Steps to Start a Residential Real Estate Business Without Money
Can you start a residential real estate business with no money down? Learn the truth in this article.
There is no denying that entering the real estate investment market is always going to be a good idea. Unfortunately, it traditionally requires a large initial investment. And this requires money. But what if you do not happen to be sitting on a small fortune? Are you to give up?
We are here to tell you that there is a way to start a residential real estate business without much money at all. So, if you are wanting to get your foot in the door and set yourself up for a great future in real estate, read on.
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What is a residential real estate business?
If you are going to start your own residential real estate business, you will need to understand what it is. While there are many different types of investment strategies, there are only two main types of real estate investing. Commercial and residential. Most real estate opportunities will fall into either category.
Fortune Builders explains the difference between commercial and residential. Put simply, commercial real estate is used for office, retail and industrial. So, if you are looking at real estate that is to be used for business and industry, then it is likely commercial real estate. Residential is the opposite and will be housing for families and anything under five or more units. So, investing in an apartment building with 30 units will be considered commercial, as well as anywhere where a business operates.
This article will be focusing on residential real estate, and anyone who invests in this type of real estate is said to have a residential real estate business. So, when you are looking for investment opportunities, you will want to focus on properties that are single family and where people will live in a residential setting.
What are the benefits of investing in residential real estate?
Any type of investing will be beneficial if done correctly, but there are certain benefits that are unique to investing in residential real estate. These are explained in more detail by Roofstock.
- Residential real estate is less sensitive to economic conditions. Leases are shorter and you can easily adjust to take advantage of a booming rental market.
- Financing for residential real estate is easier to receive. 15–30-year loans are readily available, often with little to no down payment.
- More affordable. If you have little to no money, you will have a lot more luck in investing in residential real estate than the more expensive commercial real estate. You can easily find quality, cash flowing properties for less than 100k, and with the right loan, you will not even need anything to start.
So now that we have established that entering the residential real estate business is the right approach for you, what are the steps to get started?
Steps to get started in residential real estate
If you are keen to get started in the residential real estate business, but are worried about your lack of starting capital, you do not need to despair. Here is a basic guideline on how to get started with zero money in your pocket. These steps can also be used for other industries and investment strategies as well. Source: Web Writer Spotlight.
Partner with a real estate investor
This step is particularly relevant if you have knowledge that can be useful. If you can use your knowledge or skills, and find a partner who has capital to spare, then you can work together and find a mutually beneficial investment.
Use an existing asset as leverage
This step will only work if you already own an asset, but it is a great way of borrowing money to purchase more real estate. You will need to find a lender that will lend you money and use the equity of an existing property. Then you can use this money to purchase a new property. This is a somewhat risky step, however if managed correctly, can lead to financial success.
You may have seen rent to own investment opportunities be advertised, and they are a great way to enter the real estate market without any upfront cost. While you will not be taking ownership of a property immediately, it is a foot in the door, and you will be able to live in a home knowing that you are on your way to ownership. You will basically pay more than the market value of rent, and the extra you pay will go towards the down payment. Once the rental period of over, the extra money you have paid will go towards purchasing the property.
Purchase a property with 0% down
If you are smart and look in the right places, you will be able to find lenders that will be able to loan you a mortgage with 0% down. There will be some restrictions and limitations. Some lenders will only lend you a certain amount (so you may have to opt for an older or smaller home). And interest rates will often be higher, so your monthly costs will be more. But this is worth it if it means that you can get started in the real estate business.
Of course, ideally it helps to have money to put down when starting a residential real estate business, but it is not necessarily a necessity. There are ways around it, but you may have to make some sacrifices, or lower your expectations.
There is a general belief that to get started in real estate of any sort you need to have a lot of money to begin with. A lot of the time this is true, but it does not have to be the case. There are ways to get started with little to no out-of-pocket expense. As can be seen; residential real estate is a good strategy for those with little money. Following these steps will set you up nicely for starting your residential real estate business and will not send you broke in the process.
Charles is the founder of infoSpike.com. His real estate investing experience started in 2004 and he is currently focused on rental property projects. He enjoys learning about real estate investing, personal finance, and marketing. Read more about Charles here.