Seven Ways To Invest In Real Estate When You Have Little To No Capital
Author: Feras Moussa - Tuesday, May 3, 2022
Real estate is one of the best methods for people to build and grow their wealth. However, one of the reasons that people shy away from real estate is that they don't feel like they have the funds necessary. They might drive by an apartment complex selling for $5 million and figure they don't have that kind of cash, so they don't bother looking into it. If you're wondering how to invest in real estate with no money, here are eight ways to get your foot in the door on a real estate deal.
1. Help find a deal.
One of the ways that you can add value to partners is to find and source a deal. Successfully finding a deal will require some legwork. You will have to develop relationships with brokers and actively underwrite offerings which can be a time-consuming process, but that's where your value comes in. Plus, you'll learn a lot about the business in the process.
If you can find a great deal that a real estate syndicator would be interested in acquiring, you could find yourself with a cut of the general partner portion of the transaction. Deals are hard to find in today’s fierce competition, so finding one could be your proverbial foot in the door, leading to more real estate opportunities.
2. Raise the capital.
You may not have the capital to invest in real estate deals. However, that doesn't mean you don't know others who would. If you have friends, family, acquaintances and other people who would be interested in investing in real estate, you could add value to any transaction by helping to raise capital. If you can save the general partner of syndication hours of work raising money by getting them in touch with your contacts, you have the leverage to negotiate an ownership percentage of the deal.
3. Be the boots on the ground.
Another way you can add value is to be the boots on the ground for a real estate syndication company. For example, even if a commercial real estate acquisition company is headquartered somewhere like Houston, that doesn't mean they don't do deals anywhere else. The company might want to do a deal in Orlando, but constantly sending one of its representatives to look over assets and engage with partners could be time-consuming and expensive.
If you lived in Orlando in the example above, you could potentially partner with the syndication company and be a part of a deal without a financial commitment. It's a subtle way to add value, but offering to be a physical presence in your city for out-of-state investors can be a valuable contribution.
4. Create a balance sheet.
Your net worth could get you into real estate with no financial commitment. If you have a sizable net worth, you can help guarantee loans for deals. In almost every significant commercial real estate transaction, banks and other institutions like bridge lenders require an individual with a sizable net worth to guarantee the loan.
This point is slightly different from the others on this list because it assumes you have a sizable net worth. However, if you have funds—maybe in your primary home or brokerage accounts—and you don't want to invest them in real estate yet, this is one way to do it.
5. Contribute to construction management.
Construction is crucial for almost any multi-family or commercial real estate deal. Invariably, there will be parts of the building to tear down and improve. If you have experience in construction management, you'll be an asset to most deals.
Therefore, if you want to know how to invest in real estate with no money and you're in construction, that's easy: Bring your construction skills to the deal.
6. Contribute to asset management.
Like construction, asset management is another significant component of real estate deals. Maybe you have worked for years as an asset manager, and now you're looking for opportunities to participate in real estate syndications as a general partner. If so, you can bring those asset management skills to the table and provide value to a deal.
7. Become a property manager.
Like the two skills above, property management is also highly sought after. If you have experience as a property manager or have a property management company, you can add value to the deal by bringing those skills. Almost all real estate syndications require property management, so if you can partner with the right syndication, they can use your skills in exchange for a piece of the transaction.
The secret is adding value.
Ultimately, the way to get started in real estate, even if you have no money, is to add value to someone who does. This is how you get your foot in the door. The best part about this approach is that you'll learn a significant amount about the business, enabling you to make more intelligent deals when you build up more capital.
Finally, please note that none of the above are get-rich-quick schemes. They all require work, genuine dedication and time. You have to want to get into real estate. But, if you're serious about this business, they're starting points that don't need significant financial commitments.
This story was originally featured on Forbes.com
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