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How Do I Buy An Investment Property With Little Or No Money?

How do I buy an investment property with no money large

You may be looking to invest in property as it’s one of the best ways to make a passive income. But how do you buy an investment property if you have little or no money?

How do I buy an investment property with little or no money? The best way to buy an investment property with little or no money is to use other peoples money or OPM. But before you start asking for other peoples money, there are a few important steps you MUST take beforehand. The first of these crucial steps is to find an opportunity or a great investment.

In this article I’m going to look at how to buy investment property if you have no money at all. Plus how to invest in property if you only have a little amount of money too.

I also include a handy table of the types of investment strategy you might want to adopt. The table looks at the investment strategy vs how much money you have (see below).

If you have a little amount of money (or you have access to money), you open up your property investment strategy options. I suggest you read both sections below. The first section applies to those who have no money at all, but if you are able to borrow a small amount of money, you’ll also be able to apply the strategies in the second section as well.

Both sections apply if you have a little money. So how to buy property with no money:

But first, let’s take a look at how to buy property with no money.

How to buy property with no money

If you have no money at all you may think it’s impossible to invest in property. But that’s not the case. However, you will be limited with which property investment strategies you can adopt if you have absolutely no money in the bank.

1. Find a joint venture partner to put up the money if you don’t have any to invest in property

For this property investment strategy you need to find an armchair investor who wants to invest in property, but doesn’t have the time to do the leg work. This is your job.

You find the property and you do the work on turning the investment into profit. The profits on the deal are then shared between you and your joint venture partner.

For a joint venture investment to work well you need to set up a company or what’s known in the industry as a ‘Special Purpose Vehicle‘ or SPV. You and your co-investor will each own a part of the SPV at an agreed percentage share between you.

2. Find an angel investor if you have no money to invest in property

If you can find an angel investor to lend you money at a pre-agreed rate, this is one of the best ways to invest in property with other people’s money strategies or OPMS.

One way to find an angel investor is to speak with a friend or a family member. they may have money sitting in a bank not earning much. They may jump at the idea of making upwards of 5-10% per annum on their money.

Neither of these strategies will work unless you can find a property to invest in. But the property MUST be a good investment where the figures stack up. See below for more on this point.

But also, you can also borrow from banks as well, as bank borrowing is considered Other People’s Money too. However, you have to be careful with this strategy. If you’ve borrowed the money for the deposit from an angel, the lender may not like the fact that you are borrowing 100% of the purchase cost.

How to invest in property with little money

There are a few more strategies you can add to your list if you have some money to invest. Please also have a look at the handy table I’ve created below, as this gives an idea of which strategy you can adopt.

If you are looking to invest in property but only have a little money, the above two strategies also apply to you. But then the following further property investment strategies also apply:

1. Release equity from an existing property to use for property investment

You may think you have no money to invest in property. But if you already own a property or properties, you may have enough equity in these to release for your property investment journey.

In order to do this you will need to remortgage the property concerned. You will also need to prove that you can afford the increased mortgage repayments based on the higher loan value. Plus the loan to value must be in line with how much the lender is prepared to lend on the property concerned.

This is better explained by way of an example. Let’s assume you have a property worth £300,000 and your current mortgage is £195,000. If you are able to increase this mortgage to 80% loan to value, your new mortgage would be £240,000.

You would need to prove to the lender that you can afford this new mortgage amount, but on the assumption you can, you will release £45,000, less any associated legal fees and lending costs like a valuation.

2. Lease option contracts normally require very little money down in property investment

Many people talk about property lease options investing as no money down deals. This is mostly because they’ve never invested in a lease option themselves. This is definitely not the case.

One of the key elements of a lease option contract is consideration or money. Without consideration a lease option contract would not be legally binding.

Please take a look at this article to read about the other three of four key elements of a lease option contract.

Whilst I appreciate this consideration can be as little as £1 or $1 (note: lease options work just as well in the UK, the USA and Australia). However, the consideration is not the only money you need. Please read this article in order to understand what makes a lease option legally binding.

For example, you will always need funds for legal fees. Plus it’s often advisable to offer to pay the seller’s legal fees to get the deal to work. Then on top of these upfront costs, you may need to find further money for refurbishments or to convert the property into a property suitable to let to tenants.

Having said all that, lease options are my favourite way to invest in property with little money down. If you can find a seller who is open to the concept of a lease option. If you are then able to negotiate the deal with them in such a way to create a win-win scenario, you’ve found yourself one of the best ways to invest in property with little money.

You may want to take a quick read of this article on how to negotiate a lease option contract with a property seller.

3. Assisted sale is a little money down property investment strategy

An assisted sale also relies on using an option contract. But what’s great about an assisted sale is the property owner puts in the property and you put up the development finance. You then share the uplift in profits from the deal.

