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No Money? No Credit? No Real Estate Experience? Read THIS Before You Do Anything Else.

Mindy Jensen
5 min read
No Money? No Credit? No Real Estate Experience? Read THIS Before You Do Anything Else.

Somehow, real estate investing has acquired the perception that it is easy, cheap, and will make you boatloads of money in minutes with little money out of pocket and even less work.

Boy, I wish.

Our delightful Brandon Turner has written an entire book called The Book on Investing in Real Estate with Low (and No) Money Down!

But even HE has this to say about his book:

“This book is not going to make you a millionaire. It’s not going to give you the step by step path to make $1,000,000. It’s not going to give you a simple method for finding incredible success.
It’s just a book. YOU are going to have to do the work. 
This book is not about easy. It’s not about simple. It’s not about convenient.”

Now don’t get me wrong — it’s a great book. It’s an excellent guide for investing in real estate using other people’s money. But there’s still money involved in investing.

It takes money to make money. This super-cliché also happens to be super-true.

Nobody is going to give you a house. OK, it might happen. Three people won that billion dollar lottery, too — but it wasn’t you, was it?

How do you expect to acquire a property if you have no money? What are you going to do with that property once you have it if you have no money?

Last week, I wrote an article called “The #1 Reason Newbies Go Broke in Real Estate (& How to Avoid It!).” In the article, I told of neighbors with a rental property who didn’t have enough in reserves to cover the water heater they needed to replace. They had not yet recovered from that expense when the furnace went out a few months later. They do not still own that rental property.

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Let’s Play Pretend for a Minute

Pretend you obtained a property. But you don’t have any extra money. Let’s say you have a renter in place, but the rent covers your expenses with little to nothing left over after.

Related: The Practical, 3-Step Way to Get Started in Real Estate With No Money

How would YOU replace the furnace if it went out in the middle of winter? Or if you’re in a warmer location, how would you replace the AC if it went out in the middle of summer?

Maybe you’re rehabbing. How do you pay for the materials and labor?

One hundred percent LTV loans are hard to find, especially if you are just starting out. Brian Burke could probably find one, but that’s because he’s Brian Burke. And he isn’t just starting out — he has a fairly sizable portfolio of completed jobs, something like 600 flips.

If you think 100% LTV loans are hard to find when you’re just starting out, imagine how difficult it would be to find someone to loan you 100% of the purchase price, then loan you 100% of the repair costs on top of that!

Look at it from the lender’s point of view. You are an unknown entity with no track record. Why would they risk their money, with no control over the situation? You the borrower literally have zero dollars at stake in this scenario. Should something go wrong, you could technically just walk away from the whole thing.

Rehab Problems

Anybody who has ever rehabbed a home will tell you that it’s not like those TV shows. There is ALWAYS something unexpected that pops up to ruin your budget and your timetable.

Sometimes, it throws you off by a few days and a nominal amount of money, but more often, it throws you off by weeks and thousands. This is why you build in 10-20% overruns into your budget and your schedule.

So you have your property. You are about to start your construction and you discover all the pipes have frozen and burst. Your $25,000 rehab just turned into a $50,000 repair with all the flooring, drywall, insulation and mold remediation necessary. Plus, instead of 6 weeks, it’s now 20.

Too much for you to deal with, and with no money of your own at stake, you can just walk away.

Of course, you would never do that. But the bank doesn’t know you, remember?

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But There is Hope…

Remember at the beginning of this article I talked about Brandon’s book? Brandon wrote that book because he used to be where you are now. He was young, working a job that didn’t pay very well, and had nothing in savings. He didn’t have bad credit; he had no credit.

Brandon owns 45 doors today and is continuing to add to his inventory whenever he finds a good deal. He still uses other people’s money. But his track record shows he knows what he’s doing, and his lenders know they get repaid. He uses the same lenders time and again. They believe in him now because he has proven to them that he is a safe bet.

Bad Credit + No Money + No Experience = Ultra Super-High Risk

Your credit score is a numerical representation of your past promises. It gives potential lenders an idea of your ability and willingness to pay back money borrowed.

Even worse than no credit is bad credit. Bad credit shows lenders that you don’t keep your promise to repay them. No credit shows you have never made that promise in the first place — because you haven’t borrowed any money.

“I Don’t Have Money/Credit/Experience, But I Have Passion!”

As the Community Manager here at BiggerPockets, I spend a LOT of time in the Forums, and time and again I see people saying they have passion for real estate.

That’s great. I have passion for real estate as well. I LOVE LOVE LOVE talking about it in almost any capacity. But passion doesn’t pay the bills, does it?

Passion isn’t completely worthless, though. Passion carries through in your voice and your face. It’s easy for others who share your passion to pick up on it. You may not be able to FUND the deal, but that doesn’t mean you can’t bring SOMETHING to the deal.

Related: Investing With No Money Down: Are You Ready for the Terrible Truth?

Do you have a partner? Do you know someone with money who would be willing to invest with you? Do you have a great deal? Do you have construction skills? Do you know great contractors? Do you have a great attitude and willingness to learn?

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That last one is truly key. You might have no money, bad credit and no experience. Everyone in this business started off their career with no experience. Find someone who has experience, and offer to help them out. Make it clear that you don’t expect anything but education in return.

BiggerPockets’ very own Scott Trench, Director of Everything, started out this exact way. He had been listening to the BiggerPockets Podcast for a while, and a chance tour of our old offices provided an introduction to Josh Dorkin.

After his tour was over, Scott went back over to Josh and told him that if he ever needed help, Scott would gladly come in on the weekend and give him a hand. He gave Josh a list of things he felt he could help with, made it clear that he was not asking for compensation, and left it at that.

It wasn’t very long before Josh called Scott in for an interview. Scott obviously passed the test and now works here with a fairly sizable role in the company. And Scott is really young — like 12 years old. Very little experience, but he offered something that was needed. And he had no other expectations.

So if you can’t bring money to the deal, what CAN you offer a potential partner? It is still very possible to invest in real estate without money of your own. But why would someone want to include you in their deal? Start looking at what you CAN bring, and then start offering it up.

Have you successfully invested in real estate without using your own money? What did you bring to the deal?

Let me know with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.