No Money Real Estate Investing – Part One
There’s a hard truth out there about getting rich and it’s this; if you’re already living as if you are rich, then you will never become rich. That means if your credit cards have a huge balance and you’re drowning in debt, real estate investing is not going to rescue you.
“But,” you say, “Real estate investing rescued those people on TV. They got out of debt and were able to quit their jobs.” For starters, it’s impossible to believe those testimonials are real, and even if they are, people who can do it in this way are very unusual.
You can, and we believe you WILL, create massive amounts of wealth through real estate investing. Set your goals, find properties that meet those goals with plenty of good research and then hold onto them for at least five years…preferably longer. It works… look at the richest people in your city. Of those that are self-made, I bet at least 25% of them did it through real estate. We always go through the richest people in Canada and Power List for Vancouver, and this number holds up.
The trick is to learn what you’re doing, and then accelerate your investments after you have built a base of knowledge and equity. It’s not the only way to make millions in real estate…but it’s the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.
I’ve always referred to my wife Julie as a saver. When we started out we only had $16,000. But that didn’t bother Julie; she had just graduated from college and continued to live like a student. With all the extra money she saved, she paid off her student loans and continued to save any extra money. She wanted to go back to school for her MBA and she wanted to do it without getting into debt again.
When we met, I had a property with my Mom that we’d purchased years before, but didn’t have much else. After years and years of being a student, I wanted to enjoy the money I was making. I drove a nice new financed Volkswagen and enjoyed my nights out in Victoria. I didn’t spend money excessively, but I was carrying credit card debt and didn’t have savings. Julie shared her visions of “retirement at 35″ with me, and I got excited.
The first thing I had to do was pay off my credit card. That took time. Then I consistently socked away a few hundred dollars every month. Now that we had our finances in order, we began to look for our first piece of investment property.
Thankfully, we had Julie’s savings to help us with our first purchase, but if you don’t have enough in savings, don’t worry. There are ways to buy property without money.
You may have heard of ‘no money down’ programs, and though they certainly exist and they can work, they’re also very risky. Usually this is too much risk for an average person to handle, and why would you want to handle it anyway? Especially when there are three much less riskier ways to get into real estate investing:
1. Cashing out your savings, including stocks, retirement and GICs
2. Home equity
3. Partner(s) that have money.
Here’s the brutal truth; if you can’t handle your own finances, no partner with money will want to do business with you. After all, why should such a partner trust you? If he/she feels that you’re inexperienced and drowning in debt, then your partner feels you just want to take his/her money and does not see any potential benefit to investing with you.
In contrast, if you had $30,000 in student loans with only $5,000 remaining to pay and you’ve found a really great deal and seem to know what you’re doing, then a partner will want to hear what you have to say.
Did you notice the difference? In the first instance, the person is in debt with no plan, no experience, and no way to get out. In the second instance, the person is in debt, but has a plan – so you know their debt will be over soon and they will be not be depending on your money forever.
Before you can buy a single piece of property, you have to be able to control your own finances. This gives you control of your destiny. Living beneath your means is the only way to do that. If you’re unsure about what you make versus what you spend, try this: for the next six months, keep track of every penny you spend. Once it’s there in black and white you’ll be able to see how you’re living and where you can make changes.
Oh – I hear it already – “but, Dave, it’s Christmas”, or “it’s Sally’s birthday”, or “we’ve been planning the trip to Disneyland for three years”! Well, if you’ve saved up for those things, great! Go for it! But, if you are going to go into debt for those things then you are a SPENDER, not a SAVER, and you’re obviously not serious enough about growing your wealth and becoming a rich real estate investor.
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