This is a critical article to read if you have a strong desire to be a real estate investor, but do not have any savings or income to operate on a conventional playing field. Remember that to get a loan from a lender, all you need is cash OR credit. Thus, if you have some money in the bank, or a 401(k) with some money, lenders will loan you money even with poor to marginal credit. If you have excellent credit, you can get a loan with no money in the bank. Thus, you only need credit OR cash to get loans. Remember that after your first deal, you will have filled that requirement, as you will have cash. The hard part is learning how to do that first deal.

If you have neither credit nor cash, and still want to operate on a conventional playing field where you get loans for properties and pay all cash with no “crazy” no money down TV seminar type offers, I have great news for you — Hard money lenders. Most hard money lenders could care less about you or your credit. They look to the property as their security. If you don’t pay on the loan, they know that they can turn around and sell the property for enough to get their money out. If you strike a good deal, they will loan 65% of the value of the property in renovated condition.

Thus, if you find a home that is worth $100,000 fixed up, and you can buy it for $60,000, the lender will give you 65% of the fixed up value of the home, or $65,000. $60,000 of that will get you into the property for no money down, and the extra $5,000 can be used for closing costs and/or repairs. You can then flip this property to another investor for cash, or rehab it yourself for maximum profits. The great thing about these loans is that you can typically close within 7 days. The only drawback is higher fees, but let’s face it, a few extra points on the loan to close is still cheaper than having a partner.

A point on flipping: We have received questions from students as to whether or not flipping is illegal. It is not. Owning a property for a short amount of time and reselling is completely legal.

The only problem that you will have is convincing the appraiser that the property you bought last week for $100,000 is now worth $130,000. In a worst case scenario, your buyer’s lender may require several appraisals to verify the increased value.