Real-Life Strategies For Investing In Real
The Book onINVESTINGIN REAL ESTATEWITH NO(and low)MONEY DOWNREVISED EDITIONReal-Life Strategies for Investing in RealEstate Using Other People’s Money.BR ANDON TURNERDenver, Colorado
Praise forBrandon Turner’s Books“An insider’s perspective, full of encouragement and resources for newcomers Interested readers will find the book substantially useful as astarting point.”—Kirkus Review on How to Invest in Real Estate“I only wish this book had been written in 2005 when I was starting myreal estate investing journey!”—Ken Corsini, Real estate investorand star of HGTV’s Flip or Flop Atlanta“I think this should be required reading for anyone considering realestate investing. Countless hours, months, and—frankly—years thisbook would have saved me!”—Ben Leybovich, Real estate investor,syndicator, and founder of JustAskBenWhy.com“There are very few books that provide a detailed, step-by-step frameworkfor accomplishing real estate success. Brandon Turner’s The Book on RentalProperty Investing does that, and does it in a way that puts financial freedom through real estate within reach of anyone who wants it.”—J Scott, Bestselling author ofThe Book on Flipping Houses4
“I have not read a more comprehensive discussion in my 20 years of investing. This is a great reference for beginners and experienced rental owners!”—Al Williamson, LeadingLandlord.com“This book is an A-to-Z guide for the real estate investor—not just buyingand selling, but also strategic planning, which is all too often forgotten.The real-world examples really drive it home.”—Brian Burke, CEO of Praxis Capital“The Book on Rental Property Investing fuses passion with a system-driven, business-mindedness that provides a very big resource tohelp establish and achieve your personal investment goals.”—Bill Syrios, Owner of Stewardship Properties“I wish I had The Book on Managing Rental Properties before I made allof my expensive property management mistakes! Brandon and HeatherTurner have covered the biggest challenges for landlords and solved eachone with step-by-step systems. I literally gave the information in Chapter 6on tenant pre-screening to my own team and said, ‘Use this!’ It’s that good.”—Chad Carson, CoachCarson.com“It’s practical, real, and comes across very open and unbiased This isgreat for beginners as well as anyone who is in another field of real estateinvesting looking to cross over.”—Lisa Phillips, AffordableRealEstateInvestments.com5
This publication is protected under the U.S. Copyright Act of 1976 and all other applicableinternational, federal, state, and local laws, and all rights are reserved, including resale rights:You are not allowed to reproduce, transmit, or sell this book in part or in full without thewritten permission of the publisher.Limit of Liability: Although the author and publisher have made reasonable efforts to ensurethat the contents of this book were correct at press time, the author and publisher do not make,and hereby disclaim, any representations and warranties regarding the content of the book,whether express or implied, including implied warranties of merchantability or fitness for aparticular purpose. You use the contents in this book at your own risk. Author and publisherhereby disclaim any liability to any other party for any loss, damage, or cost arising from orrelated to the accuracy or completeness of the contents of the book, including any errors oromissions in this book, regardless of the cause. Neither the author nor the publisher shall beheld liable or responsible to any person or entity with respect to any loss or incidental, indirect, or consequential damages caused, or alleged to have been caused, directly or indirectly,by the contents contained herein. The contents of this book are informational in nature andare not legal or tax advice, and the authors and publishers are not engaged in the provision oflegal, tax, or any other advice. You should seek your own advice from professional advisors,including lawyers and accountants, regarding the legal, tax, and financial implications of anyreal estate transaction you contemplate.The Book on Investing in Real Estate with No (and Low) Money DownRevised EditionBrandon TurnerPublished by BiggerPockets Publishing LLC, Denver, COCopyright 2020 by BiggerPockets Inc.All Rights Reserved.Publisher’s Cataloging-in-Publication DataNames: Turner, Brandon, author.Title: The book on investing in real estate with no (and low) money down : creative strategies for investing in real estate using other people’s money , revised edition / by BrandonTurner.Series: BiggerPockets Starter KitDescription: Includes bibliographical references. Denver, CO: BiggerPockets Publishing,2020.Identifiers: LCCN: 2020935321 ISBN 9781947200975 (pbk.) 9781947200968 (ebook)Subjects: LCSH Real estate investment. Investments. Real estate investment -- Finance. Real estate business -- Finance. BISAC BUSINESS & ECONOMICS / Real Estate / General BUSINESS & ECONOMICS / Investments & Securities / Real Estate.Classification: LCC HD1382.5 .T868 2020 DDC 332.63/24--dc23Printed in the United States of America on recycled paper10 9 8 7 6 5 4 3 2 1
