Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Here’s How To Invest In Real Estate On A Limited Budget

Written by JD Esajian

Stories centered on investors who made it big overnight are few and far between. This isn’t to say it doesn’t happen, but it is the exception rather than the norm. To borrow a decades old expression; you usually need money to make money. You don’t need to empty your bank account on your first deal, but you do need some funds to get going.

There are ways to find and close deals on almost any personal budget. The key is to know how to find them, or to align yourself with someone who has the capital to help you get started. To that end, a lack of funds should never be an excuse not to close deals. Here are a few inexpensive ways to find deals, or to find someone who can help you invest in real estate on a limited budget:

Finding Deals:

  • Expired MLS listings: Without a large amount of capital, you need to be creative in your approach. Instead of spending money on a large direct mailing campaign, there are other ways to find deals. One of those ways is through expired MLS listings. Expired listings are properties that have been in the system anywhere from 60-120 days. When a seller lists their home with a real estate agent, they do so for a specific period of time. After this time is over, they have the option of relisting, listing with someone else or keeping it off the market. Expired listings often represent sellers who have either been burned by buyer financing or listed well above the market. Either way, they may be frustrated and open to any new offer that comes their way. Not every expired listing leads to a deal, but these are the properties that are most overlooked by the masses. Your real estate agent can provide you with a list of all expired listings in your area. All you need to do is reach out to them and find out what the deal is.
  • Driving for dollars: The next time you are in your car, keep your eyes open for properties with “for sale by owner” signs in the front yard. Instead of having to deal with a real estate agent, you can deal directly with a homeowner. Make note of the property and when your initial contact is. They may not be open to selling today, but they may have a change of heart a few weeks down the road. Distressed properties are something else you should look for. These are properties that may have excessive debris in the yard, or look like they are in need of maintenance. You can reach these owners either by simply knocking on the front door or finding their information at town hall. The local municipality will provide you with the owner of record through a tax bill, and will also give you their address. Either way, you should ask them if they have any interest in selling or know someone that may in the area. For every five homeowners that are annoyed and want nothing to do with you, there may be one that has some interest. All this costs is a few hours of your time and a tank of gas.

Finding Capital:

  • Hard money lenders: There are a few ways to get started without having your own capital. This method calls for you to align yourself with someone that does. One of the most popular options is finding a hard money lender to work with. Hard money lenders are individuals or groups of individuals who lend money on their own terms. They do not follow traditional lender guidelines in terms of credit score, assets and down payment. Every lender is different, but there are many more hard money lenders than ever before. They supply the funds for the deal while you supply the deals. Obviously, the more you work together, the higher your credit line will be. Between your real estate agent, attorney, accountant and mortgage broker, you can probably find a handful of hard money options in almost every market.
  • Private money lenders: Almost everyone knows someone that wants to invest in real estate. Your job is to go out and find them. A private money lender is any friend, family or co-worker that wants to invest in real estate. In much the same way as you would work with a hard money lender, you scout out the deals and your private money partner financially backs them. This works out as a win-win: your partner gets their start in the business without having to do any of the grunt work in finding deals, and you get to earn on a deal that you didn’t put any money in. You can start by simply sending an email to everyone you know telling them you are involved in real estate. At the end you can put a line asking if anyone has interest in working together in the future. If you send this out to 40 people, you should get at least a handful of responses. From there you can define your agreement and get started.