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But, at $200,000, you cannot A) sell the property and pay off the hard money loan, or B) refinance it into a permanent mortgage to convert the property into a rental. As a result, you’d now be stuck with a high-interest hard money loan without the ability to completely pay it off, either via other financing or a sale. As discussed, hard money lenders issue loans based on a property’s ARV. So, assume that you secure one of these loans in January, when the ARV is $300,000. Due to some economic factors outside of your control, say that in July, when you’re ready to sell the property, it is now only worth $200,000 – unlikely, but possible. While completely using other people’s money to buy real estate can dramatically increase your return on investment, it also poses some risks.
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Getting started in real estate without cash can feel confusing, but it’s more common than you might think. Below are answers to the most frequently asked questions about how to invest in real estate with no money. These will help clarify your options, avoid common mistakes, and point you toward the best strategies for your situation.
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By forming equity partnerships, those with limited personal funds can learn how to get into real estate with no money upfront, sharing both the financial burden and rewards. Essentially, it’s a revolving line of credit secured by their home. By tapping into this source, investors can access funds for new investments without needing significant cash reserves, showcasing another avenue for learning how to invest in real estate with no money down. That said, investors need to know the home becomes collateral against the money borrowed, so be careful what you do with the funds from a HELOC.