What also makes an assisted sale work well is if the refurbishment costs are less than what you would ordinarily need as a deposit to buy the property in the conventional way. But even if the refurbishment costs are more than what would normally be what’s required for a deposit, with an assisted sale you don’t also need the funds for the deposit.

The added benefit is you don’t suffer the cost of Stamp Duty in the UK. This will add to the profit in the deal, which can also be shared with the property owner.

The benefit of this arrangement to the seller is they get more money out of their property than they would if they sold it in the conventional way. Plus they don’t need any knowhow about developing or refurbing a property.

But then you benefit from not having to borrow to buy the property, whilst lending your expertise to develop and refurbish the property. Which is why this type of property investing works well if you have a poor credit rating.

You both benefit from avoiding the need to conveyance the property in the first place. The seller remains on the title as the owner, but you are granted an option to buy the property. Then once the refurbishment or development work has been carried out, you sell the property to a third party. You then share the uplift in value, after taking account of the development or refurbishments costs, with the property owner.

Please take a read of this article to understand the difference between an assisted sale vs a lease option.

4. Rent to Rent is a little money down investment strategy

There are also people who tout the rent to rent property investment strategy as a no-money down deal. However, this is often not the case. Often times you’ll need to invest some money in the property before you can re-rent the property to tenants.

You may also need to be able to cover the first month’s rent until you find tenants to fill the rooms.

However, you may be able to structure the deal so the first month’s rent is not paid until your get the property tenanted. Plus the property itself may not requires any work doing. If this is the case, you’ve just found yourself a way to invest in property with no money.

However, it’s debateable whether this can be classed as property investment, as you’re not actually investing in the property.

How rent to rent works is you rent a property from a property owner. This is often a landlord who is fed up with tenants, but who still wants to retain the property. The best way to make more than the rent you pay the property owner is to convert the property into an HMO (House of Multiple Occupation), or to let it as serviced accommodation.

The downside of using the rent to rent strategy is you’ll never benefit from the capital uplift in the property’s appreciation in value. But if you have a bad credit report, this won’t prevent you from using the rent to rent strategy.

Table of investment strategies

The table below is a handy table to help you understand what strategies you might be able to tackle depending on the funds you have.

It’s only a rough guide and it largely depends on how good a deal you can find. The better the deal, the less of your money you’re likely to need.

How Much Money You HaveJoint Venture/
Angel Investor
Lease OptionsAssisted
Rent to Rent
No MoneyYESOnly if you borrow the funds required (could be on a credit card)Only if you borrow the funds required for the refurb or developmentPossible if no refurb costs and no up-front rent is paid
£500-£1,000YESNot impossible, but
difficult. Would be better to borrow what you need (could be on a credit card)
Only if you borrow the funds required for the refurb or developmentYES if the refurbishment costs are low and upfront rent is low or nil
£1,000-£5,000YESMay be a bit of a challenge depending on the dealOnly if you borrow the funds required for the refurb or developmentYES
£5,000-£10,000YESYESOnly if you borrow the funds required for the refurb or developmentYES
Over £10,000YESYESYES, but it depends on the project and the funds you have in excess of £10,000YES

What steps are need to attract investor money if you don’t have any money to invest in property

As already mentioned about, the only way in which you’ll be able to obtain other peoples money is if you are able to find good investment properties.

This means if you are asking an angel to lend you money to buy a property, there has to be an upside. For example, if you are able to buy a property that can be converted to flats. Let’s say the cost to buy the property is say £195,000 and the cost to convert is £100,000. However, the proposal is to convert the property into two three-bed flats, which are each worth £250,000.

On the assumption that buying and selling costs are say £30,000, you’ve just made £175,000. If you agree to pay your angel 8%. Plus if the project takes 12 months from beginning to end. They get roughly £24,000 and you get the balance.

However, this scenario only happens if you are able to find the property in the first place. So get looking. They saying goes, if you find a good deal the money will find you.

I hope you’ve got something from reading this article about how do I buy an investment property with no money

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How Do I Buy An Investment Property With Little Or No Money?

Article written by Russell Bowyer who has been investing in property since purchasing his first commercial property in the 1990's for his own Chartered Accountancy business. But his first property investment project was to turn an old dilapidated restaurant into a large 5-bed home, which he purchased for £117,500 and sold for £450,000 (to see an "after" photo of the house before it was sold see here: About). Russell owns a number of investment properties, which includes houses, flats and HMO's. More recently he has turned his creative side to investing in property using lease options. His largest lease option deal to date was to acquire 12 properties worth over £2 million for just £12, which means he paid just £1 to acquire each property!

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