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How can I get involved in Real Estate and start a business around it with no money?

Learning how to make money in real estate is a difficult task, let alone with no seed money to start with. I wont sugar coat it – not having a lot of money will make your journey more difficult.

…but not impossible. Far from it. I know because I had to climb up the success ladder from the bottom rung. I worked my butt off, put in a ton of sweat equity, and I learned how to make serious money in real estate.

But I got cocky. I thought I had figured real estate out. I made a huge investment in a housing project I didn’t fully understand, and I ended up losing everything.

I had to start all over again right back at the bottom rung. I realized that my success was directly attributed to the power of hustle, not the power of my bank account.I’ve climbed that ladder once more, but this time, I wont forget that incredibly important lesson.

If you take massive action, push forward, and you never give up, you won’t need a penny more to make it in this business. Without further ado:

4 Ways You Can Start A Real Estate Business With No Money Out Of Your Pocket.

1. Create a Lead Generation Business

The backbone of any real estate business is lead generation. It doesn’t matter if you’re a Realtor, a house flipper, or a mortgage broker, you need a constant stream of leads to create new business.

Most real estate professionals struggle with lead generation.

Here’s an example: According to the National Association of Realtors 2017 Annual Report,the average Realtor completes 11 transaction annually. The average transactions among the top 1,000 Realtors in the county is 190, with the top three averaging 1,500 transactions.

That’s an enormous difference. So why do the top agents get the majority of the business? Because they’re excellent at generating leads.

So where do you fit in? Create a lead generation business and links motivated sellers and agents together.

If don’t have a lot of money to start with, emulating a business model like Bold Leads or Market Leader isn’t going to work. They have massive online advertising campaigns to find leads from all over the country.

But you can beat them at the local level. This is how I would start a lead generation business if I didn’t have money to invest.

1. Find Agent-Clients FIRST

Make sure you find a market to sell to before sourcing the product. Find agents on Zillow, Redfin, etc. and call them up. Ask them if they’d be interested in more leads. Create a database of at least 100 agents interested in buying leads from you.

2. Find Motivated Sellers

Since you’re on a tight budget, handwriting notes or cold calling are your best bets. Go to Zillow and find the areas with the most activity. You can get address and phone info from Batch Skip Trace.

3. Sell Leads to Agent-Clients

Once you’ve collected leads, broadcast to your agent-client list. Sell the leads exclusively, otherwise they won’t have value. Depending on your location and the lead quality, you can expect $20-$50 per lead.

Build a foundation based on integrity and trust. You need to be honest with your prospects and you need to offer high quality leads to your agent-clients. If you violate either tenant, you’re business will fail. If you use unethical practices, you may also land in legal trouble.

*You MUST do your own due diligence on local real estate rules and regulation. Consult with an attorney before starting a lead generation business.

2. Intern For A Power Real Estate Agent

Every market has a few dominant agents that do a disproportionate amount of business. As a result, they are overwhelmed with clients, listings, marketing, eduction requirements, and innumerable other task pulling them apart.

Find the power agents in your market and call them up. Explain your interest in real estate and see if they’d take on an intern. Offer to put out signs for open houses, make photo copies, get coffee, whatever it takes to join the team.

Make coffee, put up open house signs, make photocopies, whatever you need to do…

In exchange, ask if the Power Agent would sponsor you to get your real estate license. Don’t make your internship conditional on this request, just ask if they’d consider it. Most will say yes, provided you hustle and are a benefit to their business.

Once you get your license, you may be able to say on their team as a buyer-specialist or listing-specialist, or you can strike out on your own. Either way, learn what it takes to be a successful agent and adopt it for yourself.

3. Partner With A Real Estate Investor

This is how I got into real estate development. It was 2010, two years after I started in real estate, and I was struggling hard. We were in the teeth of the Great Recession and the housing market was on life support.

I decided to make one last ditch effort at real estate before throwing in the towel. I found a potential deal (it was a total dog, in retrospect) and called around to hard money lenders to see if I could get financing.

One of the hard money lenders recommended I talk to his friend, a successful real estate investor in Washington D.C. I agreed, and it turned out to be a huge turning point in my life.

The investor agreed to let me work with him. I did project summaries, pro formas, fetched permits, took project photos, and a ton of other grunt work.

I didn’t earn a penny, but I learned the business and ultimately became independently wealthy from real estate investing.

Where do you find real estate investors?

  • REIA Meetings – Network with active investors
  • Real Estate Agents – Call the major agents in your market.
  • Title Attorneys – They know every investor in town, but may not share that information freely. Keep in touch and build rapport.
  • Search Zillow– Look for renovated houses and contact the listing agent.

I searched Zillow and found this renovation. The photo and description tell us this house has been renovated. Contact the agent and see if the house was renovated by a professional investor.

When get a few investor leads, call them up and see if you can take them out for coffee. Offer to do grunt work – believe me, they need the help and would love you for offering.

