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

How To Invest In Real Estate With No Money Or Bad Credit

Written by JD Esajian
| Reviewed by Paul Esajian

Unlocking the power of leveraging other people’s finances is key for those aiming to learn how to invest in real estate with no money. This skill is especially crucial for beginners or those without ample financial resources or strong credit. Seasoned investors also benefit from this strategy, as it allows them to use others’ funds, keeping their own liquidity for further investments.

For those looking to dive into real estate without putting down personal funds, you’re in the right place. With the correct approach and a reliable network, investing in real estate with no money down is entirely feasible. Let’s explore how you can start this journey with the right partners and knowledge at your disposal.

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how to buy real estate with no money down

How To Invest In Real Estate With No Money: 11 Ways

The real estate market is bustling with deals, some conventional and others not so much, often due to investors’ lack of capital or credit. However, not every deal requiring no money down is beneficial. Having a good credit score opens more doors and offers better control over financial commitments.

Certain situations make the most of no-money-down investments. Here’s how you can invest in real estate without money of your own:

1. Private Money Lenders

Private money loans, which bring speed and efficiency to every transaction, will typically cost investors somewhere in the neighborhood of 6 and 12 percent interest on the money borrowed. The most popular course of action when financing real estate deals with no money down is through the use of private money lenders. These loans are not given from banks but rather individuals and businesses aimed at financing investments for a return. Also, these loans are generally comprised of their own set of criteria, including more fees and higher interest rates to deal with. When using these types of lenders, a good rule of thumb is to find homes that can be purchased for 50 cents on the dollar.

Unlike private money, hard money lenders set forth fees in the form of points. Ranging from three to five, these points represent an added, upfront percentage fee based on the borrowed amount; this is on top of the interest rates hard money lenders charge, which range between 10 and 18 percent. Fees and interest rates are not universal with hard/private money lenders, so investors need to do their due diligence.

2. Hard Money Lenders

Unlike private money, hard money lenders set forth fees in the form of points. Ranging from three to five, these points represent an added, upfront percentage fee based on the borrowed amount; this is on top of the interest rates hard money lenders charge, which range between 10 and 18 percent. Fees and interest rates are not universal with hard/private money lenders, so investors need to do their due diligence.

3. Wholesaling

As the introductory course to real estate investment, wholesaling requires neither a high credit score nor large sums of money down. Instead, it simply comes down to having the right numbers in place. Real estate wholesaling, at its core, consists of finding discounted properties, assigning the contract to a potential buyer, and getting paid to do so.

4. Equity Partnerships

A very common path in real estate investment is through partnerships. Edward Shaw, Co-Founder of Leeline Sourcing, says, “A typical path in real estate investments is by using alliances. If you lack something as an investor, another person can make up for it.” Many partnerships will entail one partner finding a distressed property at a discounted price, while the other uses their credit score and working capital to finance it. Just make sure everyone is bringing something to the table. For more experienced investors, goals, risk, roles, and returns should always be discussed before creating any partnership type.

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5. Home Equity

An alternative option for investors with no upfront money is home equity. This can be a viable option since property values have gone up in recent months, meaning there could be more capital available than you think. For investors looking to capitalize on this route, there are generally two options: rewrite the first mortgage and do a cash-out refinance, or keep the first loan in place and add a home equity line of credit.

6. Option To Buy

Sometimes referred to as a “lease-option,” this method allows investors to acquire properties without initially taking legal ownership. However, the investor will sign a legal “option to buy” from the homeowner at a specific price in the future. In return, the investor rents the property out on a long-term basis with an agreement in place to purchase the property at a later date for a previously set amount.

7. Seller Financing

Unlike traditional loans, seller financing works like this: the investor purchases the property from the homeowner/seller, rather than a bank, and the two sides sign an agreement that states an interest rate, repayment reschedule, and consequences of default that both parties have agreed upon.

8. House Hacking

House hacking, as its name suggests, is a real estate strategy that awards savvy investors the ability to take advantage of a unique situation. However, this particular exit strategy will witness investors earn rental income by renting out their primary residence. Those with multi-unit homes, for example, may choose to rent out the units they are not living in. That way, the rent generated may help pay for the mortgage, allowing the owner to potentially live mortgage-free. Those in single-family homes, on the other hand, may elect to rent bedrooms when they can. Either way, house hacking allows investors to mitigate the risk of vacancies while building cash flow simultaneously.

