If you’ve ever put any time or effort into researching the ins and outs of property investment, you’ll likely have come across the notion of getting into the property market without using any of your own capital. And whilst this may seem either a little fanciful or improbable to some, there are a number of ways that it can be done, meaning that you don’t have to have a vast pot of savings at your disposal to get involved.
Interested? Well, we think you should be and with that in mind, we now look at the three of the main avenues you can take to do so. The one that’s right for you will depend largely on your personal circumstances and your intended exit strategy.
1. Joint venture 'Flipping'
Whilst property flippingis a strategy that usually requires you to have the required capital to engage in, it is possible to partake if you can find a partner that is willing to put the capital in for you. In this kind of scenario, the value they offer most often relates their financial input, whereas yours is most likely to be much of the legwork, negotiating and management of any renovation that needs to be completed to get it ready for sale.
When entering an arrangement like this one, it’s vital that you and your investing partner clearly define the terms of the deal from the outset. What typically happens is a 50-50 split of any money made, but it’s entirely your prerogative how it’s structured. How you find investors is also your own prerogative, but a good place to look is those within your own professional sphere or to advertise in the local area.
Another avenue open to those looking to invest without capital is wholesaling, which too involves connecting and partnering up with an investor, however, in this case, it will likely need to be a cash buyer due to the potential time constraints. This particular method is seen as a high-risk strategy by some, as it involves agreeing on a contract on a property for one price and then repairing or enhancing said property and transferring the sale to the investor before closing at a higher price.
This kind of proposal is predicated on the idea that the improvements you make will mean that the cash buyer is happy to pay the extra and it works as a strategy for someone with no capital, as you’re never actually the owner of the property. Another benefit is that it typically doesn’t take up too much of your time in the long term either, so if your sums add up and you’ve got the expertise/connections to get the work done quickly, you can make an excellent profit with a minimal outlay.
3. Leasehold/Owner Financing
The third choice involves using virtually no cash of your ownand then making a residual income through renting. This can be done in a couple of ways:
The first way is to go down the leasing route, which is essentially a rental arrangement at the end of which, you have the choice to either walk away or to buy the property outright. This offers the possibility of either simply making a monthly profit from those subletting from you until the end of the agreement and/or extending the offer to buy the property at the end of the rental period to your tenant. In this scenario, there are multiple touchpoints to create profit, from the monthly income to the gains you can make on the purchase itself.
5. Owner Financing
Unlike with leasing, owner financing(as the term suggests) is where the existing owner of the property allows you to pay them directly over a set term (typically 25-30 years) for the principal sum and any interest incurred. The exact details of an arrangement of this kind will vary from person to person and will involve a good deal of planning and paperwork, but it’s one that transfers the title of the property to you straight away, allowing you to rent it out and benefit from the income and be a property landlord without putting down any of your own money.
This method is ideally suited to those who have trouble getting a mortgage, as the owner technically acts as the lender instead of the bank.
The main takeaway from what we’ve spoken about here is that even with little to no capital behind you and even a poor credit status, it’s possible to make a living from property. It’s just a matter of getting creative, thinking between the lines and taking one or two educated risks.
The profits are out there, you just need to go out there and grab them.