No Money Real Estate Investing – Part One

There’s a hard truth out there about getting rich and it’s this; if you’re already living as if you are rich, then you will never become rich. That means if your credit cards have a huge balance and you’re drowning in debt, real estate investing is not going to rescue you.

“But wait,” you say, “those people on TV got out of debt and quit their jobs a couple of months after taking a course on real estate investing.” I’ve seen those commercials too, but I tell you one thing- if those people on TV are real, then they are the very rare exception. It simply does not work that way.

Believe us- it is possible to make massive amounts of money through real estate investing. The key is to set your goals and, through plenty of research, find properties that meet those goals. Once you’ve purchased the property (or properties), hold onto them for at least 5 years or longer. Never lose faith that real estate investing is a highly effective way to make money. Look at the richest people in your city- of those that are self-made millionaires, I would bet that at least 25% of them made their fortunes through real estate. We often look at the list of the richest people in Canada as well as the Power List for Vancouver, Canada, and see that our estimate of real estate investors is correct.

The trick is to learn what you’re doing, and then accelerate your investments after you have built a base of knowledge and equity. It’s not the only way to make millions in real estate…but it’s the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.

I’ve always referred to my wife Julie as a saver. When we started out we only had $16,000. But that didn’t bother Julie; she had just graduated from college and continued to live like a student. With all the extra money she saved, she paid off her student loans and continued to save any extra money. She wanted to go back to school for her MBA and she wanted to do it without getting into debt again.

When we met, I had a property with my Mom that we’d purchased years before, but didn’t have much else. After years and years of being a student, I wanted to enjoy the money I was making. I drove a nice new financed Volkswagen and enjoyed my nights out in Victoria. I didn’t spend money excessively, but I was carrying credit card debt and didn’t have savings. Julie shared her visions of “retirement at 35″ with me, and I got excited.

It took a lot of work on my part to pay off my credit card debt, but I did it. I then started to save a few hundred dollars every month. But the reward was worth the work, and we started to shop for our first investment property.

Our first investment was a lot easier to do thanks to Julie’s savings. But, you don’t need money to buy your first property.

Many programs out there will tell you that you can get into real estate for no money down – and there are definitely plenty of ways to buy real estate with no money down, but they come with a lot of risk. As far as we’re concerned, there are only 3 ways you should consider coming up with a down payment on a property, and the good news is that only one of them requires that you have money saved:

1. Cash out retirement and other savings, stocks, and GICs

2. Home equity

3. A partner with cash.

Here’s the hard reality that you won’t like to hear though. Finding a partner will be next to impossible if your own finances are ugly. If you have no experience investing in real estate, you are deep in debt and you are trying to get rich on my money, what exactly is in it for me, as your potential partner? It just sounds risky to me.

But, if you come to me and say “Dave, I have found this property that I think is a great investment. I don’t have any money because when I graduated from University two years ago, I had $30,000 in student loans. I only have $5,000 left to pay off, but I really want to get started real estate investing and I think this deal will be great,” I will be more interested in working with you.

See what I am saying? This person has no money, but they have the right mindset about money. They are in debt for a good reason AND have been diligent about debt repayment.

You HAVE to get control over your finances before you buy a real estate property. Even if you have nothing for a down payment. You need to change your lifestyle so you are living beneath your means. For the next six months, track every single penny you spend, then see how that compares to the money you made in the same time frame. If you spend more than you make, you need to make some changes!

It’s possible that a few of you may be thinking “well, I couldn’t possibly cut back on buying expensive birthday presents”, or “I’m not willing to give up my yearly beach vacation”. That’s fine, as long as you have a plan to save for those things rather than going into debt for them. If you go into debt often when things like this come up, you are a SPENDER, not a SAVER, and are not serious enough at this point about growing your wealth by becoming a real estate investor.

Learn How to Retire with Real Estate with Dave’s free Real Estate Investing Starter Tips Guide. Learn how to find money for real estate deals, create financial freedom, extra revenue and massive wealth with tips like: How to find quality rental properties, finding and keeping great tenants, and easy ways to make more money with real estate.

This entry was posted on Wednesday, June 1st, 2011 at 8:54 am and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed.