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HOT TOPIC How can someone with no cash start a real estate empire?

Geekour

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I apologize if this has been discussed before but I have been looking online/forum for ways to get into real estate with no cash. I don't care if it takes me years to get there but how the hell do I pave my path? Do I need to establish a business first to grow capital? I have read the forums here and it seems wholesaling is either loved or hated and is controversial. I do not have the money to flip yet. I am not asking for you to make decisions for me but if you have any suggestions please do enlighten me.

I recently started working as a registered nurse and have been reading this forum trying to find my fastlane. I am working overtime trying to save up for investing in real estate or a business idea. This community has opened my mind but I need to start taking action.

Anyway, bless you all. Thanks for reading. I hope you are having a fantastic year.
 

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vshetty.vs

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I have been thinking about real estate a lot recently. I don't think of it as a good investment for me personally for the following reasons

Renting
Cost of buying a 2BHK house: 146k
Rent for a year: 6k
Money after a year: 152k


The 146k in the bank
Money+interest after a year:156k(7.1% interest rate at RPL bank)

If you can think of a reason why real estate makes sense id love to hear it


Now back to your question, you could collaborate with a couple of friends and purchase the property together.

Each of you put in a couple of grand and collect the profits. Slowly you buy them out or even work together to buy more real estate.


P.s: I live in india
 
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Scot

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There are whole courses, podcasts, even forums dedicated to this question. You may find some answers here, but definitely check out biggerpockets.com

The most valuable resource you can use is OPM, other people's money. Lots of real estate investors just want easy returns without doing the actual real estate work. In the beginning, you do the work and use their capital, and you get a share of the profits. Over time, you establish a reputation, get access to more capital, bigger investors, and bigger projects.
 

Real Deal Denver

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I have been thinking about real estate a lot recently. I don't think of it as a good investment for me personally for the following reasons

Renting
Cost of buying a 2BHK house: 146k
Rent for a year: 6k
Money after a year: 152k


The 146k in the bank
Money+interest after a year:156k(7.1% interest rate at RPL bank)

If you can think of a reason why real estate makes sense id love to hear it


Now back to your question, you could collaborate with a couple of friends and purchase the property together.

Each of you put in a couple of grand and collect the profits. Slowly you buy them out or even work together to buy more real estate.


P.s: I live in india
You are missing the entire point of real estate investing VS. Leverage.

Without that, your plan has some merit. Some - but not a lot. With leverage, and a little bit of knowledge, your paltry 7% is nothing.

I'm always amazed at the conclusions people come to on their own. I wasn't born smart, but I know a lot because I've read dozens of books on this subject. @JScott even wrote a couple of them, which I just recently realized - thanks J!

Get yourself some knowledge beyond rolling it around in your own head. Don't stay in the dark.
 

vshetty.vs

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You are missing the entire point of real estate investing VS. Leverage.

Without that, your plan has some merit. Some - but not a lot. With leverage, and a little bit of knowledge, your paltry 7% is nothing.
Could you please explain? I'd love to hear more.

Btw I'm talking about real estate as a low time investment side project and not your actual business. Hope that clarifies things a bit

Even as your main source of income, would you choose building a real estate empire vs your own business(whatever it may be)?


P.s: I am no expert on the topic, would just love to hear your opinion
 
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Andy Black

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“How can someone with no cash start a real estate empire?”


The first thing I thought when I saw the thread title was to rearrange it slightly to:

“How can someone with no cash help people with real estate?”
 

WJK

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I started with no cash. I got investors to put up the money. It started with finding the project and having the investors waiting in the wings. Then I did the work -- the dirty work. And the marketing. And then I did it all again and again until I had my "strutting money" to do it on my investments.
Even now, 42 years later, I not too good to do anything myself. Every Sunday, I still walk with a friend around my property, and we pick up trash. I wave at my tenants as we walk through my mobile home park making sure everything is clean. I still do the shopping and I pick up the building materials. No one takes care of my money as I do. The same with my properties.

It's a mindset. It's a point of view. It's a commitment. It's a lifestyle.

I have gone further and done more in my lifetime that I ever would have guessed when I was young. Women couldn't qualify for a house loan or have a credit file when I became a woman in 1972. A woman's salary couldn't be considered because either she was within childbearing age or too old. There were very few types of employment available to women. The Fair Credit Act became the law in 1974 as part of the Civil Rights Movement. I started in real estate in 1976 when I finished college the first time. I actually meet the first woman in USA for whom FHA approved a house loan. She was a single black woman in Los Angeles. What a difference that Fair Credit Act has made in my life! I am SO lucky to be living during this period of time!
 

