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

[Scot]

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.

 

[WJK]

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!

 

[Jakawan]

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.

Hello, thought I'd drop my opinion here. Real Estate is the vehicle that helped me quit my J-O-B.
I would start with looking at your current situation and goal. Do you have a job? Career? Is the pay good? Are you getting ahead? Are you in debt? Are you trying to pay off debt or just get ahead and not have a job and have the time to spend on building a business or enjoying your life?

Ok. Real Estate is HARD from scratch with no money, regardless of what the gurus say. I've been through it for 6-7 years and have seen hundreds of people come and go and "attempt" starting with no money.

The most successful people I've seen are in two categories.
#1 are savers with business sense that are not addicted to instant gratification. Engineers, career people, who already saved tens of thousands and are looking for a way to invest and grow what they've already started.
#2 are a much smaller percentage. Maybe they started with nothing or very little money. But they are HUNGRY and DETERMINED... and they get obsessed with real estate.. they want to learn everything.. they hustle their face off. They are determined and hard working... they usually start WHOLESALING.. and quickly learn to do it better than most of their local market.. and it's not hard to save up $50k-$100k quickly if you get good at this and build a system for finding properties cheap and selling them for the highest possible price. These people then start maximizing their real estate leads.. they look at each deal with investor eyes and say.. what would be the best ROI and ROT (return on time) basically what is the most effective thing we can do with this type of property? Wholesale it, wholetail it, rent it, or rehab it?
I've seen people become a millionaire like this in 3 years or less, multiple times.

This is a lot of crazy talk.. but if you're interested in seeing how far the rabbit hole goes.....
If you want to be part of #1... make your money first in another business, cash business would be great or even a high paid salary can be reinvested and leveraged in rentals and grow your net worth quickly.
If you want to be part of #2... Start researching Wholesaling Houses, learn to extract information quickly from books.. buy a $250 course and implement it. Go to every single real estate investor meeting in your area and be a noisy sponge... ask questions.. and take notes, learn your numbers... and go make deals happen. Eventually you'll have done several in a month and wake up with options. Go do it.

 

[Real Deal Denver]

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.

 

[Andy Black]

“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?”

 

[Andy Black]

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.

 

[minivanman]

Get a lawn mower and get to work. In no time, you can have what ever empire you choose.

 

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[DVU]

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.

 

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[CareCPA]

I am just looking the advantage of the asset. You buy a rental property. You get the benefit of the initial cash flow, thanks in part to the depreciation on the property. It eventually appreciates in value.

Rather than sell it and create a taxable event, you do a 1031 exchange into a new property, using the equity from the old property. Once again, you depreciate the new property. You still have never paid taxes on the equity growth or the depreciation because you have not sold.

You repeat this until process a handful of times on as many investment properties as you are able and willing to buy before you die. Then that inevitable day arrives and you die.

Your heir gets the properties with a stepped up basis and the previous depreciation no longer matters, the process begins again. The only potential tax ramifications would be state and federal death taxes if you exceed the exemption limits.

Does that sound generally correct or am I missing something?

That is generally correct.
Keep in mind, as you move up the scale (while still alive), you won't get full depreciation on each successive property.
For example, if you 1031 a partially-depreciated $500,000 building into a $1m building, your basis for depreciation on the new building (generally) is not going to be the full $1m. It's going to be $1m minus the deferred gain.

Here is a website that I quickly found that seems to have the calculation laid out accurately.

 

[CareCPA]

...
What about the guy trading down in the 1031? He will surely get some money to compensate for the value difference. Would that money be considered income for him?

The guy you are acquiring property from may not be doing a 1031 exchange. You don't have to buy and sell from the same person. It may just be a person looking to liquidate some holdings. Whether or not they recognize gain will be dependent on their basis vs sale price

Now the tricky part. Added on to the above conversation, can I take an equity loan from my million dollar property, for let's say, $400,000? Yes - but can I not pay income taxes on it because it is not income? It's a loan. I can then use that money to buy another property? I will in effect have a goose that lays golden eggs. A perpetuating ATM.

Correct. A loan is not income. You can take a loan out on one property to purchase another, without it being a taxable event.
One way to do this efficiently is to look for a portfolio lender. Just like they sound, they will lend on your entire portfolio, instead of having to apply for each property independently. This is usually reserved for individuals with higher real-estate holdings.

 

[Kak]

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

Lol... you completely disregard the access to collateralized leverage you get with real estate.

Try 30k (sometimes even less) buys you control over 150k house. 6 grand in rent for the year is LOW on a 150k door. Try 15 grand MINIMUM for anual rent if you actually put some thought into the oroperty you were buying, and 10k to keep up with the mortgage/taxes/insurance and most problems you can fix yourself.

Barring any unforeseen issues, You would be turning 30k into 35k... not 150k into 155k. There are also tax advantages like depreciation in RE. That's a 17 percent return. Most people would be pretty happy. I think it's a lot of work for 5 grand. I like the numbers far better on multi-family deals and will buy an apartment complex at some point. I have been getting my feet wet in RE though.

Listen to @JScott and @biophase they know what they are talking about.

 

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[Kak]

Op...

You said you don’t care if it takes years... but you are hell bent on building a real estate empire with no cash... Why not get some cash? Just curious. People with jobs can have an easier go of it getting the first loans.

 

[vshetty.vs]

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.

 

[Geekour]

@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]

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.

