Welcome back to the Discount Property Investor podcast. Our mission is to share what we have learned from our experience and the experience of others to help you make more money investing like a pro. We want to teach you how to create wealth by investing in real estate, the discount property investor way. To jumpstart your real estate investing career, visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in.

David: Alright guys, welcome back to the discount property investor podcast. Your hosts, David Dodge and Mike Slane.

Mike: Hey.

David: Coming to you today to talk about how to invest in real estate with no money.

Mike: Boom.

David: Boom.

Mike: This is one of my favorite things to talk about Dave because I mean you and I, I think are kind of just prime examples of people who have created wealth or created a lifestyle through real estate. I mean we've kind of grown up in real estate together, I know we both were doing it beforehand but I think we've really learned a lot since we started working together and truly evolved as real estate investors together and it's very exciting to share what we've learned through this discount property investor podcast and talk about some of the most powerful things I think that we've learned and we've leveraged over the past few years and again, that is really, it's how to invest without having capital, without having money to invest. So it's like how do you do that?

David: How do you do that?

Mike: Like crack that code, it's like a- it just- it's a game-changer. I mean, it has been for you and me- for you and I. I know me personally, it's just- I mean we've stepped up from working for someone else to being self-employed to you know, actually feeling-

David: Being business owners.

Mike: Yeah, being an entrepreneur and doing multiple things.

David: Just talking about it the other day, I was like man it's crazy like I feel like I've made the leap from being a self employed entrepreneur to being a business owner. Still working everyday of course.

Mike: Yeah.

David: But like we have systems in place at this point, we have a team of people and if we go on vacation for a week, like nothing halts to a grinding stop like in some cases we come home from vacation and like the business is doing better than when we left.

Mike: That used to be the case almost every time, I thought you guys were going to kick me out of the company. Every time I was gone for a week, there'd be money sitting in the accounts. I thought man-

David: Woah, what's going on?

Mike: -these guys are gonna fire me, they'll think I'm embezzling or something, you know?

David: That's right, that's right.

Mike: All right, let's get back on topic though. So it's how to invest in real estate without any money? And there's three different types of investing so you wanna touch on those first.

David: There's really a hundred different types of investing but there's the big 3.

Mike: I like that.

David: Let's refer to those as the big 3, cuz there is a bunch of ways Mike, there's so many ways and once you start going down the road of positioning and joint ventures and creativity and creative financing, like literally it just multiplies into hundreds, if not thousands of ways, right? But the big 3 that everybody has at least heard of or is aware of would be wholesaling, fix and flip and landlording. So let's use this opportunity to talk about those big three guys. So, what are they? Let's just break them down. I'll go with wholesale and then you can take over, right?

Mike: Perfect man, do it.

David: So wholesaling isn't really investing per se, it's really more of a marketing business but you can turn a wholesaling business into an investing business or investing company. Basically, wholesaling guys is marketing and finding homerun deals or really great deals, and it's using contracts to gain control of properties and then it's selling the interest in that property or the ability to purchase or even another way to word it would be selling the contract. The beautiful thing about wholesaling is you don't need a lot of money because you're not actually buying typically the property instead you're using paperwork to control it and you're selling that control.

Mike: Yeah, that's great man. And what's so cool about wholesaling though is you learn the business.

David: Oh absolutely.

Mike: So you said it's not investing, I would argue that it kind of is man.

David: It is, it is. Yeah.

Mike: You are putting- you are doing a lot of legwork and it's a true business and you're spending a lot of time in it even if you're not necessarily spending dollars on it, you know?

David: For sure.

Mike: So again, you learn the business and it's again, I learned so much about buying off-market properties. I mean it wasn't even a thing like 5, 10 years ago.

David: Right.

Mike: It seems very pervasive now, a lot of people have heard of it but again, very, very powerful way to do it. The next two are-

David: I gotta interrupt for just one second.

Mike: Yeah.

David: Some guy sent me an Instagram the other day and goes hey do you have any courses on how to find deals on the MLS? And I just responded hey thanks for your inquiry but no, I have a ton of courses on how to find deals outside of the MLS but not a single course on how to find them on the MLS, and the reason is because they're not on the MLS.

Both laugh. 

David: Sorry, I had to get that out, it was eating me inside.

Mike: Well, there might be a deal on the MLS but the problem is, when someone prices a property 20 grand under what it should be-

David: It's gone.

Mike: It's gonna get bid up.

David: Right, right.

Mike: To 20 grand or 30 grand over where it should be.

David: I apologize, I didn't mean to interrupt. That was rude.

Mike: That's hilarious though dude, I love that. No.

David: I was like no, sorry I'm not trying to be rude but like I don't and I don't have any intentions of making courses like that because-

Mike: It's BS.

