How Much Money to Invest In Real Estate
Investing in real estate can be anywhere from NOTHING to perhaps A LOT. If you’re very, very creative, it can take nothing. But if you’re doing conventional financing, it can take as much as 30%.
On average, conventional financing requires that you put 20% down. Now, beware. There are times in the economy when banks will only allow you to put 5 or 10% down. I personally never recommend that. Why?
Because whether you’re using your money or somebody else’s, putting 20% down creates a really great SAFETY NET.
Imagine: If you bought a house at a discount and you put another 20% down, then you’ll have no time in having that house half-paid off.
What that means: Even if the economy affects the banks, you’ve still kept a cushion and that translates to you keeping a great cash flow.
20% is a good standard. But there are a couple other options:
If it’s going to be your primary residence, you want to make sure you get it with the biggest discount possible. If you buy a primary residence, you can often get away with 3.5% downpayment. So for the home that you live in, you’re making a commitment that’s different from an INVESTMENT property. On a primary residence, you can get away with putting very, very little down.
Imagine: If you bought a primary house at a 15-20% discount.
What that means: You have a chance to walk into a $20,000- $60,000 instant net worth increase.
Putting a tiny amount down and then walking into all that EQUITY for a house that is also a home, is a wise decision for you and your family. If you commit to live there for a year and then move, you can do the same with your new house.
My wife and I did that and for less than $10,000 out of our own pocket. We got into four different properties. How did we do that? We used the equity from both those houses to fund our THIRD and FOURTH deals.
We basically built a net worth over $200,000 with less than $10,000 out of pocket.
The other great option is partnering.
What YOU can do:
Find the deals
Put it all the work
What YOUR PARTNER can do:
Come up with the money
Put in all the money
Play more of a passive role
And then you agree to a scheme where you split the money. It could be 50-50, a 30-70, or a 70-30. So how much money is NEEDED to invest in real estate? In the above given situation, YOU’re walking in with NO MONEY DOWN.