How to Become a Real Estate Investor with No Money

When it comes to real estate investing, many people believe you need to have a lot of money to get started. However, even if you don’t have a lot of money to invest right now, there are many options to get real estate funding. In most cases, you can get started investing in real estate right away. Keep reading to learn how to become a real estate investor with no money!

10 Ways to Get Into Real Estate with No Money

Check out these ten options for how to become a real estate investor with no money to see what may fit your situation best, and start getting excited about all the possible ways to begin establishing your real estate investments.

USDA Loans

If you are looking to purchase in a rural area, a U.S. Department of Agriculture (USDA) loan can be a great option. This type of loan is part of the Rural Development Single-Family Housing Program through the U.S. Department of Agriculture. This program makes it possible to buy, build or repair housing in rural areas with no money down. You can enjoy the new build or purchase with no money down, and use it as a rental property down the line once the loan is paid off. The main qualifications are:

• Property must be within the USDA’s eligibility site (generally rural locations with a population less than 20,000)
• Must meet income eligibility (low to median income, with a steady job and proof of income)
• The home must meet quality assurance guidelines (safe and sanitary living conditions)

SBA Loans for Commercial Real Estate

Small Business Administration (SBA) loans are available for most business purposes, including purchasing inventory and real estate up to $5 million. Two common types are 7(a) loans and 504 loans. These options have different requirements and terms but generally have similar guidelines such as:

• Operate for-profit in the U.S.
• Use funds for sound business purposes
• Have owner-invested equity
• Have exhausted financing options from other financial lenders

Home Equity Line of Credit

If you have equity in your primary residence or another investment property, a home equity line of credit (HELOC) is a great option to get real estate funding for your next endeavor. This option gives you a line of credit to use as needed. During your borrowing period, you can make minimum payments or possibly interest-only payments. Once you hit your repayment period, full monthly payments will be required. Qualifications include:

• Proof of income 
• At least 15% to 20% equity
• Good credit (closer to 700 or above is ideal)
• Low debt-to-income (DTI) ratio

Seller Financing

An alternative financing option for real estate investing with no money is seller financing. This is when a seller is willing to stand in as the lender. Known as an all-inclusive mortgage, the seller holds the promissory note, which includes the interest rate, repayment schedule and other agreed-upon terms. 

• Buyers may be able to get lower interest rates
• Usually short term, where the borrower refinances with a regular institution in a set amount of years
• Only about 10% of sellers use this as an option — it depends on the current real estate market
• Terms can include no money down and less stringent qualifications
• Typically the seller can foreclose if the buyer defaults — a term that would be included in the promissory note 

Lease Options

With lease options, a seller agrees to have the buyer lease a property for a set amount of time, which will eventually turn into a purchase. Rental payments may be credited toward the purchase price, and time frames and pricing are specified in the agreement. 

• All terms are negotiable
• The typical lease-to-purchase duration is one to three years
• Depending on the agreement, the option to purchase can expire or the buyer can be contractually obligated to purchase the property

Hard Money Lenders

Many real estate investors turn to hard money lenders over traditional loans. It’s a private investor — an individual or a group of investors using their own money rather than a bank using money from depositors. Hard money loans can be ideal for house flippers, builders or investors with credit issues such as a foreclosure or defaults on their credit and offer:

• Fast cash — not dealing with a bank and its extensive procedures can get you money in as little as a week
• Short-term loans — hard money lenders typically lend with terms of six months to a year
• High interest rates of 10% to 20%

The high interest rates and short durations may be scary to agree to at first, but many investors use hard money lenders with the expectation that their investment will yield quick returns and the ability to pay off the loan in the allotted time frame, or they can refinance with a traditional mortgage later.

Micro Loans

A Microloan is another option available through the SBA. This type of loan is for smaller amounts — up to $50,000 — to help small businesses start up or expand. While it cannot be used to purchase real estate, it may be an option to purchase what you need to invest in your real estate business. Microloans can be used for:

• Working capital
• To purchase supplies, furniture, fixtures, etc.
• To purchase machinery or equipment

Form a Real Estate Partnership

Another option to get real estate funding is to find a partner to go in on a deal with you, like a contractor or developer with similar goals. Or join a real estate investing club in your area and see who’s out there. 

If you find promising opportunities, there are people around who have the money to invest if you have the time and energy to make the investment worthwhile. Crowdfunding platforms such as Crowdstreet and Diversyfund pair real estate professionals with individual investors looking to work together.

Real Estate Investment Trusts

Real estate investment trusts (REITs) are companies that own and operate income-producing real estate. Because most are publicly traded, pretty much anyone has the opportunity to invest. 

Owning shares of REITs is a great way to get your foot in the door of real estate without actually owning or maintaining real property. Instead, you are investing in a company that is handling many real estate investments with very little risk to you.

Retirement Accounts

With an Individual Retirement Account (IRA) it’s possible to use funds from this or other accounts that you already have funds investing into to fund real estate investments. This type of account is ideal for long-term saving and investing and includes tax advantages. 

Using self-directed IRAs allows you to lend and receive money, tax-free or tax-deferred, without dipping into money you need for your daily life. Becoming a private lender through your IRA can help you experience real estate investing on your own terms, without managing a property. Or, you can take out your own retirement money to invest in whatever you’d like. It’s already there and it’s already yours.

This can be a great investing avenue for real estate investors who want to grow their retirement dollars with an asset that’s in their area of expertise. It can also provide a lucrative asset for a retiree looking to get into the real estate market. This is a wildly popular option when it comes to how to become a real estate investor with no money

Key Takeaways for Investing in Real Estate With No Money

With all of these options available to you for how to become a real estate investor with no money, you need to decide which is best for your situation and what is most realistic for your investing goals. 

While some are more specific and may be less common like the USDA loan or seller financing, there are opportunities everywhere if you just look. Be open to alternative financing and do whatever it takes to make your investment goals a reality, opening the doors to long-term success and financial freedom. 

Frequently Asked Questions