Want to get rich via real estate, but have no money of your own to invest in property? Don’t worry – making money in real estate is still (kinda) possible!
The most successful real estate investors in Malaysia – and the world – have made their money in real estate through recognising and understanding.
They don’t necessarily need to use their own money to invest, but instead can use other people’s money to get their foot in the door.
While there’s no such thing as “no money” needed (the money has to come from somewhere, even if it’s not your own pocket), there are a few options to get on the property ladder without having a flush bank account.
There are a few people these options are suitable for, including fresh graduates with lower salaries and less earning power, or individuals/couples who are purchasing their first homes together.
Additionally, those with poor credit ratings might need to look into these options if the bank won’t lend you the money.
There are a few reasons Malaysians are not able to buy a home yet, and the most common one is not having enough for a deposit on a home.
It’s not unusual for prospective buyers to jump ahead of themselves and overestimate their purchasing power, only to find that the bank won’t lend them what they need to cover a home loan (not to mention other costs like stamp duty and legal fees!).
Another reason many people aren’t able to buy a house is due to not having a full understanding of their financial situation.
In fact, around 60% of people in Malaysia have never looked up their credit report, which can give you a good overview on the health of your finances.
For example, whether you have been making timely credit card payments or if you’ve ever acted as a guarantor for anyone.
If you face these challenges, never fear! Instead of abandoning your desires for your dream home altogether, have a read through these suggestions for ways you can invest in real estate with no money.
If You’re Investing With No Money…
1) Private And Hard Money Lenders
When you think of money lenders in this case, DON’T think of illegal loan sharks –this isn’t what we’re talking about! In this situation, licensed private or hard money lenders can provide you with a loan given against a set of criteria for repayment.
Typically, these loans are aligned with higher fees and interest rates, but it can be worth it in the long-term if you find the right option.
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Hard Money Lenders
Offer you financing without a down payment, which is typically based on loan to value.
You can usually offer cash, and they’re not bound to the same strict financing guidelines as traditional banks. But do your research!
Although there are plenty of sharks out there, the perception of hard lenders has changed drastically, and if you have the right support, this can be a very viable option.
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Private Money Lenders
Be any friend, coworker or family member who has the money and is interested in investing in real estate, but doesn’t want to do the searching, house hunting and deal-finding themselves.
You can draw up your own agreement for the transaction – and the parametres you must stick to – and they can supply the cash.
How you split the profit is up to you, but if someone else is fronting up the cash, they are likely to request the lion’s share.
This is fine, and considering you’re starting out at zero, you’ll still end up rich in real estate if you make a good investment. Win-win!
2) Purchasing With A Group Or Partnerships
Similar to private money lenders, partnerships can be an option that allows you access to real estate deals that you might not otherwise have.
These can be individual partnerships or commercial ones – just make sure everyone has something to put on the table for the agreement.
While one partner might provide you with the money, another might have a strong network to leverage on.
To ensure you make money in real estate with this option, make sure your goals and attitudes towards risk align.
If you want to hold on to the property for a long time but your partner wants to sell it sooner rather than later, it could cause stress in your partnership and put a strain on the relationship.
3) Real Estate Wholesaling
Wholesaling is the process of finding a property seller whose property has yet to be listed on the market, getting it under contract, and finding a buyer to purchase at a profit.
The difference here is that you get a share of the selling price as it’s yet to hit the market.
This process is well-known as being a quick way to get rich in real estate without having to put any money down (and not something that we condone!).
However, it does require some decent knowledge of the local real estate market, as well as a huge network of potential buyers to pitch to.
There can be some detailed nuances to real estate wholesaling, so it’s important to do your research and speak to experienced professionals ahead of any big – and potentially dangerous – decisions.
If You’re Investing With A Little Bit Of Money…
1) Seller Financing
In essence, seller financing is about the seller being motivated enough to give you a loan to make it easy for you to buy.
When buyers are unable to secure a bank loan, the seller can extend finances to the buyer, who can then repay them within agreed-upon terms.
Often, the terms involve higher monthly payments instead of providing a down payment, which can be great for people without much money in the bank.
No matter what decision you come to, you need to ensure you have legal advice to protect yourself and ensure the terms are fair.
2) Malaysia’s Rent-To-Own Schemes
RTO schemes were introduced in Malaysia in recent years to make owning property more affordable.
In a nutshell, it doesn’t require the hefty down payment associated with buying a house outright and instead works through a lease agreement that gives you the option to end in a sale.
Each RTO scheme is different, and can stipulate a differing length of time the buyer must lease the home for, but typically it’s anywhere between 5 and 20 years.
The benefits of an RTO scheme are that you generally only need around 3 months’ rent to be eligible – rather than a 10% down payment on the purchase price.
If you’re smart, you can lock in a good price for your property based on the current value.
This means that even if the property market has changed for the better and property prices have shot up since you entered the agreement, you’ll purchase the property based on the valuation at the start of your lease.
At the end of the day, investing in property and real estate with little or no money is very doable, but buyers need to be extremely smart about it.
Making the wrong decisions or agreeing to the wrong terms could lock you into some risky financial situations, instead of kickstarting your property investment portfolio.
Relevant Guides:
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Finding Low-Entry, High Yield Properties In Malaysia For A Positive Cashflow
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50 Property Investment Terms For Understanding Investment Better!
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Choosing A Successful Investment Property In Malaysia With 7 Tips!
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Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.