David: It's the wrong approach.

Mike: Yeah, you can't do that. Again, you can find decent properties on the MLS.

David: Yeah.

Mike: I mean again, you can do your career by buying on the MLS. That's the cool thing about real estate too is that it doesn't matter what your timeline is or I'm sorry, it doesn't matter- oh man, I lost my train of thought. If your timeline is long enough, you're not going to lose.

David: Yeah, you can mitigate your risk. Yeah.

Mike: You're not gonna lose if your timeline is long enough. That's what I was trying to spit out.

David: Fix and flip.

Mike: Back to the topic at hand, how to invest without any money? Fix and flip and landlording. So both of these are a pretty similar approach depending on- it just depends on what you're to do with the property. You're going to sell it right away by flipping it or you buy a distressed property as a landlord and you sell it very, very slowly via someone renting it out, so basically you're getting paid very, very slowly in that method. But how do you do it with no money? And that is the million-dollar question, and why would you do it this way? Another million dollar question, we're gonna answer that right now. So how do you do it with no money? First off, hard money lenders. I think it's super, super overlooked. Most people are scared of using a hard money lender because hard money lender, I mean Dave that sounds scary to a lot of people. It's like oh no, they're going to break my kneecaps or they're going to- they're going to foreclose and take my property. No, a reputable hard money lender does not want to do that but they are going to lend based on an asset more so than on the individual and they're going to charge for it. So you're going to borrow from a hard money lender but you're going to pay a pretty hefty interest rate.

David: Yes.

Mike: But here's why it makes sense. If you can't get the money from a bank loan or-

David: Or you don't have your own money.

Mike: -if you don't have the cash.

David: And you don't have a great aunt or uncle that's rich that's willing to lend it to you, you can get the deal done.

Mike: You could-

David: You can still do it because they're not necessarily looking at the borrower- they are.

Mike: They do, yeah.

David: They do, absolutely, but it's heavily weighted on the property and that's why they're called hard money loans. It's not because they're hard to get, they should call them easy loans cuz they're super easy to get if you have a deal. It's hard money because it's based on a hard asset.

Mike: What's so cool about a reputable hard money lender that's kind of you know, more institutional, they actually will help you with the deal. They're gonna help you analyze it. If they look at the deal and say eh, I don't think so. That's great, they just saved you from making a mistake in buying a property that you probably wouldn't make money on.

David: Right.

Mike: So again, hard money lenders can be one of your greatest allies when you're getting started, although you're going to see this 10% interest rate or 12% or 15% interest rate.

David: Yeah.

Mike: With three points. Like yeah, it sounds-

David: That freaks people out.

Mike: It's- it sounds crazy, it really does. Here's the thing.

David: Doesn't freak us out.

Mike: No, I'm happy to pay 10, 15 percent.

David: 14%, what ever.

Mike: If I can make infinity.

David: Right.

Mike: And I can because it's none of my own money, I get it all paid off by someone else so my returns are basically infinite which is- it's just a game changer.

David: Yeah.

Mike: Also, this gets us to- so fix and flip, that'd be kind of the first one. If you use a hard money lender, you say hey I'm going to buy this property, going to fix it up and then I want to sell it and I'll pay you off, and the hard money lender agrees and loans you money and you can do that. Great, you get a big chunk of change. It's great, awesome way to get started investing with no money. The landlording is a little bit more complicated. You're going to need to have decent credit to do this and you're going to want to start by working with a bank. I know it sounds silly. You don't have any properties yet, but you want to find a bank that is willing to loan you money on a rental property.

David: Refi.

Mike: On a refinance, so you're going to want to talk to them about that and I recommend going to commercial banks, I'm sorry local lenders and working with their commercial lending department. There they're going to do loans in an LLC and are they're going to be commercial loans, but they're going to be much easier for you to get and do multiple. So again with the traditional loans, conventional loans, I think Fannie, Freddie, all that stuff, all those conforming loans, you're going to be capped at 8 to 10 and it changes from time to time. I mean, I don't even know what the current is because again I like using commercial loans. So again, you're going to want to start there. You're going to want to start with a banker and if they say no we wouldn't approve you, you're gonna have to figure out why, you need to fix your credit. So that's kind of step one. If you don't do that, you could be in trouble when it comes time to pay off that hard money lender, so that's why I say that. So what you're going to do with landlording if you want to start there investing with no money, you're going to use a hard money lender to buy the property, you're going to rehab it, similar to rehab to fix and flip, then you're going to refinance it with that banker you spoke with earlier, rent it out and you're gonna keep doing it over and over and over again. That's where Dave and I have had a lot of success and again, that's why we like to share stuff like this with you guys.

