3 Simple Ways to Start Investing in Real Estate

Are you looking to start investing in Real Estate but just aren’t sure where to start? This is one of the most common questions I receive. Read on to find 3 tried and true ways to finance your first project.

Using Cash to Invest in Real Estate

Cash is one of the most obvious and simplest options but also probably the most unlikely way to start investing in Real Estate. I’m guessing if you are reading this you don’t have a bucket of cash sitting around…although maybe you have just enough. I purchased my first house for a measly $5,000 cash. Yep. You read that right. It was 3500sq feet, a double lot, and a total mess. I snagged that baby for under $1.50/sq foot! Guys, that is cheaper than most low-end flooring.

Cash really is king, just don’t forget to plan for holding costs and the necessary repairs.

If purchasing a house by yourself is too intimidating consider partnering with an experienced investor.

What if you are short on cash but still want to get started?

Owner Financing to Fund an Investment Property

Owner financing, A.K.A. Seller Financing, is when the seller acts as a bank. This can be a more complicated deal to present and get accepted but they exist and are one of my favorite methods. An experienced agent can guide you through the process. When I started my C-corp we looked for owner financing to avoid a substantial capital investment. We ended up with a 9 bedroom rooming house for $35,000 and the seller held a 5 year mortgage with a small down payment. The payments will be higher than a conventional loan, especially with such a short term, but at the end of the 5 years we owned the property free and clear. The mortgage was paid monthly with the rental income.

Most properties that you can get with owner financing will be distressed which means the house and/or the seller has fallen on hard times.

Neither of these options work? That’s okay we have option #3.

Conventional Financing Hack to Start Investing In Real Estate

There are many ways to start investing in Real Estate with conventional financing. With this method you obtain a mortgage from a lending institution, like your local credit union or one of the big name banks. Mortgages will typically be a 30 year term although 15 year mortgages are not uncommon. Investment properties will often require a 20% down payment.

…You are thinking well wait. What do I do if you don’t have a 20% down payment?

Here’s the trick! Make your personal residence an investment instead of a liability.

Mortgages for primary residences often have less stringent lending and down payment requirements, as well as a lower interest rate. Use that to your advantage. You can even use grants to purchase your new home.

Take on a house as a live-in flip, rent extra rooms for income, leverage your equity, or purchase a small multi-family where you live in part of the property and rent out the remaining units to reduce or eliminate expenses.

I did a combo of this method with a house I owned while in nursing school. The 5 bedroom beauty needed some TLC so I rented out the extra bedrooms to other mature college students, grad students, or young professionals. The rental income was enough for me to live in the house for free, make some improvements, and get some additional income every month. After I graduated nursing school and got engaged so we sold the house for a profit and paid for our wedding.

The secret to getting ahead is getting started. ~ Mark Twain

There are a many methods to finance the purchase of an investment property. No matter what method you choose to start investing in Real Estate taking that first plunge is the hardest. Don’t expect big profits, be happy with no money lost, take it as a learning opportunity, and a deal under your belt. If you demonstrate tenacity, hardwork, and a willingness to learn more opportunities will grace your path.