Tips for Starting a Real Estate Career with No Money Down.
• This page was last updated on September 7, 2022. Mrs. Lois Arcari • Jae Vee
We understand that investing in real estate is one of the most appealing ways to secure your financial future - but having little to no money upfront is the most common reason people put off their property investment dreams.
That is why, regardless of your budget, we have created a brand new blog to assist you in getting started with your property investment strategy. To make things even easier, we've ranked them from cheapest to most expensive.
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The first, simplest, and least expensive thing to start with is the proper frame of mind. It may be free, but it is an important factor in real estate investment success.
You must be hardworking, research-ready, and resilient.
If you possess these characteristics, you can apply any investment strategy and weather any market storms. Even the most successful investors do not last long if they do not develop these key characteristics.
2. Accept a lodger
This is not only one of the most affordable ways to invest in real estate, but it can also SAVE you money.
The government's Rent a Room scheme means that you’re allowed to earn up to £625 without paying any tax on those earnings - a great way to save money to put aside for your rental property business or to invest in a course for your learning, and get used to tenant needs
This is where you start putting real money in, but you're not quite ready to fund your first development.
A REIT (real estate investment trust) is a portfolio of shares in commercial and residential property options.
They typically provide a generous and low-risk income because the REIT is required to share 90% of its rental profit with its shareholders and is secured by long-term company leases.
Optional property leases
Property lease options are underutilized investments with low initial costs. You can rent out a property without purchasing it if you have a property lease option.
You invest a small upfront payment to make the process legal - as little as £1 - and agree on a monthly payment to the owner, which is usually set at the amount needed to cover costs and no more. Set the length of the contract and then agree on a purchase price if you decide to buy outright later.
It can be a small upfront investment that provides all of the benefits of a steady rental income without the hassle of a mortgage - and if the price rises above your agreed-upon purchase price, you'll have gained instant equity.
On the other hand, these properties are inherently difficult to find, as property lease options provide little benefit to homeowners.
The solution is to look in areas with high negative equity, which may not appeal to you for obvious reasons, or to run advertisements targeting people who need to move quickly, such as divorcees or relocators.
Peer to peer lending is when you invest directly with another person or company, rather than through a bank, and use a peer to peer platform like Zopa to handle the transaction process for you.
Because the banks aren't taking a cut, if done correctly, you can see significant increases in your ROI. Even better, peer-to-peer property investment allows you to have a liquid asset, which is uncommon in property, and the interest rate is usually much higher than the bank's bottom scraping interest rate.
But keep in mind that if you want to invest in peer-to-peer lending with an individual, these loans are usually unsecured, which means you won't get your money back if the borrower defaults.
When you invest in peer-to-peer business lending, your money is secured against business assets and property, which is why you should do your homework to ensure that the company is stable.
Property peer-to-peer lending, which typically allows developers to do short-term renovations or quick projects, is also secured against the property.
While there are risks, such as the development experiencing major delays, being secured against the property usually provides good security for your money, as your investments can be recovered against the sale of the property.
6. Real estate crowdfunding
Some aspiring property investors mix up property crowdfunding and peer-to-peer loans. However, they are very different investment strategies.
Property crowdfunding is the process by which a group of property investors pool their funds so that everyone owns a small share. The difference between the two investment channels is that peer-to-peer lending effectively puts you in the position of mortgage provider, whereas property crowdfunding gives you a stake in the company.
Peer to peer loans allow you to provide a short-term loan, whereas property crowdfunding requires you to commit to a long-term investment to see real returns. There are two types of property investments.
To begin, you can invest in property developments in which each investor receives a share of the profits from the development's sale. These can produce higher returns more quickly, but they are considered a riskier investment.
The other option is buy to let property crowdfunding, which works similarly to any other buy to let strategy in that it accumulates rental yields over time and distributes them to investors.
You already know how much we enjoy joint ventures. Consider joint ventures to be a smaller-scale version of property crowdfunding, between two or more companies that each have something valuable to offer the other.
Typically, one will have more cash, while the other will provide non-monetary value, such as access to key growth markets or a strong marketing strategy.
These are frequently preferred by property investors as they begin to expand their business because they provide security due to their short term nature, and they are also a way to develop great business partnerships and property projects without requiring a lot of financial wealth.
However, you cannot use this method at the start of your career because good joint venture partners will always want to see proof that you have previously succeeded in property investment.
8. Use your own money
We've included this one because, while it may not be the most expensive strategy in terms of money, it is unquestionably one of the most costly in other ways if something goes wrong.
This is a strategy you should only employ if you are completely confident in your ability to handle any hiccups in your property investment journey, or you may end up seeing the worst and having to relocate.
9. Purchase UMV and resell it
Buying properties under market value to flip is one of the most popular property investment strategies - and because it's portrayed so glamorously in comparison to other methods, it's also one of the easiest to get wrong if you don't do your research.
Ideally, you'd look for a bargain at auction or off-market properties such as repossessed houses or properties from ex-landlords, then use a financial strategy such as bridging loans to secure financing without rubbing up against mortgage brokers.
While this strategy is well-known for producing high capital gains when executed correctly, it is also notorious for having hidden costs. If you fail to properly assess the potential costs for refurbishment, you may be stung with unavoidable costs such as electrical repairs.
So there you have it: 9 ways to start investing in real estate with (almost) no money. Which is your favorite?
Visit our blog for more tips and tricks.
Please keep in mind that this blog post is not intended to be investment advice. Before making any investment, we recommend that you seek independent financial advice and conduct your own due diligence.
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