David: Yeah, absolutely. It's possible to do wholesaling with no money. It's possible to do fix and flip with no money and it's possible to do landlording with no money guys, these are facts. It's not going to necessarily be super easy, you're going to have to get creative. You may have to get out of your comfort zone. You're gonna have to be able to- you're going to have to get loans typically, maybe not on the wholesaling side but on the fix and flip and the landlording, 100% you're going to need a loan. You're going to probably need a loan to get into the deal and you're going to most likely need a loan if your landlording of course, you're going to need a loan to get out of the deal or want to pay off that short-term hard money or private money lender to get into that long-term debt. So let's just do a super quick scenario real quick. You know, like we were just talking earlier, we have some loans at like 5%, we have some loans at 3%, right? With our long-term 20 or 30 year loans on our rental properties. These rates they vary a little bit but they're low, 3%, 5% guys this is very small. So let's say that I wanted to go borrow $100,000 from a hard money lender to buy a property, right? And that lender says guys, you know, I can't do 3%, I can't do 5%, this is my business, right? I need to be at 14%. Well 14% that's annualized. It's not a 14% simple interest rate, it's an annualized rate. So 100 thousand times 14% is going to be $14,000, so you basically have a $14,000 interest expense over the course of 12 months. You break that down daily, it's about $39, $38 and some change, okay? Mike and I's goal is to be in and out of a short-term loan in roughly 90 days. So 38 times 90 is going to basically mean that our interest, total interest is going to be right around $3,500. So even at 14%, right? It's a short-term loan, that 14% is annualized so if we only have it for 3 months or for 90 days guys, the total interest that we're going to pay is $3,400. Now, would you be interested in paying $3,400 to be able to acquire an asset at 100k? Absolutely.

Mike: Here's the cool thing.

David: And if you get really good at it, you can pay that $3,400 interest on the backend not on the front and you refinance it into your existing loan so you can really do it for none of your own money but your debt will go up by 3400, but 3400 is nothing guys, you cash flow 350 bucks a month on a property, one year pays back that interest expense of positioning yourself in that deal. So what I'm trying to get at and I'm not trying to dive too deep down this rabbit hole of course, but short-term interest can be high. You're not- it's not a 20-year term at 14%, it's 3 months or 4 months or maybe 5. Let's say you're doing a fix and flip, 5 or 6 months guys, double that, 7 grand in interest but if you can do a fix and flip with none of your money and go make 60 grand on a flip, who gives a crap- I got to watch my words here, who gives a crap about 7 grand when you're making 60? You still make 55 grand, $54,000 on that scenario, you know. So basically if you want to learn how to invest in real estate with no money, you have to be a) be comfortable with the fact that it's time or money typically, so if you have no money, then you're going to be spending a lot of time, period. Understand that, know it, live it, breathe it. If you want to go beyond just wholesaling and you want to do the fix and flip side of the game or you want to be on the landlord side of the game, you have to get comfortable with not only spending a lot of time, right? But also borrowing money, borrowing from a hard money lender or a private money lender to position yourself into these type of deals and then using the long-term bank financing to exit that short-term note and position yourself into a lower interest rate, longer-term type of a deal. And that's it, that's how you do it. That's the secret. I don't think there's really much more to dive into, you know? You got to be comfortable with borrowing money and that's how you're going to do it. Now the cool thing is though is when it comes to borrowing money, you can use cool tricks like Mike mentioned earlier or cool, I shouldn't say tricks, strategies like the BRRRR method to get into a deal with none of your money. There's other ways to do that too with subject 2 and creative financing, you know, maybe the owner will be the bank and they'll sell it to you on owner financing, maybe you can joint venture with somebody and you go find the deals, they add the money. I mean there's so many ways to do this, that's why I said there's literally hundreds, right? But the big 3 are always going to typically be your wholesaling, fix and flipping, landlording.

Mike: Yeah. I mean cuz again, at the end of the day you're basically buying and selling a property to make money. Dave, I would love it if you would kind of jump into what we talked about your buddy Chris and what he's doing too though. So you just touched on the subject 2 acquisition model.

David: Sure.

Mike: So let's talk about the subject 2 acquisition and then the I guess the lease purchase sale side of it. So that would be another way you could have no money into a property and be a landlord, right?

David: Yeah.

Mike: I mean essentially it's what's happening.

