- Win lottery
- Get an inheritance
- Rob a bank
Just kidding... The truth is that investing with no money is tricky and I haven't personally done it yet. What I have done is "investing in real estate with no money of my own", which I think is good enough and counts.
- Your primary home - If you own your primary residence and have not refinanced it in the last few years, there is a high likelihood that you have some equity in your home that you can swap for money and use. In Canada, this is known as HELOC. Contact your mortgage provider or mortgage broker and ask them about a home equity line of credit (HELOC). Depending on your financial situation and credit score, you should be able to get a line of credit up to 65% of the current assessed value of your primary residence. This line of credit will be secured by your home and will not negatively affect your credit rating. Please remember to account for the interest on your HELOC, when you analyse potential investment properties and make offers.
- Your family and friends - If you are lucky like me, you might be able to talk some of your friends or family into letting you use their money or home equity. This approach puts a lot more responsibility on your shoulders. In my case, my family gave me a boost. I am grateful for their trust. In our example, in return for 50% of investment capital, my family receives 50% of cash flow and 50% of equity gains. They are "silent partners" meaning that they trust me with all the decision making regarding selection and management of our investment properties. Take a look at my Joint Venture (JV) post with some more insights on using other people's money.
- Your reputation with your banks - At one point in my life, my husband and I were both between jobs. We started using credit cards for ongoing bills and have gotten to a point when we couldn't pay interest. We started skipping minimal payments. Very quickly and much faster than I thought it possible, lenders cut down our credit limits demanding accelerated debt repayment. Luckily, we did find jobs and got back on track. On the flip side, once we started treating our credit history and financial reputation as the most precious thing on earth and put in effort into decreasing bad debt and increasing assets, the opposite happened. We started getting offers for more and more credit from various lenders. On several occasions, we received 0% interest offers and were able to use the banks' money at 0% as a down payment for rental properties.
The formula for return on investment (ROI) is Net Profit / Cost of Investment.
When you invest almost no money of your own, your cost of investment is approaching zero. In this case, your ROI is infinity:
The only gotcha in this formula is that you HAVE TO make sure, you get into a cash positive deal. If "Profit" is below zero, you'd be converging towards negative infinity and might not last very long in real estate investor capacity.
I hope you find this post helpful. Please leave me a comment, if you have any questions or suggestions. I look forward to receiving your feedback.