always plan for worst case scenario, if you don't get investors you need to be able to pay for that house yourself. That means down payment, closing costs, repairs, etc. See what you can afford by yourself, then look into properties get an idea of what is out there. Then go to a trusted friend, family member, coworker and asked "Hey I am going to buy an investment property here in Gotham city. The numbers look like we can make 100$/month (or 1200$/year) a door and you only need 10,000$. Would you be interested in investing with me?" But allow them to be curious and ask questions, if they say no don't push it. If they say yes, then Hey guess what?! You just invested in a no or low money down house. But showing people that you are able to manage your money (aka you have money on the bank and you are okay if they fire you tomorrow) will give them confidence that you will be able to manage their money.

Hope this helps.

Scott Winter · Answer

Since you're using the phrase, and you've said you're interested in reading more to learn, I have to at least ask if you have read Brandon Turner's book Investing in Real Estate with No (and Low) Money Down?  It seems like that may help clear some things up.

My story: I've had a roommate ever since I purchased my primary residence.  7 years later, I get into real estate investing and I was able to used "little or no money down" on my first investment property because I was able to refinance and pull equity out of my primary residence.  Could have used HELOC, could have sold and bought multiple discounted properties, etc. but point is, it is appreciation that bought my investment property and not really money I traded my time for.  Now I can let the investment property pay that money back I refinanced out of my primary residence while having a second property also building wealth.

You mentioned paying equally as much as those you rent to.  In my case, my wife and I paid $2,300 (plus utilities) and our roommates have paid around $800 (flat).  Although you may not be cash flowing or living for free, you are still making money to pay down your mortgage, you get the tax benefits, and you get the housing appreciation.

I think the best way to minimize risk is through education and experience. Keep on asking questions and learning!

Jordan Davis · Answer

@Nathan G.

Not harsh at all, thanks for the time invested to respond to me. I have a very healthy salary but like all risks I would like to make sure I am comfortable and confident with what I am doing.

I’ll spend more time doing research and reading those books you mentioned and will happily shoot you questions that arise during the meantime.

I agree with your conclusion on OPM and once I have skin in the game I’ll peruse that option.

Nathan Gesner · Answer

Sweet! I posted my response and then realized it may come off a little harsh.

You have to be careful with "No Money Down" advice. There are ways to do it, but they usually only work with more experienced investors. Newbies should save up and have some skin in the game until they've developed themselves a little and can handle more risk. If you put no money down and the market turns or you have a bad tenant that trashes the property and causes $10,000 in losses, there's a very good chance you'll walk away from investing and not come back. Better to take your time, get your finances in order, save up, and invest from a strong financial foundation.

Feel free to reach out if there's ever anything I can help with.

Jordan Davis · Answer

@Nathan G. I will happily read those books. Thank you for the recommendations!

Where do I get started with little to no money down?

Most Popular Reply