WJK

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I have been thinking about real estate a lot recently. I don't think of it as a good investment for me personally for the following reasons

Renting
Cost of buying a 2BHK house: 146k
Rent for a year: 6k
Money after a year: 152k


The 146k in the bank
Money+interest after a year:156k(7.1% interest rate at RPL bank)

If you can think of a reason why real estate makes sense id love to hear it


Now back to your question, you could collaborate with a couple of friends and purchase the property together.

Each of you put in a couple of grand and collect the profits. Slowly you buy them out or even work together to buy more real estate.


P.s: I live in india
You don't sound like you understand at all. You're right. It's not the investment for you.
 

vshetty.vs

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You don't sound like you understand at all. You're right. It's not the investment for you.
I hate it when people say I'm wrong without explaining why.

I would love to hear your side of things.
 

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Geekour

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@JScott Started going through some biggerpockets posts and saw this encouraging comment by you. Sharing this on forum to get encouraged to take action. I hope this helps someone here too as simple as the advice is I am thankful. Being on this forum is like a constant treasure hunt picking up valuable wisdom as I go. It is always good to stay focused but I just realized I am too ignorant about types of real estate investing so I have some basic learning to do.

You said:
1. Read, read, read.
2. Figure out what you want to do (house flipping, rentals, multi-family, wholesaling, lease options, notes, commercial, etc)
3. Read, read, read about that specialty
4. Put together a basic plan
5. Start executing on your plan
In addition, here are some other things to do when getting started:
- Join your local Real Estate Investors Association (REIA) and start networking
- Ask some local investors to lunch (you pay) and be prepared with some good questions
- Find a local investor who you can volunteer to do some work for
 

FastLaner007

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You are missing the entire point of real estate investing VS. Leverage.

Without that, your plan has some merit. Some - but not a lot. With leverage, and a little bit of knowledge, your paltry 7% is nothing.

I'm always amazed at the conclusions people come to on their own. I wasn't born smart, but I know a lot because I've read dozens of books on this subject. @JScott even wrote a couple of them, which I just recently realized - thanks J!

Get yourself some knowledge beyond rolling it around in your own head. Don't stay in the dark.
You don't sound like you understand at all. You're right. It's not the investment for you.
I am not into Real Estate either. Why don't you guys explain how this leverage works with an example figure? Some numbers will clear out things for some of us who are new in the RE business.
 

Andy Black

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I am not into Real Estate either. Why don't you guys explain how this leverage works with an example figure? Some numbers will clear out things for some of us who are new in the RE business.
Just some friendly advice:

You may or may not get a reply. Now you have a question to ask maybe you could Google for it? I’m sure there’s some great and simple examples out there.

If you’re confused by what you find then you could come back and say you Googled for X, found Y, but are confused by Z.

People like to help the people in motion.
 

FastLaner007

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Just some friendly advice:

You may or may not get a reply. Now you have a question to ask maybe you could Google for it? I’m sure there’s some great and simple examples out there.

If you’re confused by what you find then you could come back and say you Googled for X, found Y, but are confused by Z.

People like to help the people in motion.
Thanks! I already Googled a couple examples and watched a few YouTube videos. Now I guess I got the hang of leverage in Real Estate terms. I intensively use leverage in the financial markets. So, I wanted to know if it worked the same way in RE too.
 

DVU

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Could you please explain? I'd love to hear more.

Btw I'm talking about real estate as a low time investment side project and not your actual business. Hope that clarifies things a bit

Even as your main source of income, would you choose building a real estate empire vs your own business(whatever it may be)?


P.s: I am no expert on the topic, would just love to hear your opinion
If you, for example, have 200k, find an apt building for 1mil, get the bank to finance the other 80% and buy it.

Your residents will pay down the loan, you will have a piece of it leftover each month and as the loan gets paid down, your net worth increases.

That's it in the simplest terms.

Of course, you have to find a property where the numbers work out.
 

ZCP

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Birddog.

start a venture to generate cash to invest.

network. lot of money available out there....
 

