Thread: No Money, No Credit ... No Problem

This is one of the subjects which is brought up often to me by want-to-be investors at my seminars and webinars. How can I make money in real estate if I have not much money to start with and no credit?

There are ways that you can get in the game, learn the business and make some money in the process. These are the most popular, if the investor wants to get into the actual "action" besides real estate side businesses like BirdDogging, Property Management, etc.

Wholesaling/Flipping – in this cycle, the investor/buyer “ties up” with a sale or option contract the property with the sole desire to sell the property, or the interest in the property, without doing any improvements or updates. Transactional funding or hard money lenders are used for this process, and no cash or credit are needed.
Subject to” Clause – A ‘subject to’ clause in the sale contract simply means that the buyer is willing to purchase a piece of property ‘subject to’ some specific circumstance. We can use this clause in relation to purchasing a property, by stating “subject to the sellers’ existing mortgage remaining in place.” This phrase means that at closing, the property is titled in the buyer’s name, but the loan is still in the seller’s name. Therefore, you are buying the property ‘subject to’ the sellers existing mortgage payments. Since there are so many distressed sellers who want to move or relocate, and prefer a sale instead of leasing the property, this has become a desirable option, and again the buyer/investor credit or cash available are not an issue.
Lease Option to Buy – if the seller is reluctant in selling a property with a “Subject to” clause, this might be a great alternative. Lease Option basically means that the investor/buyer is leasing or renting a property with an option to buy it at a future date. The future price of the property should be fixed at the time the lease-option is signed. Usually a downpayment or some type of monetary consideration is required at the signing of the lease option, but that can be negotiated and broken down in monthly installments.
Real Estate Syndication – Real estate syndication is formed when a group of people is pooled together with the same investing goal, which is to purchase property. An initial group can be formed of only a couple of people, but it can easily grow to dozens of investors, therefore providing the possibility to raise a lot of capital for big projects.A syndicator is a facilitator and organizer for this group of investors: he/she is responsible for:
• Finding properties
• Analyzing the deals in order to establish if they are suitable for the goals of the group
• Supervising construction and maintenance
• Selling the properties or secure long term financing
• Distribute profits to the group

There are more distressed and discounted houses available for sale nowadays than any other time in history. Unemployment, falling housing prices, option ARM adjustments, and other factors have lead to more households entering the foreclosure process.
At the other end, there are many cash buyers, wholesalers, domestic and international investors looking to capitalize on this excess inventory.