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5 Ways to Start with No Money and No Credit?

One of the Myth’s of real estate is that you have to have money. This is flat out not true, you can absolutely do deals with no money and credit. There are a few precautions I want to mention, especially for beginners before explaining how to do deals with no money and no credit.

Having money and credit can certainly make it easier to do deals. It is crucial however to make sure the deal still meets your criteria. At no point in time should you bend your criteria and make the deal work by putting in your own money. For instance, if you are considering putting in 10% of your own money to make it meet your 70% LTV criteria, you should lower your offer or pass on the deal. The risk has to be warranted, in fact, all deals should be good enough where you do not have to use any of your own money. Using your own money should just sweatin the deal and improve the return without unneeded risks.

Here are some ways you can do deals with No Money and No Credit.

  1. Use Private Money – Cash is king and having private money backing can allow you to do deals without any of your own money
  2. Partner – If you have a strong business plan with solid exit strategies and a successful track record there is a ton of money out there to fund 100% of your deals. Make it a win-win for your partners and make it happen.
  3. Find deals with incredible numbers – If you are an expert at finding incredible deals, doing and exiting the deals then people will fight over funding your deals.
  4. Wholesale, Bird Dog – There is no risk, money or credit needed in getting a deal under contract or locating deals for investors.
  5. Subject To, Seller Financing, Lease Options – Taking title to a property subject to the seller’s existing mortgage, getting the seller to carry financing or lease optioning a property are ways to do no money no credit deals.
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16 Responses to 5 Ways to Start with No Money and No Credit?

  1. Danna Ntaka says:

    Hello Ryan,

    I got my start in real estate 20 years ago, while in college. I had excellent credit and earned $12.00 per hour at the blood lab in the university hospital. My greatest asset was determination. My business partner and I employed the strategy of buying distressed properties cheaply. Our parents thought we wasted their hard earned money on college education. Being young visionaries, nobody else could see our mission. We endured laughter that came from living in perpetual construction zones.

    Ten years into our business, family and friends decided to seek us out for investment opportunities. By then we had laid a solid foundation by living far under our means. We had flipped several properties, had a comfortable home, and had handsome rental incomes. The sweat equity and diligence of our experiment paid off.

    Danna Ntaka

    Danna Ntaka

  2. Hey Ryan,
    Don’t forget about the Wrap Mortgage or no down assumption.

    Have seen a number of deals done lately with no money down … “just take over my payments PLEASE!”

    Dike
    Dike Drummond
    http://www.investortours.com

  3. Heather says:

    Ryan,

    Great info.

    Another idea is to bring in a JV partner who has excellent credit. Create a JV partnership for the specific deal, then they go out and get the loan to purchase the property. The key here is that the investor (you) need to bring something to the table, such as doing all the legwork, managing the rehab, finding the retail buyer, etc.

    Heather

  4. Ryan Moeller says:

    Great points Heather. I have done something similar in that I do all the work and have a money partner bring in all the funds either using leverage or cash. Result is a win-win for everyone!

  5. Leo Gagnon says:

    Ryan,
    I need help getting over the hump and pulling the trigger on a first deal. I have been to tons of seminars and read qa bunch of books, so I know the money is out there. I just back off when it comes time to find the money and make an ask. I get gun shy!
    My wife and I are visiting my parents in Florida for Christmas and we are goiong to visit friends in Punte Gorda. I just know I am going to be chomping at the bit for a $30,000 condo or something comparable. I really need to get off the fence because I do not want to miss the opportuities in this market.
    The kicker is that I am a Realtor in the states of Maine and New Hampshire, so I see deals all the time.
    Any suggestions?
    Thanks,
    Leo

  6. Ryan Moeller says:

    Danna,

    That is a tremendous story. I wish I started back in college. It sounds like you did a tremendous job believing in your ability and sticking to your criteria and it has really paid off. Having a successful track record in good times and bad sure helps. What are you doing to take advantage of the tremendous opportunities available for the next 3-5 years?

  7. Ryan Moeller says:

    Great point, thanks for the comment!

  8. Ryan Moeller says:

    Leo,

    You have come to the right place. The first thing I believe thing is to determine your strategy and focus on only that strategy. In my opinion, the best deals are ones with not only tremendous LTVs, but also tremendous cash flow. What is your criteria? You mentioned FL condos, any particular reason why?

    Your strategy must mitigate risk and result in multiple exit strategies or one guaranteed exit. Once you define your strategy, you can define your criteria and get tons of prospects into your pipeline and cherry pick only the best ones.