WJK

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I am not into Real Estate either. Why don't you guys explain how this leverage works with an example figure? Some numbers will clear out things for some of us who are new in the RE business.
Here's an example of how I don't use leverage, and I have great returns. I've been rehabbing my mobile homes in my park. My goals are: (1) to do the work out of my current cash flow and (2) rent them to increase that cash flow. I spend an average of $8K to $30K each, to come out with good rentals. It takes me between 1 to 4 years to pay myself back out of the resulting cash flow. After my overhead expenses, I'm getting a 25% to 100% per year return OF my investment, plus my depreciation & a bump in my overall market value.

Once I get my investment $ back, I still have the continuing depreciation, the profits from that cash flow, more rentals assets... and eventually when I sell -- long term capital gain treatment for my profits which haven't been depreciated.

And, to compare, the bank would pay me how much in interest????
 

Real Deal Denver

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I am not into Real Estate either. Why don't you guys explain how this leverage works with an example figure? Some numbers will clear out things for some of us who are new in the RE business.
We have this internet thing that can answer every question you throw at it. I use it extensively for things I don't know much about. Right now I'm concentrating on landing pages. I have spent hours reading about this.

And that's ONLY landing pages.

You want a course on the advantages of investing in real estate here, in a paragraph or two? I wish life was that simple.

Okay - here you go. Luckily it IS that simple, with Google.

Use the example below as a beginning. Play it out. What would happen if you spent the entire $100,000 that is used in the example? What could you do with the cash flow you make from the investments? How could you increase your income stream and reduce your expenses? At the same time? Much to know.

The lesson here is not the lesson. The lesson is that I gave you the answer already. Leverage. You now have something to research and build on. That is how you learn and grow. I say this because I did not have this knowledge at one time either. How did I figure this out then? It sure wasn't as easy as Google, I can assure you that much. There are powerful tools at your fingertips. If you take the time to know what you're learning so you can learn more. That is the essence of "taking steps" in learning. That is the most important skill that you need. You need to know how to know what you don't know. And, besides sounding silly perhaps - that is the secret. I have 60 books on this subject (real estate). I am drowning in knowledge. Why do I say that? Because knowledge is there for the taking. So take it.

I could have just said, here it is. So I will.

Here it is:

Leverage.JPG

For more info:

How Leverage Can Multiply Your Returns & Create Massive Wealth | Passive Income M.D.
 

FastLaner007

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Here's an example of how I don't use leverage, and I have great returns. I've been rehabbing my mobile homes in my park. My goals are: (1) to do the work out of my current cash flow and (2) rent them to increase that cash flow. I spend an average of $8K to $30K each, to come out with good rentals. It takes me between 1 to 4 years to pay myself back out of the resulting cash flow. After my overhead expenses, I'm getting a 25% to 100% per year return OF my investment, plus my depreciation & a bump in my overall market value.

Once I get my investment $ back, I still have the continuing depreciation, the profits from that cash flow, more rentals assets... and eventually when I sell -- long term capital gain treatment for my profits which haven't been depreciated.

And, to compare, the bank would pay me how much in interest????
Good answer. But I don't understand why you use the word "depreciation". Isn't RE business all about appreciation?
 

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JScott

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Good answer. But I don't understand why you use the word "depreciation". Isn't RE business all about appreciation?
Depreciation is an accounting/tax term -- it's a tax benefit of real estate. Basically, because the actual property (the building, not the land) deteriorates over time, you can to claim a deduction for the building each year.

For example, a single family home can be depreciated over 27.5 years (based on IRS guidelines). So, if you own a building that is valued at $275,000, as an investor, you get a $10,000 tax deduction each year for 27 years. This is a HUGE benefit to real estate as an investment.
 

JScott

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I am not into Real Estate either. Why don't you guys explain how this leverage works with an example figure? Some numbers will clear out things for some of us who are new in the RE business.
I've posted the content of this article I wrote here before, but will just post the link this time...

All About Leverage
 

WJK

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Depreciation is an accounting/tax term -- it's a tax benefit of real estate. Basically, because the actual property (the building, not the land) deteriorates over time, you can to claim a deduction for the building each year.

For example, a single family home can be depreciated over 27.5 years (based on IRS guidelines). So, if you own a building that is valued at $275,000, as an investor, you get a $10,000 tax deduction each year for 27 years. This is a HUGE benefit to real estate as an investment.
Thanks for your answer. I couldn't have said it better!
 

ryanbleau

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Depreciation is an accounting/tax term -- it's a tax benefit of real estate. Basically, because the actual property (the building, not the land) deteriorates over time, you can to claim a deduction for the building each year.