David: Yeah, so like you know, there's a creative approach to acquisitions and there's a creative approach to dispositions, and if you want to get super creative, you can do creative approaches on both of these, right? So one of my buddies that we just bought a house off of last week, good friend, good guy. He buys everything subject to existing loans. So he's doing marketing and spending a lot of time, not necessarily money but time, marketing and finding people that are looking to sell but don't have a ton of equity, right? So what he does is he comes in and says hey I'll buy it but I can't- I can't give you any money today and I'll basically pay you what is remaining on the loan and I'm just going to start making- taking over payments so I'm basically just going to start paying your payment but you're going to walk away from the deal, I'm going to be the new owner. I'm not really going to pay you anything and you could in some scenarios but for sake of simplicity, you take over the payment. So now you control the property, right? Day one, you're at 0, 30 days in, you're going to have to make a mortgage payment probably, right? So you're gonna have some expense but the quicker you move, the better, right? So now you've just positioned yourself into a deal where you're just taking over payments, right? Well now if you want to- if you want to wholesale it, wholesale it. If you want to fix and flip it, you have to go borrow some money from somebody else for the rehab but now you're maybe only borrowing 20 or 30 grand versus 120 grand cuz you're not having to borrow the purchase, you're only borrowing the rehab. Think about that, it's a really, really cool tool. Same with landlording, you can borrow- you can buy something subject 2, get it- let's say it's vacant, get it rented and performing, let it sit there performing for 3 to 6 months and do what's called season or get your seasoning and then take it to a bank and refinance it out as well.

Mike: I love that.

David: Maybe do a little work, maybe not. There's so many ways though, literally so many ways. We talked briefly about the creativity which was right there but don't forget that joint ventures is also a massive massive tool to get into properties. Maybe you go find a homerun deal, right? You can take that to some of these big investors in town or maybe even just a friend, a local investor, doesn't even matter but if they want that deal, instead of selling it to them, partner with them and say hey I need to get a piece of this. Maybe it's half, maybe it's 10%, whatever, right? But my contribute- my- how I've contributed- contributed- I cannot say that word.

Mike: Contributed.

David: How I've contributed my contribution, thank you Mike, is bringing the deal to the table. Your contribution's going to be financing it and if they don't like it, then wholesale it to somebody else.

Mike: Cool. So let's- if you don't mind, I'm gonna kind of follow up on what I was trying to get out of you. So the acquisition strategy was the subject-

David: You got it out of me, it was contribution.

Mike: You did contribute- was the subject 2 acquisition but then how do you sell it that way? Then it's a lease option sale.

David: Yeah, so we talked a little bit about the acquisitions, right? And you can do the exact same scenarios whenever your dispositioning it. You can- you could sell a property sub2, I wouldn't recommend that but you can sell a property with the lease, with the option to buy, you can do a lease purchase which is basically an extended purchase date with an option clause. It's very similar, they're just flip flopped. You can do sandwich lease options where you lease option it on the acquisition side, you sell it on the disposition side as lease option for more money monthly, more bigger payment, more money down. You use all these tools and you just flip them.

Mike: So you went into sub2 pretty well explaining that we're taking over the payment. So a lease option again, it's kind of described right there in the name of it. So you're basically leasing it to the person but giving them the option to purchase it, we-

David: At a later date.

Mike: Yeah, at a later date. So you basically are going to lease it for about 3 years or 1 year or 2 year, whatever the term may be with the option to purchase it at this price. We kind of do a hybrid model, we call it a- what are we calling it?

David: Lease purchase I think.

Mike: Lease purchase, yeah.

David: Yeah.

Mike: Well we basically, we treat the tenant as a tenant buyer. So we say you are the owner just not on title, but you are now the owner so you're going to buy it from us at this date and until then you're going to pay- you're gonna rent it from us for this amount.

David: And at any given time between now and the end of that expiration, they can exercise their option essentially and they can buy it from is.

Mike: So how would that work? So you bought it subject 2, so say you bought a property and somebody owed $80,000 on it and the payments were 500 a month. Great, so you say okay cool, I'm going to take this property over to you- over from you. I'm gonna make these payments, you're free, cool. They say awesome, then you go and you lease option it to someone else and you say I am going to let you rent this from me for 900 or a thousand dollars a month, whatever it is and you can buy it from me for 110 thousand. So anytime if they exercise that option, you're going to make $30,000. If they don't exercise that option, you're going to make $500 a month, so it's a win-win-win and normally when they sign for the lease option, they're gonna have to put down an option deposit, a 5, 10, whatever you come up with, thousand dollars, 5 or 10 thousand dollars. So you're going to get paid there, paid monthly, paid on the backend, very, very powerful creative strategy. How do you find all these deals though? Let's talk about that on the next episode.

David: Let's do it man. That was a really good episode guys.

Mike: Yeah.

David: So basically, we broke down how to invest in real estate with no money. Very high level of course, and we talked about you know, the big 3, what are they and how do you position yourself in those three. Next we're going to talk about finding deals, tune in to the next episode. Signing off.

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