 

[Real Deal Denver]

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:



For more info:

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

 

[AfterWind]

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

They even have a really good youtube channel

 

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[Rich Wood]

Great Thread and Topic - So many people are in the same boat as you. In fact, so was I about 7 years ago. My friends and I got together and decided to pool our resources. Some took out a Heloc on their home, some decided to ask there parents to Heloc their homes, and some cashed out their 401-K's took the penalty, and began investing. You would be amazed how there is access to capital everywhere if you really look.
I'm not saying take out expensive debt to earn just a bit more, but be savvy with it. Look for possible arbitrage opportunities. For example, I am borrowing at 4% for my business right now, and am making 12-15% on mezzanine loans and REIT investments.
Also, I know it sounds a bit sad, but when my mother and grandmother passed away, instead of using my cut of their life-insurance or my inheritance, I used the majority to start investing in real estate which has seen a 10x over the years in value. You can look for private placements, or generate ideas with your friends. If you seek it out, opportunities and capital will come.

 

[Geekour]

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]

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

 

[WJK]

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????

 

[CareCPA]

Right, one of my businesses is life insurance related, so there you go. I meant 1031.

I have not personally done a 1031 but I know many RE investors who have successfully moved their money from one property to another, using the 1031. Great way to level up and defer taxes.

Also, if original owner dies wouldn't the new property pass at a stepped up basis, essentially avoiding all taxes? Is the stepped up basis on all real property holdings? TIA.

Generally, yes.
It would essentially reset that basis, and could then be depreciated over again (and would have a higher basis when you sell).
Be careful using the term "all taxes." This is for income tax only. Estate taxes are a different subject.

 

[CareCPA]

I did not connect the dots on this. Let me give you an example, and see where I went wrong.

I have a property that I am definately doing a 1031 exchange on, to defer taxes. That's my main purpose, but I also want to trade up.

I trade my property, worth $800K, for a property worth $1,000,000. How does that $200,000 imbalance get settled? It has to be settled somehow. Boot. That is cash, or cash equivalent (my yacht).

So I don't see how you can say the guy I am doing the exchange with might not be doing the exchange. How could this be different than what I explained, keeping in mind that my main goal IS to do a 1031 exchange, and I want to trade up. How could I (or the other guy) NOT do a 1031 exchange without exchanging properties back and forth with this guy? Your response seems to be in contradiction with that.

My options, for the $200K difference, would be to take a mortgage, or fulfill it with cash. But whatever I do, the other guy is getting the value difference somehow.

If I don't engage in a 1031 exchange by swapping properties, as your response suggests - then it is not a 1031 exchange. I can have it one way or the other - but not both ways.

Okay. Am I missing something in this analysis?

The disconnect is that you're thinking about it as one transaction: trading your property for his. It doesn't have to be this way.

You can sell your $800,000 property to person A, hold the funds at a qualified intermediary, and buy a $1m property from person B.
Yes, the additional funds will probably come from a mortgage (or out of pocket). Neither Person A nor Person B care about this. Person A is just buying a property. Person B is just selling a property. The fact that you are executing a 1031 exchange has no bearing on how they treat the transaction.

 

[biophase]

The disconnect is that you're thinking about it as one transaction: trading your property for his. It doesn't have to be this way.

You can sell your $800,000 property to person A, hold the funds at a qualified intermediary, and buy a $1m property from person B.
Yes, the additional funds will probably come from a mortgage (or out of pocket). Neither Person A nor Person B care about this. Person A is just buying a property. Person B is just selling a property. The fact that you are executing a 1031 exchange has no bearing on how they treat the transaction.

Might i add that your loan needs to be greater too.

So you have an $800k prop with a $500k loan. You buy a $1m prop buy selling your $800k prop, effectively putting down $300k and getting a $700k loan. You get no cash back.

You can’t buy a $1m prop and take out a $800k loan and get $100k in your pocket.

But you can probably refi out the $100k after it closes.

 

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[Real Deal Denver]

Lol... you completely disregard the access to collateralized leverage you get with real estate.

Try 30k (sometimes even less) buys you control over 150k house. 6 grand in rent for the year is LOW on a 150k door. Try 15 grand MINIMUM for anual rent if you actually put some thought into the oroperty you were buying, and 10k to keep up with the mortgage/taxes/insurance and most problems you can fix yourself.

Barring any unforeseen issues, You would be turning 30k into 35k... not 150k into 155k. There are also tax advantages like depreciation in RE. That's a 17 percent return. Most people would be pretty happy. I think it's a lot of work for 5 grand. I like the numbers far better on multi-family deals and will buy an apartment complex at some point. I have been getting my feet wet in RE though.

Listen to @JScott and @biophase they know what they are talking about.

You said this SO damn good, rep on the way. You should give @JScott a run for his money and write a book. I have several of his, and they are worth their weight in gold.

But he could use a little competition just to keep him on his toes.

 

[Kak]

You said this SO damn good, rep on the way. You should give @JScott a run for his money and write a book. I have several of his, and they are worth their weight in gold.

But he could use a little competition just to keep him on his toes.

I'll leave that to @JScott, there are topics I would be far more qualified to write about.

@JScott can you post a link to your books? I'll make sure to add them to my list.

 

[vshetty.vs]

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

 

[WJK]

I hate it when people say I'm wrong without explaining why.

I would love to hear your side of things.

Read my other post in this thread. At this point, you didn't even know that you don't know... Now you have a jumping off place.

 

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[WJK]

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!

 

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[Jason "GrandK"]

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.

 

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