For example, a single family home can be depreciated over 27.5 years (based on IRS guidelines). So, if you own a building that is valued at $275,000, as an investor, you get a $10,000 tax deduction each year for 27 years. This is a HUGE benefit to real estate as an investment.
This one post has opened up so many more avenues. Thank you
 
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Geekour

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Great information coming in here! Slightly off topic but I've seen some posts about the real estate market being affected soon. How will this affect investors whether it be buy and hold, flipping, wholesaling etc. Will specific markets be more affected?
 

JScott

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This one post has opened up so many more avenues. Thank you
I realized that I didn't cover this as comprehensively as I should have... I ignored the fact that when you sell, you need to "recapture" (i.e., pay taxes on) the amount of the gain over the adjusted cost basis of the property.

To clarify, here's an example:

Let's say you buy a property for $500,000 and the depreciation amount is $10,000 per year (basically, the IRS agrees that the wear-and-tear on the property devalues it by $10,000 per year and lets you take that as a deduction). After 10 years, you've depreciated $100,000 of the property. That means that you've gotten $100,000 in tax deductions, but the IRS assumes that the property is worth $100,000 less than when you bought it -- the adjusted cost basis is $400,000.

Now, let's say you sell that property after the 10 years for $550,000. Because the IRS agreed that the cost basis of the property was only $400,000, you now have a "realized gain" of $150,000 (not just the $50,000 gain based on the original purchase price).

Your depreciation recapture gain is the full $100,000 that you took in depreciation over the past 10 years -- you'll pay taxes on that at your marginal rate. The rest of the gains ($50,000) are long-term capital gains that you'll pay 15% or 20% on (depending on your capital gains rate).

So, this depreciation tax deduction isn't free money. You are essentially delaying the payment of taxes on the depreciated amount until you sell the property. The benefits are the time value of that depreciation (you get the benefit now and owe taxes later) and potentially you save money if your future marginal tax rate is lower than your current marginal tax rate (though it could potentially cost you money if the opposite is true).

Nonetheless, depreciation is a huge benefit when buying investment property.
 

Jason "GrandK"

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I apologize if this has been discussed before but I have been looking online/forum for ways to get into real estate with no cash. I don't care if it takes me years to get there but how the hell do I pave my path? Do I need to establish a business first to grow capital? I have read the forums here and it seems wholesaling is either loved or hated and is controversial. I do not have the money to flip yet. I am not asking for you to make decisions for me but if you have any suggestions please do enlighten me.

I recently started working as a registered nurse and have been reading this forum trying to find my fastlane. I am working overtime trying to save up for investing in real estate or a business idea. This community has opened my mind but I need to start taking action.

Anyway, bless you all. Thanks for reading. I hope you are having a fantastic year.
I highly recommend Get Rich Education podcast by Keith Weinhold for a great education on real estate. His earlier stuff is great. However, podcast episode 163 is my personal favorite.
 

Jason "GrandK"

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I realized that I didn't cover this as comprehensively as I should have... I ignored the fact that when you sell, you need to "recapture" (i.e., pay taxes on) the amount of the gain over the adjusted cost basis of the property.

To clarify, here's an example:

Let's say you buy a property for $500,000 and the depreciation amount is $10,000 per year (basically, the IRS agrees that the wear-and-tear on the property devalues it by $10,000 per year and lets you take that as a deduction). After 10 years, you've depreciated $100,000 of the property. That means that you've gotten $100,000 in tax deductions, but the IRS assumes that the property is worth $100,000 less than when you bought it -- the adjusted cost basis is $400,000.

Now, let's say you sell that property after the 10 years for $550,000. Because the IRS agreed that the cost basis of the property was only $400,000, you now have a "realized gain" of $150,000 (not just the $50,000 gain based on the original purchase price).

Your depreciation recapture gain is the full $100,000 that you took in depreciation over the past 10 years -- you'll pay taxes on that at your marginal rate. The rest of the gains ($50,000) are long-term capital gains that you'll pay 15% or 20% on (depending on your capital gains rate).

So, this depreciation tax deduction isn't free money. You are essentially delaying the payment of taxes on the depreciated amount until you sell the property. The benefits are the time value of that depreciation (you get the benefit now and owe taxes later) and potentially you save money if your future marginal tax rate is lower than your current marginal tax rate (though it could potentially cost you money if the opposite is true).

Nonetheless, depreciation is a huge benefit when buying investment property.
Which is why using 1035 exchanges can be beneficial, right?
 

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