Many people would like to get started in real estate investing, but the one thing that holds back many potential investors is lack of capital. After all, you need a great deal of cash to purchase a property, and with most mortgages you are expected to put down about 20% of the total purchase price. So is it true that you need money to make money? Well, when it comes to our experience in real estate investing, this old saying is unfortunately true most of the time.
If you read any number of books on the subject, they will probably assume one of two things about your financial situation. First of all, the author of the real estate book may simply assume that you have a large bank account and only need to learn the mechanics of purchasing a property, being a good landlord, selling for profit, etc. The other assumption is that you are broke but want to get started in real estate using no money down scenarios. Unfortunately, this way of purchasing properties, made popular in the 1980s and 90s by infomercial gurus, is unrealistic because it is extremely difficult to find sellers desperate enough to sell for no money down and pay you cash at closing.
So what should you do if you don't have a huge five figure or six-figure balance in the bank and don't want to spend all of your time looking for desperate sellers and dilapidated properties? Unfortunately, you'll have to follow some of the time-tested principles of creating wealth: namely patience and vision for the long-term. It may be as simple as starting a savings plan (ideally an accelerated one) in order to have enough money for the down payment.
You may simply need to adjust your spending and increase your income, though we realize both of these recommendations are usually easier said than done. Still, you can't expect to do significant investing in real estate (or perhaps any purchases of property at all) without having your financial house in order. If you're simply not ready at this time, you may have to wait until raising the capital is more realistic.
There are also lower cost, more passive forms of investing in real estate. These include real estate investment trusts, which in its most common form simply means that you would buy stock in a company which owns and manages various properties. In order to spread your risk and own a piece of a number of companies, you can
invest in mutual funds specializing in property investing.
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