When you get task, treat it with the utmost urgency, no matter how mundane. If the investor asks you to make photocopies by 5 p.m., do it by 4 p.m. If you are asked to take 20 photos, take 100. Go above and beyond on every task – I promise you it will pay massive dividends.

While you’re grinding away, start to add real value to the relationship by finding off market deals. Focus your search using free (or practically free) lists that contain motivated sellers. Examples are:

  1. Tax Delinquent– Cost: Free – Get from your town, city, or county.
  2. Code Violation– Cost: Free – Get from your town, city, or county.
  3. High Equity– Cost: Approx $.05/Lead – Get from Listsource.com
  4. Ugly Houses– Cost: Whatever gas costs – Get by driving your neighborhood.

Start to reach out to these prospects and generate leads. Once you have a hot deal, bring it to your investor and split the profit 50/50. Rinse and repeat until you have enough capital to start house flipping on your own.

This is a great strategy if you’re a real estate investing beginner. Learn the ropes without taking too much risk. It’s how I got started in the business and it will work for you if you’re willing to do what it takes.

4. Passive Investing: Crowdfunding & REITs

If you’re have a bit of money but not ready to start a full-fledged business, you can still make money in real estate by investing in crowdfunding companies or Real Estate Investment Trusts (REITs).

Crowdfunding

Crowdfunding is an absolute phenomenon that allows anyone to invest. If you’re a real estate investing beginner, want to become an investor but are too busy at work, or if you’re not ready to dive into the business yourself, real estate crowdfunding is a perfect option.

What is Crowdfunding?

Crowdfunding is a method of raising capital from the public to fund a specific investment. Although this practice has been around for hundreds of years, crowdfunding is defined by small contributions made through an internet platform.

Crowdfunding is divided into two categories: rewards and equity (this is a huge topic far too broad for this answer. We’ll be focusing on equity crowdfunding, for the time being).

Equity crowdfunding offers equity shares in a private company to the public, with initial investments amounts that are accessible to most people. Equity crowdfunding was adopted in the 2015 Jobs Act and shot off like a rocket.

Popular Real Estate Equity Crowdfunding Platforms

How Do I Make Money Investing With Real Estate Equity Crowdfunding?

Similar to investing in a publicly traded company, you make returns through dividends and the appreciation of the company. Fundrise, for example, combines dividend and appreciation totals and reports a 8.9-10.3% annualized return on investment

Pros and Cons of Real Estate Crowdfunding

Pros– Passive investing channel with strong annualized ROI and minimum investment requirements that are accessible to most people.

Cons– Won’t do much to progress your knowledge base if you’re a real estate investing beginner. Not all real estate crowdfunding platforms are created equal, so make sure to do your due diligence.

Crowdfunding has opened up real estate investing to the masses. It’s a viable investment channel, but it’s completely passive. You invest, collect your dividend, and watch your equity share appreciate.

If your ultimate goal is to invest by house flipping, buy and hold investing, repositioning multifamily property, or any other active real estate investing strategy, equity crowdfunding won’t help much in your journey.

Real Estate Investment Trusts (REITs)

Another way to make money in real estate is to invest in real estate investment trusts (REITS).

REITs are publicly traded companies that acquire real estate and manage for cashflow. They enjoy a special tax designation that bypasses corporate tax rates, but in return, they must pay 90% of net income to their investors as a dividend.

REIT Basics

REITs differ from real estate crowdfunding in a few key ways:

  1. They’re publicly traded companies and are effected by stock market fluctuations that have nothing to do with their own business fundamentals.
  2. REITS buy and hold properties for cash flow. Crowdfunding companies include fix-and-flip projects in their portfolios.
  3. Significant capital at their disposal, allowing them to invest in Class A projects.

Since REITs are publicly traded, its a good idea to get familiar with the basics of stock market investing.

Focus on REITs that have stable and diversified portfolios, as these companies are more insulated to market vicissitudes.

After you find a few candidates, examine their balance sheets and make sure they’re not overloaded with debt. If they have a lot of debt, they may have difficulty making interest payments and puts your dividend at risk.

Lastly, examine the REIT’s dividend payment history. Are they consistent with their distributions? Does the dividend grow over time? A spotty dividend history is a red flag, and more research is required.

Disclaimer – Please do your own due diligence and consult with your financial advisor.

Conclusion

Real estate investing is a wonderful way to build wealth and is totally accessible to everyone.

Making money in real estate is not easy, particularly if you’re starting small. But you’re success is 100% predicated on your ability to work hard and take massive action. Having a lot of money helps, but is NOT a prerequisite.

Remember – you can’t skip steps in this business and you CAN’T BUY SUCCESS. If you’re willing to build sweat equity, stay focused, and never quit, you will smash any goal you have set for yourself. Just pick a path and get to work!

Hope this was helpful!

-Neil

P.S. If you have any questions, please let me know! Just follow me and shoot me a message, I always answer!