Cash for Real Estate Investing – Do I Need Cash as a Real Estate Investor?
Do you really need cash to be a real estate investor? Yes and no.
While you can start investing in real estate with absolutely no cash, you will find it very challenging.
With a little cash, a few hundred dollars, you will find it much easier to start your real estate investing business.
What types of investing can you do with little or no cash?
Bird Dogging
You can be a bird dog and find potentially motivated sellers to turn over to another real estate investor who is willing to take the next step and negotiate with the seller to purchase the house.
Your expenses as a bird dog are in finding potentially motivated sellers.
Wholesaler
You can be a wholesaler and find deals and put them under contract then find another investor or retail buyer to buy the houses from you for more than you have it under contract for.
Your expenses as a wholesaler are finding motivated sellers, putting up money to control the property (binder deposit or option consideration) and finding your investor or retail buyer.
What if I have some money (a few thousand dollars or more)?
With a few thousand dollars, you might consider some no money down deals being especially careful not to commit to making payments on the house until you have lined up your tenant, buyer or tenant-buyer.
Your cash needs in buying and selling houses with no money down is the holding costs and marketing and not necessarily the down payment.
For example, often times when we buy a house “subject to” the existing financing, where we agree to make payments on the seller’s existing mortgage, we are not putting any money down. We are merely agreeing to make payments on their existing mortgage.
Even if the seller agrees that you will start making payments only when you find a tenant or tenant-buyer, you might still have marketing costs and in the event the property goes vacant you should be able to make the mortgage payments while you find another tenant or tenant-buyer.
You will notice that I did not include buying houses “subject to” the existing financing in the category of little or no money. Even though we can often buy houses “subject to” with no money down, we do need to have some cash on hand for the marketing, fix up, and holding costs.
What if you are interested in buying houses with new loans?
Yes, I think you should have some reserves put aside (just like your lender usually requires) to account for vacancies, marketing and maintenance.
So, while you can get started investing in real estate with no money, it helps to have a little money on hand. I would suggest having access to some money if you plan on holding rental property in any form.
Until my next post,
James
P.S. In our Real Estate Investor Bronze Membership training we teach a variety of ways to generate immediate cash flow from real estate investing with little or no cash.
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