can I start investing with no money?!

CorySperle

Senior Forum Member
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Sep 1, 2010
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#21
50%/50% JV's are a rip off, you should NEVER give someone that much of your profit. Totally ridiculous. You can get the best RE direct investors in the world for less than 30% of profits, and you usually get your money back + a preferred returns. Don't let jokers tell you otherwise.
30% profits or less is fine as long as going in fees are reasonable, to ensure there are actually profits to be realized! a 50/50 deal could be much richer if it's a great project with zero to no initial fees. Skimming 20% off the investment for going in fees means the project must make 25% just to return to zero! Many REIN members have done amazingly well for themselves and their investors with the 50/50 model largely due to the motivational fact that if they screw up they don't receive a cent.
 
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Sherilynn

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#22
30% profits or less is fine as long as going in fees are reasonable, to ensure there are actually profits to be realized! a 50/50 deal could be much richer if it's a great project with zero to no initial fees. Skimming 20% off the investment for going in fees means the project must make 25% just to return to zero! Many REIN members have done amazingly well for themselves and their investors with the 50/50 model largely due to the motivational fact that if they screw up they don't receive a cent.
Agreed. I think the key is to discover what your investor needs and wants and make every reasonable effort to make sure he gets it.

One of my friends has a couple of 70/30 deals but a) the money partner prefers a guaranteed return over the possibility of a higher return and the operational partner offers a guaranteed minimum return with the 30% share, and b) the deal is very profitable so even 30% of the deal provides an above average return.

In other cases, 50% of the deal may end up providing less than what was anticipated, and perhaps the operational partner will need to make adjustments to the way the property is operated or may even choose to adjust profit distribution in order to fulfill any implied promises.

It comes down to establishing expectations from the outset and working diligently to fulfill them.
 

CorySperle

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Sep 1, 2010
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#23
For the most part yes I agree with your comments, but the main takeaways I would tell any newbie:

1. can you start investing with no money? No
2. are there hybrid products out there that can offer a 'guarenteed return' plus share? No. The investor must chose one or the other. If they are seeking strait interest there are many great products such as REITs that can accomplish this. For most of us here, we give up equity in exchange for higher share return to investors who understand that, and are willing to wait for the big equity pop at the end. Paying too much interest and/or taking excessive fees puts the deal at risk, especially in the first couple of years.

co-venturing and pooling funds is a great win win, provided everyone wins, but In my opinion one needs several buy/hold/sell transactions through a variety of market conditions (especially down markets) before they can confidently accomplish this.
 
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Steve_12690

Steve Lount -
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Oct 18, 2017
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#24
As an Edmonton Realtor specializing in creative financing for the last 31 years, and an owner/past owner of over 50 properties, I have done or arranged hundreds of deals with low, or no, down payment. I would have to look very hard for any of those where the buyer later deeply regretted their purchase. In a lot of cases they were able to quickly gain equity in a rising market and as their mortgage paid down.

If waiting until you save a 5% down payment takes two years... and a $300,000 property rises 3%/ yr in that time... you will pay $318,270 in 2 years and your down payment will simply fund the increase in price. Meanwhile you also give up 2 yrs of mortgage pay down of about $12,000. Assuming even a slowly rising market you will still be ahead of the property breaks even cash flow wise!

The only way you lose is if the market falls! Base the decision on your strong belief in which way prices will go.


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CorySperle

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#25
The only way you lose is if the market falls!
And it does, often and hard. Respectfully this is horrible advice. 100% financing is reserved for speculators with deep pockets, as even a long term horizon often cannot erase damage caused by overpaying in boom times, and not being able to sell later or even rent to break even. There are many that bought in 2007 and 2014 this way who are still underwater. No one can predict when the cycles will shift, and the best and most sane strategy is modest leverage and a long term time horizon. My advice to anyone new who is contemplating jumping in but lacks startup capital, and hears the words "creative financing" to run.
 

ThomasBeyer

Senior Forum Member
REIN Member
#26
For every person successful with no money down there are 3-4 going bankrupt you will never hear about.

Once you have done a few deals with your own money you can ask others to invest or co-invest with you ie JVs, syndications, creative financing, seller financing or hard money high ratio lenders.


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Sherilynn

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#28
For every person successful with no money down there are 3-4 going bankrupt you will never hear about.
I would argue this applies to more than those who buy with no money down.

It never ceases to amaze me how many people buy a property with negative cashflow either because they are in a rush to jump on the investing bandwagon or they simply don't understand how the numbers work. I get calls every week from sellers with equity in their properties but they need to sell because they can't afford to keep paying out of their pockets every month. (And unfortunately, I can't buy the properties unless the sellers are willing to give up a good chunk of their equity.)

My point is: regardless of what type of investing one does and what strategy one uses, one must educate oneself to the point of understanding well enough to make informed, intelligent decisions. And - above all - the numbers MUST work.
 
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