How Much Money Do I Need to Start Investing in Real Estate?
How much money should you have if you want to start investing in real estate? It all depends on the deal.
No Money Down Investments
We regularly help people start with no money for a project.
BRRRR rental properties work great for this. Investors can invest in them without putting any money into the property purchase or the flip.
Another way we frequently see people succeed with zero down is when they have really, really good deals. It’s a rare find, but if you do come across a property for sale for 60% or lower of the ARV, you can get 100% financing. Smaller, local hard money lenders will jump at the opportunity for such a great deal.
How Much Money Should I Normally Expect to Bring In to Start?
Traditionally, when you’re starting out investing, you’ll use either hard money loans or a bank finance. It depends on your credit score and the amount of money you’re able to bring into a deal.
When you’re going into these loans, it’s good to expect to pay between 10% to 20% of the total cost of the project out-of-pocket. This includes 10% to 20% of the property purchase and 10% to 20% of the fix-up costs.
As an example, say you have a $100,000 purchase that will require a $50,000 rehab budget. If you’re bringing in 20%, you’ll need $20,000 as down payment for the house, plus $10,000 to cover construction – so $30,000 total out-of-pocket to start.
What Will My Financing Depend On?
How much you as a new investor will need to bring into a deal will depend on several factors:
- The kind of deal you find
- Your qualifications – with or without real estate experience
- Your income
- Your savings
- Your credit score
Hard money lenders tend to lend based on your deal. Banks tend to lend based on you. A higher credit score will give you better chances at bank loans. And banks love lending to those who don’t need money. So if you already have a lot of savings and income, you can get 100% financing. But the more you put in, the cheaper it’ll be.
Overall, you can get involved in real estate investing with no money, especially for rental projects. But if you really want to get a running start, you’ll need some money for your investments.
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