TABLE OF CONTENTSForeword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Introduction to the 2nd Edition . . . . . . . . . . . . . . . . . . . . . . . . . .15Chapter OneTHE ART OF CREATIVE REAL ESTATE INVESTING . . . . . . . .18Who Am I? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19It’s Not About Being Broke or Irresponsible . . . . . . . . . . . . . . . . . . . . . .20This Book Is Not About Getting Rich Quick . . . . . . . . . . . . . . . . . . . . . . .20Who Is This Book For? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21You CAN Afford It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Should You Really Invest with No Money Down? . . . . . . . . . . . . . . . . . .23The Four Rules of Creative Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24No Money Down: Myth, Scam, or Secret? . . . . . . . . . . . . . . . . . . . . . . . .27Having the Right Tool for the Right Job . . . . . . . . . . . . . . . . . . . . . . . . . . .28What to Expect in This Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29Will All These Strategies Work for Me? . . . . . . . . . . . . . . . . . . . . . . . . . . .29Chapter TwoOWNER-OCCUPIED INVESTMENT PROPERTIES . . . . . . . . . .31What Exactly Are We Talking About? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31FHA Insured Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38The 203k Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Summary of the 203k Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46The VA Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46USDA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Wrapping it Up: Owner-Occupied Investment Properties . . . . . . . . .518
Chapter ThreePARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52Let Me Introduce You to “Bob” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53Building Your Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54How to Work with Bob: Four Strategies . . . . . . . . . . . . . . . . . . . . . . . . . .57Dangers and Pitfalls of Using Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 64Wrapping it Up: Is a Partnership Right for You? . . . . . . . . . . . . . . . . . . .67Chapter FourHOME EQUITY LOANS/ LINES OF CREDIT . . . . . . . . . . . . . . . .69Where Do I Get a Home Equity Loan? . . . . . . . . . . . . . . . . . . . . . . . . . . . .70Risks and Drawbacks to Using Home Equity . . . . . . . . . . . . . . . . . . . . . .77Wrapping it Up: Home Equity Loans and Lines of Credit . . . . . . . . . .80Chapter FiveSTRATEGIES FOR USING HARD MONEY . . . . . . . . . . . . . . . . . .81What Is Hard Money? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81Trouble on the Horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85Will a Hard Money Lender Fund the Entire Purchase Price? . . . . . . .86Wrapping it Up: Should You Use Hard Money? . . . . . . . . . . . . . . . . . . . .91Chapter SixRAISING PRIVATE MONEY TO FUND YOUR DEALS . . . . . .92What Is Private Money? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92Who Are Private Lenders? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94How to Find Private Money Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94How to Talk with Potential Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97Meeting with Your Potential Private Lender . . . . . . . . . . . . . . . . . . . . . .98Getting Your Private Lender to Commit . . . . . . . . . . . . . . . . . . . . . . . . 100How to Structure Your Private Loans: Interviews with Four RealEstate Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101Legal Issues with Raising Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111Risks and Drawbacks to Using Private Money . . . . . . . . . . . . . . . . . . . 115Wrapping it Up: Should You Use Private Money? . . . . . . . . . . . . . . . . .116TABLE Of CONTENTS9
Chapter SevenLEASE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117What Is a Lease Option? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117Why Use Lease Options? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120No Money Down Investing with a Lease Option . . . . . . . . . . . . . . . . .122Risks and Drawbacks of the Lease Option . . . . . . . . . . . . . . . . . . . . . . .132Wrapping it Up: Lease Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134Chapter EightSELLER FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136What Is Seller Financing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136Why Use Seller Financing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139Three Ways to Find Seller-Financed Deals . . . . . . . . . . . . . . . . . . . . . . 144Risks and Drawbacks of Seller Financing . . . . . . . . . . . . . . . . . . . . . . . .145Seller Financing Doesn’t Mean “Buy a Bad Deal” . . . . . . . . . . . . . . . . 146Chapter NineREAL ESTATE WHOLESALING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147What Is Real Estate Wholesaling? