Late night television and the hotel conference circuit are chalk full of slick salesmen telling you how you can get into an incredibly profitable real estate investing career with no cash on hand at all. While many of these so-called systems have an off-putting, high-pressure aspect to them, the underlying idea that you can actually get into real estate investing without having hundreds of thousands of dollars on hand turns out to be true.
A knowledgeable investor may only need a small sum to attract additional funding.
The best way to get into real estate investing is to go with the age-old investment adage: Buy low and sell high. The best way to do this is often to just go straight to the residential real estate market. Residential real estate is often far more liquid and offers, by orders of magnitude, more opportunities to find underpriced or potentially negotiable properties. Also, when dealing with residential listings, you will be using traditional lending mechanisms such as mortgages and bank lines of credit. These lending vehicles are well established and can provide a relatively quick and easy way for someone with good credit to get into a deal.
Unfortunately, traditional lending methods often require up to 20 percent of the property value as a down payment. Luckily, there are specialty real estate investors in every city across the United States who specialize in providing financial assistance to make up the difference typically denied by conventional lenders. Known as hard money lenders, these investors are willing to take on a higher level of risk that the banks often eschew. In exchange, however, the investors may charge additional fees or request a higher interest rate.
Finding hard money lenders in your local area isn’t hard. Just ask around. Local real estate agents and other industry professionals will know exactly where to point you. It’s advisable to have a small amount of earnest money set aside to initiate a transaction, but it is not likely that you’ll be required to put an unusually large percentage of the purchase price down.
What you will need, however, is the ability to convince people to invest with you. Generally speaking, the more knowledgeable you are, the more confidence you will instill. Your very first investment deal may seem intimidating and unattainable. But, if you put in your due diligence and come prepared to pitch your case, you’ll likely find it’s not as bad as you once imagined. Eventually, you should be able to provide proof of previous successful investments to your investors, which will make subsequent deals far easier to obtain.