  9. George Hsu says:

    Great post, Ryan
    I have seen may deals being a real estate broker for 20 years, & also worked with some investors with limited resources. While all your ideas are valid, I think one of the key challenges to find true zero down deals is to find the un-advertised deals through one’s own networking effort. If there is a decent deal on the market, there are too many buyers out there with money competing for the same deal, usually the most qualified buyer wins, & after the bidding war the deals might not be that spectacular anymore. Investors needs to have access to un-advertised deals to have a chance to work with the seller on a one-on-one basis, just to have a better chance of succeeding.
    The other thing to remember is the zero-down investor needs to keep knocking on many more doors then someone with deeper pocket to find an acceptable deal.

  10. Ryan Moeller says:

    Great point George, the best deals have no competition. A good marketing plan to different lists is a good way to find deals and work directly with the sellers. How would you recommend finding these deals?

  11. In today’s RE investing arena, there are two main areas which make up a large majority of the residential market and they are REO’s and short sales. I actively invest in both and I can tell you from experience that succesffull REO investing requires cash. Granted it does not have to be yours, but it certainly requires the cash and you must be able to show a POF (proof of funds) to the bank.

    Short sales are a whole different ballgame and in my opinion, are the most viable strategy for investors without their own money or credit. Best of all, you don’t even need a money partner or JV partner either. Flipping short sales is one of the most attractive investment strategies and the profit margins are often $20k or more. All you need for funding the front end is a transactional funding source and your expenses for that are not paid out of pocket but from the back-end transaction on the re-sell side. This is also where your profits are paid from.

    Example, you find a homeowner in foreclosure trouble, negotitae with their bank and get them to agree to a short payoff of $100,000. The home is actually worth $150,000 and you immediately find a buyer to buy it for $135,000. You have escrow and closing costs on both ends of the transaction and possibly RE commissions on the back end (the front end commissions are paid by the bank). Your profit margin is the diference between what you paid the bank on the front end and what you sold the property for on the back end, minus your costs.

    If you would like more information on transactional funding or short sale investing, feel free to contact me.

    Will Barnard
    website: http://www.theshortsalefunders.com
    email: info@barnardenterprises.com

  12. Ryan Moeller says:

    Great comment and advice William. Myself and probably many readers would find information extremely informative on short sales and strategies to successfully flip short sales.

  13. Frank says:

    I’m going through a divorce and after being taken to the cleaners will have limited funds. I have found some good deals published but are gone within days. How do I go about finding them before they are published? My plan is to find something with min – mod rehab and live in it for maybe a year then find another and move on. I would like to build that rental revenue. Any suggestions?

  14. Ryan Moeller says:

    Frank,

    I definitely have some suggestions. The highest rent to purchase ratios are found in the low income non warzone areas. These may not be the areas you wish to live in so you may want to reconsider living in the properties and looking in other areas with less demand and competition. At no point in time should you overpay because the property will be gone in a few days, find a different deal and have many deals to cherry pick from. You can do mailers to out of state investors, foreclosure lists, expired listings, for sale by owners, probate, rehabs, rentals, etc. Short sales can work too if they are not listed on the MLS. I hope this helps.

    -Ryan

  15. Hello,

    First I wanted to say that I have not taken the plunge into investing myself yet. But I am very interested and scared to do so. I have a 790 credit score but do not make much money. Most of my money comes from my parents. So no one will loan me any money.

    I am a young Realtor in California and frankly don’t see too many great deals I would want to jump on. Everything is getting bid up by novice investors that, like you say not to do, deviate from their criteria.

    As for short sales… as a Realtor I have dealt with a few short sales. They are a pain in the butt. Most lenders take 120 days to give you an answer. I won’t get into it but they take a lot of time, patience and last 5-6 months.

    I do have a question. Given my credit score and the fact I am a Realtor, is it better for me to try and find a good deal using my commission as a down payment, or should I be searching out creative financing on non MLS properties?

    Also, are you doing more flipping right now or Renting?

  16. Ryan Moeller says:

    Jonathan,

    Thanks for the comment and sharing your experiences. You are seeing exactly what I see. Short sales are often difficult and take forever. In many larger more competitive markets you see beginners over bidding and paying way too much. They buy on emotion and throw their criteria out the window if they ever had criteria.

    Once investors realize this, they take a huge step forward and begin gathering good information and making good business decisions. I recommend creating a strategy, business plan, criteria and select a market where you can achieve success. If you are willing to focus on one market out of state that has tremendous opportunities to cherry pick from, what would that market be and why?

    The most common strategy is rent and hold then sell for the capital gains in 5-10 years, but some properties make sense for flips.

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