9. Government Loans

Government loans are perhaps the most well known of all the sources of funding made available to today’s investors. Here’s a list of the government loans you may already be familiar with:

  • FHA Loan

  • USDA Loan

  • VA Loan

  • Good Neighbor Next Door Program

  • Fannie Mae Or Freddie Mac

  • Energy-Efficient Mortgage (EEM)

  • FHA Section 203(k)

  • Native American Direct Loan

  • Local Grants & Programs

However, it is worth noting that there are aspects of government loans that are not perfectly suited for rehabbing homes for a quick profit. VA Loans, for example, may only be applied to one home at a time. On the other hand, FHA loans tend to coincide with loan durations that are considerably longer than private and hard money lenders. What’s more, nearly all government loans can take months to receive approval, making them less attractive than just about every other option on this list.

Using USDA or VA loans can open you to more flexible options, especially if you first purchase your future rentals as a primary residence. This is largely useful when you are trying to invest in real estate with little or no money. You can purchase a home as your primary residence with zero cash down, stay in the home for a one-year minimum, then turn the home into a rental property upon moving out. Building equity also includes your primary residence, not just your rental properties. Credit score and down payment requirements are also more flexible when purchasing a primary residence. Living in properties you hope to turn into rental properties is common practice to avoid harsher lender rules.

You can finance a duplex with only a 3.5% down payment using FHA loans as long as you live in one unit. In turn, you can rent out the second portion of your duplex and gain extra profits. This strategy can help those who are just starting to invest in real estate with little of their own money. With a low down payment along with an influx of rent, you can cover a substantial portion of your mortgage payments.

10. Microloans

As the peer-to-peer economy continues to shape how real estate investors do business, microloans will remain a viable option. Issued by individuals, as opposed to banks and credit unions, microloans are yet another branch of peer-to-peer lending, making it possible for people to invest in real estate. Microloans can be issued by a single lender or aggregated across several investors, each of whom is expected to contribute a portion of the borrower’s needs.

11. Investing In REITs

Real estate investment trusts, called REITs, are a great way to start investing in real estate. Instead of purchasing physical properties, investors buy shares in a company that develops or manages properties. In this way, REIT investing is similar to stocks; however, REITS still allow investors to enjoy all of the benefits real estate offers. REITs are an excellent opportunity for generating passive income by real estate investing without having to purchase properties themselves.

how to invest in real estate with little money

Can You Invest In Real Estate With Bad Credit?

No cash or credit? No problem. For beginners seeking how to invest in real estate with no money down and bad credit, the first step is understanding your credit score. This number, which is essentially a statistical method for lenders to determine the probability of you paying back the money borrowed, is critical when acquiring financing for real estate. Quality scores equal better mortgage rates, resulting in long-term savings and ultimately benefiting you — the investor.

Credit scores are almost always based on a scoring model, with the most popular model being FICO. These scores range from 300 to 850, and ultimately determine a person’s creditworthiness. It looks somewhat like this:

  • Bad Credit: 300 – 600

  • Poor Credit: 600 – 649

  • Fair Credit: 650 – 699

  • Good Credit: 700 – 749

  • Excellent Credit: 750 – 850

Although each credit agency will have its own evaluation systems, which are based on different factors, the most common credit score calculations are based on five major factors:

  1. Payment History = 35 percent

  2. Outstanding Balances = 30 percent

  3. Length of Credit History = 15 percent

  4. Types of Accounts = 10 percent

  5. Credit Inquiries = 10 percent

The first step is knowing your credit score and understanding how it impacts your investment strategy moving forward. Depending on your score, you may qualify for a traditional loan and be eligible to secure down payment assistance. Comprehending where you stand in the financial realm of credit will only enhance your real estate investment strategies, as well as your financing options. Learning to invest in real estate with no money down is important as an investor, but it’s not always your only option.

Avoid Becoming House-Poor

There is a phrase in real estate and finance called “house-poor.” The term describes people who stretch themselves too thin when buying a home and are left without any emergency money. When unexpected events happen, such as a job loss or broken appliance, these homeowners are in such a tight spot financially that it is difficult to recover. Unfortunately, this is all too common when attempting to invest in real estate with no money.

There are a few ways to avoid being backed into a corner financially when purchasing real estate. It is always a good idea to keep your emergency fund separate from other money and not include it in your estimates when buying a house. That way, if anything were to happen, you have funds you can rely on. In some cases reserving your emergency money may force you to make a smaller down payment than you want. Remember that even if you are required to get mortgage insurance initially, you can always refinance down the road when you have more equity in the home.


Do you know how to invest in real estate with no money out of your pocket? There are several ways to begin investing today, even with a low credit score. Review these options, and you can turn your financial situation around while jumpstarting a new career. Now that you know you can, are there more opportunities you would like to pursue? Since it is possible to buy real estate with no money of your own, what will you do next?

Ready to start taking advantage of the current opportunities in the real estate market?

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The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.