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“How can I get started in Real Estate Investing if I don’t have any money?”

It’s a common question on BiggerPockets. I’m going to answer it for you right now:

You can’t.

That’s it — it’s that simple. You cannot invest in Real Estate with no money down. It is impossible; in fact, it is antithetical (big word) to the definition of “investment.”

“But what about wholesalers? What about Brandon Turner?”

They didn’t get started by “investing!”

The Difference Between Investing and Building a Business

Brandon Turner didn’t acquire his first dozen — or even his first 80 properties — by investing. He acquired them through hard work, dedication, and by building an awesome network of individuals with which he connected in complicated and lucrative ways.

Related: Is it Really Necessary to Make a Down Payment?

He didn’t invest money. He built a business. If you want to call that investing, I suppose that it’s possible to define it as an “investment of time,” but in the real world, we call that “working.”

For many readers, building that type of business is not a good use of time. It just isn’t worth most Americans’ time to go out, find deals that no one else can, and sell those leads for cash or equity in a property. This kind of work requires a marketable skill set, after all. You will compete with others just like you would with any other skill in any other industry.

I personally believe that most readers are just as well off continuing to apply their current professional skill set and instead working with wholesalers and agents to buy investment properties with the cash generated from their profession. Why would you leave your current profession for one that is just as competitive — and where you likely have to start from a position of inexperience?

I’m not saying it can’t be done, but I am saying that wholesaling or flipping — which in the end are pretty much what investing with no money down boil down to — are laborious skills that need to be developed and honed over a professional career. It is a job and should be treated as such. Brandon, instead of being paid cash for finding and selling deals to investors, was paid in equity in many cases.

The Hard Truth About Getting Started Investing in Real Estate

So how do I suggest that most readers get started investing in Real Estate?

Here’s a hard truth: in order to invest in real estate, you need to first generate a significant amount of money to invest. I’m not talking about millions, but for most of us, probably somewhere on the neighborhood of at least $20,000 is going to be needed to make most investments — perhaps $10,000 for very low income housing. Again, this isn’t the case for everyone (we’ve seen examples of everything on BiggerPockets!), but for most of us, in order to truly “invest” and not “work,” you are going to need that sizable chunk of money to put down.

Let’s look at an example that might apply to many readers:

Suppose your goal is to build a rental portfolio. Specifically, your goal is to have $20,000 in equity in a first property that nets $200 per month in cash flow for you — probably an investment that a lot of BP readers would say is decent for a first investment. Let’s also pretend that you are a skilled worker and make about $50,000 per year.

If the goal is to get to $20,000 in equity in that property, do you think that you are more likely to accumulate that kind of money by keeping your job, increasing your savings rate, and applying your skill set towards freelance or overtime pay, or by developing an entirely new business? I’d stay with my job all day; in fact, I pointed out a few strategies that might help in generating that kind of savings rate in my article last week.

On the other hand, if you quit your job to wholesale, or even work as a wholesaler on the side, you will face difficulties that I would argue just aren’t worth the time for most skilled professionals. You go from a skilled worker to a completely novice wholesaler. Wholesaling is not an easy task, and it’s not something that most people are successful at.

To be a successful wholesaler, you need to develop a business, complete with systems and strategies. You’ll need to become an expert in your local market, in estimating rehab costs, and in negotiating with motivated sellers. You’ll need to develop relationships with lawyers, accountants, and buyers, and you’ll need to spend serious time or money on marketing. If you can do all that successfully, I’d argue that you can build a successful business in many industries!

Why not stick with the one that you are already in? I’d also apply the same thinking to fix and flippers.

Related: Money Myths and the Biggest Mistakes I’ve Made Raising Capital

On the other hand, I believe that focusing that same time and energy on saving your income and earning some extra money on the side with your current profession is a far more achievable task. Then you can take that $20,000 or so that you’ve accumulated and invest in a turnkey property, which you can purchase from the experienced wholesaler who put in the skilled work needed to find that property!

Of course, real estate investing (buy and hold, for example) is still a time-consuming process that requires time and energy, but I’d argue that landlording and managing properties is a far less time-consuming business than wholesaling. There’s a reason there are millions of successful landlords managing property on the side, but only a handful of successful wholesalers and flippers!

Conclusion

Real Estate is certainly a powerful way to build wealth, if not the most powerful means for many of us. I firmly believe that anyone who has ambitions to build a sizable net …read more