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Tips to Find Investing Money for Beginners

Ready to purchase a rental property but wondering how to find money? Here’s the expert’s guide to investing money for beginners

Summary

• Becoming rich requires the proper mindset; instead of saying “I can’t afford it,” learn to ask “how can I afford it?

• Investing with no money for beginners can seem overwhelming, especially when it comes to finding money to invest

• There are many ways to acquire funds for your first rental property - this is the expert’s guide to investing when you’re starting with no money

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If you’ve decided you’re finally going to make your first real estate investment, congratulations are in order! This is a huge step toward achieving financial independence. Of course, once you find the right rental property and are ready to take action, you may be left with one very important question: How are you going to invest with no money? Ahhh yes, where to find the money is the million-dollar question!

Change your attitude, find the money

Don’t worry; investing money - especially for beginners - comes with a lot of learning lessons, particularly around findingthe money you hope to invest. Even for investors with some experience under their belts, this is still a part of the equation they are trying to figure out how to master. Unfortunately, many people end up quitting before they even start, throwing their hands up in the air and saying, “I can’t afford to invest!”

But as Robert Kiyosaki’s rich dad taught him, “Whenever you say the words, ‘I can’t afford it,’ your mind automatically shuts down. That’s because the poor have a mindset of scarcity.” Whenever his poor dad wanted something that wasn't part of the budget, he would deny himself that item, saying, "we can't afford that." When Robert wanted a special toy or his mother wanted a new dress, his poor dad would say, you guessed it, "we can't afford that." What a stifling mentality to be surrounded by your whole life!

On the other hand, Robert’s rich dad taught him that rich families have a mindset of abundance. Instead of saying they can’t afford something, they ask themselves, “ how can I afford it?” They look at the things they want to buy as motivation to help them put their money to work so that they can afford to buy the things they want. Rather than letting their finances defeat them, they look at their finances as a game that they would win. Isn’t it time you start thinking like the rich?

Doesn’t it take money to make money?

More often than not, the reason people get discouraged when starting to invest is because they think they have to use their own money to do so. Nothing could be further from the truth!

Take it from Andy Tanner, investing expert and long-time Rich Dad contributor, whose own experience and method of making money has proven this notion false:

“My personal experience has taught me that it’s 100% possible to achieve good success when starting with no money. I have personally reaped many thousands of dollars in cash flow for me and my family starting with nothing.

In my circle of friends and mentors, I’ve seen firsthand how other people have accomplished the same thing. They have shown that it doesn’t take money to go out and make money.”

Here’s even more proof for you. Consider the following famous wealthy people:

•  T. Boone Pickens is an oil and gas investor worth about $1.5 billion

•  Donald Trump is an icon in real estate, and his wealth is worth somewhere between $3 billion and $7 billion

• Richard Branson is an amazing businessman with multiple companies under his Virgin brand, currently worth about $2.7 billion

•  George Soros is known as a master of paper assets (my favorite, of course) and is worth about $7.2 billion dollars

•  And Warren Buffet, perhaps the greatest investor ever, is worth about $143.7 billion according to Forbes, and he has had success in almost every asset class

Now think about this: What if we took away all of the wealth of these people by taking every last penny from their bank accounts. Where do you think they would be in five years?

Since they don’t have any more money, do you think they would be destined for poverty?

Would we see them on the streets homeless without hope of ever getting it back?

Or do you believe that they would find their way back on top?

Almost everyone would agree that these icons would become rich again. If that is true, how could they do it? If it takes money to make money, how can a person that is absolutely penniless climb up to the highest levels of wealth again?

Is it because of dumb luck happening again and again to the same person?

Or is it because they possess some type of knowledge that other people don’t have?

How to find money

Most people’s first stop for a loan or additional funds is at a traditional bank. But when the bank turns them down because of their debt-to-income ratio, credit history or lack of collateral, they feel discouraged. However, it’s important to realize that banks often don’t loan money for the types of properties or businesses that many investors pursue.

As such, it’s important to find alternative sources of financing. The following are a few suggestions to locate Other People’s Money, or OPM.

1. Family and friends

   Now that you know that using other people’s money to invest in real estate is a viable path, you may want to approach family or friends and ask them to invest with you. This is often people’s first avenue to get funding outside of traditional banks. The agreement goes a little something like this: You put up the time and effort, and they’ll put up the money. If you choose to go down this path, however, here are a few words of caution:

   • Treat your friends and family like investors, not people who love you and want to help you out. Be professional, use agreements, and do your best to give them a stellar return. In fact, before you get too far in your discussions, read this Entrepreneur article on how to keep family and friends loans strictly business.

   •  Because there are so many emotions involved with family and friends, this route can be dangerous. A strong relationship is not worth risking over an investment that may not perform — and, as you can see below, investing money for beginners can come from several other places with fewer personal ramifications.

2. Seller financing (also called owner financing)

   As with a rental property, the seller acts as the bank. You have a loan agreement with the seller that specifies the amount of the loan, the interest rate you will pay the seller, and the length or term of the loan. There are a number of reasons why a seller might choose this route — maybe they are tired of the work required to operate the property, or perhaps they are looking for a steady return by collecting set interest on their money rather than rely on the fluctuations of rental income. It never hurts to ask if the seller is interested in this arrangement, and then the negotiations begin.

3. Finance out of cash flow

   For example, you buy a business and you have an agreement with the seller, lender, or investor to pay them back through the cash flow that the business generates. This means you’re essentially borrowing from the cash flow you expect to receive in the future.

4. Lender financing

   There are many types of lenders available. This is where a mortgage or business broker can be a valuable member of your team. The brokers know what lenders lend for which investments. And best of all, the lender pays the fees of the broker, not you!

5. Assumable loans

   In real estate, a property may have a loan attached to the property, which means you can “assume” the existing loan — just as if you’d taken out the original loan yourself — with little qualifying effort on your part. You must also assume the existing terms of the loan, which includes the interest rate, the term of the loan, and any other specifics. You’ll likely have lower closing costs as an added bonus.

6. Other investors

   There are many people with money but no interest, time, or expertise in finding and managing certain investments. If you can prove that your investments will give the investor a good return and your team is set up, they may be willing to invest with you. Let’s say you are buying a property and the bank requires you to put down 25% — you would use private lenders to raise most or all of the equity money needed for that 25%. How do you get them to invest? You’ll need to put together a solid investment prospectus that shows the potential of return for the investors.

Bottom line: There’s always money

For beginners, investing money takes time. Identifying how to find money in a way that works best for your particular situation, requires extensive research on these aforementioned options. But the main takeaway is this: Remove the words, “I can’t afford it” from your vocabulary. There is always money to be had and it doesn’t need to come from your own pocket. As the old saying goes, “Where there’s a will, there’s a way!” Get creative and figure out how to solve the problem in your favor.