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148Example of a Wholesale Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149Real Estate Wholesaling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151Does Wholesaling Require Money? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151Marketing for Great Deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152Is Wholesaling a Job or Investing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156Wholesaling Math . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .158The 70 Percent Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163Estimating Rehab Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168The Difficulty of Being a Wholesaler . . . . . . . . . . . . . . . . . . . . . . . . . . . .171Making Your Offer and Negotiating with Sellers . . . . . . . . . . . . . . . . .172Finding and Working with Cash Buyers . . . . . . . . . . . . . . . . . . . . . . . . .176Legally Putting Together a Wholesale Deal . . . . . . . . . . . . . . . . . . . . . .183Wrapping it Up: Wholesaling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18710THE BOOK ON INVESTING IN REAL ESTATE WITH NO (AND LOW) MONEY DOWN
Chapter TenSYNDICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188The Organizational Structure Of A Syndication . . . . . . . . . . . . . . . . . .189Syndication Fees: Making Profit Before Profit Is Made? . . . . . . . . . 190Can You Really Syndicate With No Money Down? . . . . . . . . . . . . . . .192How To Find Limited Partners For Your Syndication . . . . . . . . . . . . .193The Legal Side Of Syndications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194Putting It All Together: Your Syndication . . . . . . . . . . . . . . . . . . . . . . . .197Chapter ElevenCREATIVE COMBINATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202Wrapping it Up: Where to Go Next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206Final Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207Bonus ChapterEven More Inspiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208Paul Savage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208Miguel Palos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209Shawn Rea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209Pete Osceola III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210Lauren Griffin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210Kelly Cook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .211David Pere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .212Christian Hall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213Cody Stegeman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214James Baker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214Jon Huber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .215George Iliev . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .216TABLE Of CONTENTS11
FOREWORDBy David Greene, Co-host of The BiggerPockets Podcast andbestselling author of Long-Distance Real Estate InvestingLike you, I love real estate.I love looking at it, analyzing it, talking about it, and owning it. I loveit so much that I’ve written detailed books so I can teach the art of realestate to others. I co-host The BiggerPockets Podcast so I can talk about it.I became a real estate agent so I can make my living selling it.When I first started buying rental property, I did so with my ownmoney that I saved while waiting tables throughout college. When Imoved on to my law enforcement career, I started working 100 hours aweek to make the money I needed to fund real estate deals. Seven daysa week, often working twenty-hour days, I would drag myself throughshifts as a police officer, always striving for that elusive goal of financialfreedom through real estate.To be free, it was worth the cost.Was I dogged, determined, and focused? Yes. In fact, I think I workedharder than anyone. Was I unhealthy, unbalanced, out of shape, worn out,and depressed? Also, yes. It wasn’t until later in my career that I realizedI was doing it all wrong. I found there were investing techniques, strategies, and principles that I wasn’t aware of, and I had missed opportunitieswhile I worked with my head down.While I was sacrificing some of the best years of my life for real estate,Brandon Turner was living some of the best years of his life through realestate. I was laboring away with a handsaw while Brandon had discovered12
power tools. I wish I had a book like this back then—it would literally havechanged my life, my health, and given me back many years of freedom.I met Brandon when I was first interviewed on The BiggerPocketsPodcast. I had listened to every single episode of the podcast a
Real-Life Strategies for Investing in Real Estate Using Other People’s Money. BRANDON TURNER REVISED EDITION Denver, Colorado The Book on INVESTING IN REAL ESTATE WITH NO (and low) MONEY DOWN. 4 “An insider’s perspective, full of encouragement and resources for new -
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