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SHOW NOTES FOR EPISODE 194: BARRIERS TO ENTRY – EXCUSE #1 – “I DON’T HAVE THE MONEY”
All too often the biggest thing keeping us from success is ourselves. In this episode, Bill begins the first in a new podcast series entitled “Barriers to Entry,” where he explores and responds to some of the most common excuses we use for not getting started in real estate investing. This episode addresses excuse number one – “I don’t have the money.”
Introduction
- One of the toughest, if not the toughest obstacle for potential real estate investors is just getting started. And it’s understandable. There’s a lot of reasons:
- Fear (the biggest) – a four letter word
- Fear of failure
- Fear of success
- Fear of what people will say
- And on and on
- Here’s a primer on what you need to get started in real estate investing: Podcast episode #006 – Getting Stated in Real Estate Investing where I look at a series of steps that you need to get started in real estate. The toughest step is the last – just doing it!
- Fear (the biggest) – a four letter word
We’re doing a special series on the top 5 most common objections to getting started in real estate investing
Top 5 Most Common Barriers to Entry
- I don’t have the money
- I don’t have the time (I’m too busy)
- I don’t have the knowledge
- I don’t have the confidence
- I’m scared or I’m afraid
And there’s there’s the less popular excuses:
- I’m too old
- I’m too ugly
- I’m too beautiful
- I have real estate phobia
I was reluctant to do this for a number of reasons but the biggest is “Why focus on the negative?” Why not do a series on all the reasons why you SHOULD get involved in real estate investing but as I scanned all the podcasts and articles listed at olddawgsreinetwork.com/blog, which number, as of today at nearly 300 different podcasts and articles, MOST of them emphasis the positives.
Series Episode #1 – “I Don’t Have the Money”
This may be accurate statement in that you don’t have the money available in a bank account, your mattress, etc. to spend on a real estate investment However, do you really need money? Or, have you considered all ways to obtain the money you might need to get started? Here are few things that people do, who may not have the money, to get started in real estate investing:
Save
- Dave Ramsey approach – “Don’t buy until you have the total cash to buy the property out right.” I get it.
- I just happen to like mortgages – at least in the beginning
Credit
- Credit
- Credit cards
- I recommend that you don’t use your personal credit, unless it’s absolutely unavoidable
- You want to guard and improve your personal credit score and rating
- Set up business credit – create a business line of credit by creating a business that has a credit rating separate from your personal credit rating(fees involved). Some companies that help you do this for a fee include:
- Heloc
- Only draw when needed
- Bad Credit
- Credit repair organizations for a fee:
- IRA/401K
- Convert to self-directed (even if you’re over 50 ½)
- Podcast episode on setting up a Self-Directed 401K: http://olddawgsreinetwork.com/self-directed-solo-401k_for_rei/
- Credit cards
Seller Financing
- Requires knowledge
- Creative Financing
- Carry-back
Other People’s Money
- Create a plan and share it with others
- Friends
- Family
- Investors
- Real estate is HOT! More money than RE projects
- Meet-Ups, Clubs, REI Groups
- Start-up your own group
- Niche group: multifamily, flipping, rental
- Cash Flow meet-up (Hear how guest Tyler Sheff started his real estate business this way: http://olddawgsreinetwork.com/livin-in-the-cash-flow-zone/)
- A great podcast on raising private money: 039 – Bob Bowman – How to Raise Private Money
Down Payment Grants
- List of down payment assistance programs by state:
- Other down payment grant links:
Loans
- FHA 0% Down or 3.5% Down
- 007 & 008 – Susan Lyons 2-Part Series
- 039 – Bob Bowman – How to Raise Private Money
- 067: How to Get Bankers to Love You with Michael Becker and Paul Pebbles
Lease Option or Master Lease
- This allows you to work with the seller to lease a property for a short term and then transfer ownership over to you
- Links to podcasts and articles:
Wholesaling/Flipping
- When I have asked many of my guests in the “Rap it Up” segment of my Monday podcast interviews – “If you lost everything and only had $1,000 cash, how would you rebuild your real estate investing business.” The number one answer is, I’d use the money for coffee/lunch/dinner meetings with those who can help me either financially or through referrals. The second, top answer is,” I would wholesale/flip, build up my cash and go from there.” Now, keep in mind, that comes from someone who already knows how to do that but, that’s also how many started when they had nothing
- We have a lot of great podcast interviews on how to get started in
- Links to articles and podcasts:
If I didn’t have any money…
- I would buy a below market price small multifamily property, with rents that are also below market, as my first investment property (duplex, triplex or quad). One where I can live in one unit, get the tenants to cover mortgage and expenses and still generate additional income on top of that
- Get a no money down FHA loan or a 3.5% down FHA loan and/or get a down payment grant
- Move in one of the units
- Increase rents
- Use the extra income to improve the property to help leverage the value of the property and increase rents again in the future
- After one year (the minimum time required for the FHA loan) or when ready, I would pull out equity in the property to buy another, move in and repeat.
- Generate a track record and outline your successes in a PowerPoint for future investor presentations
- Keep doing this until I am generating the cash I would need to survive
- Then look to buy bigger multis with partners or perhaps through syndication
Links to “No Money” Related Podcasts and Articles on the Old Dawg’s Website
021: Buying Properties with Little or No Money Down with Brandon Turner
084: 10 Best Ways to Buy a Property with Little or No Money Down
You see, saying you don’t have the money is really not a good excuse. I hope this podcast was helpful!
DISCLAIMER: real estate investing is not the “be all end all” for everyone. Like any investment there are risks involved. You could potentially lose all or part of your investment.
This Episode Brought to You by Roofstock
This episode of the “Old Dawg’s REI Podcast” is sponsored by Roofstock, the first online marketplace created exclusively for investing in single-family rental homes with tenants already in place so you can start earning passive income right away.
Roofstock has put together a SPECIAL OFFER just for Old Dawg listeners who use the link Roofstock.com/dawg. If you sign-up today, you’ll save $350 when you close on your first rental property through Roofstock. Offer valid for a limited time only. Terms and conditions apply.
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