A big lie about real estate investing

One of the biggest lies that keep people from investing in real estate is, "I have no money."

Yes, you do need money to invest in real estate. But it doesn't have to be YOUR money.

OPM -Other People's Money

There are various sources. The most common that comes to mind for non-investor types are bank loans. "But I have crappy credit." So did I. I began investing in real estate two years ago with horrible credit (short sale), no liquid cash, and very little experience (I read several books and did one real estate deal before the 2008 crash).

Aside from bank loans, what are the other sources of OPM? Credit cards or lines of credit. "Credit cards are bad!" True, if you do not use them the correct way. Many a real estate career has been jumpstarted by using this method to fund that first deal. The key is to pay off your balance every month. And use this method only to grow your business.

Hard money. These lenders charge 2-6 points (1 point = 1% of loan amount) plus anywhere from 10% - 18% interest, sometimes higher. Who would pay that??!! If you can't get a traditional bank loan due to crappy credit, hard money could be one solution.

Private money. Similar to hard money but better terms. Typically from private individuals (family, friends) with whom you've built a good relationship and proven yourself to be trustworthy. The real estate business, like any business, is built on relationships. Creating and nurturing relationships is key to your success. Owner financing. Typically, the owner of a home owns it free and clear. They become the "bank," you make payments similar to a mortgage. They hold a note and have a lien against the property until you pay it off. Payments may be higher or lower than a traditional bank loan, depending on your market. But the typical loan hoops you have to jump through (income verification, debt-to-income ratio, etc.) are more relaxed.

If you have your own cash, great!

And it's just not cash in the bank. Got a 401(k) or IRA? You can use money from self-directed retirement accounts (consult your tax advisor) to invest in real estate or start your own business.

The point of this blog is, if you've always thought about investing in real estate and the lack of money in your bank account has stopped you, you have no excuse now. Reach out to investors who are doing deals in your area, make connections, ask them how they got their start, ask them if they will connect you with money partners. Chances are, you already know somebody with money in your circle. Now you have to put it out there that you are serious about investing. Money will always flow to a good deal!