If you’re thinking about buying a short-term rental as an investment but feeling stuck because you don’t have the money, learn how to buy one with no money down! In this article, we show you how one of our students bought a short-term rental with no money down. How did she do it? It wasn’t just one thing. She executed on multiple fronts at the same time. Something she learned in just a short time by taking our real estate courses and then going out and taking action!
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Think you need money to buy a short-term rental?
In this article, we’ll show you how one of our students, bought a short-term rental with no money down. At the same time, she raised the value of the property, something called forced appreciation. Not only that she did it not just once but twice!
Let’s dive into how she did it.
1. Pick a great market
The first step is to pick a great market. Our student chose Waco, Texas, which at the time was rated an A+ in AirDNA. Now whether you believe AirDNA’s assessment or not, it’s definitely a data point you don’t want to ignore.
Aside from AirDNA, if you look at data sources like FRED’s House Price Index, Waco is much more affordable than the big metro areas like Dallas and Austin.
2. Build great relationships
Our student found this deal through a short-term rental property manager.
The property manager was already managing several of the units in this condominium building. The building was in a great location, basically walking distance to all of the top Waco attractions.
This was one of the last few condos in the building. She ended up buying two units and she handed a third one to another member of our community. All three are performing VERY well.
She thinks she got the deal because of the quality of the relationships she was able to form with the property manager. So the bottom line is, relationships matter!
3. Know your numbers
If you’re going to invest in real estate, you need to know your numbers.
What does this mean? It means you need to know how to analyze a deal BEFORE you buy it and once you buy it, it performs exactly as you predicted.
Having gone through our real estate course, our student knows how to analyze deals. She uses a tool called a cash-on-cash calculator. If you want to download ours, CLICK HERE.
Here are some of the numbers for this deal:
Purchase price: $255,000 (appraised for $301,000 when she bought it)
Cash-on-cash return without property management = 40%
4. Learn how to spot hidden value
One of the best ways to buy a property with no money down is to find a property with hidden value.
Hidden value is an opportunity to increase the value of the property that most people don’t see, therefore, it’s “hidden” to those who don’t know how to spot it.
This unit our student bought is a 1000 square foot, 1 bedroom loft. For those trained in spotting hidden value, you know immediately that you should be able to find another bedroom in a 1000 square foot space.
And in fact, she was able to find space for a second bedroom and all she had to do was put up a wall and a door. If you know construction, you’ll know that this costs very little, maybe a few thousand dollars.
What is that worth? She knew that two bedroom lofts in the same building were selling for over $400,000. She bought the property for $255,000, spent a few thousand dollars to put up a wall and a door.
You see how she forced appreciation?
5. Build relationships with a local lenders
One of the keys to our student’s success was to find a local lender who would help her buy the property with relatively low money down AND also give her money for construction.
She was able to find one who let her put down 15% and gave her 100% financing for construction.
This means on a $255,000 purchase, she only needed $38,250 down and she didn’t have to come out of pocket for any of the construction.
6. Execute on all fronts
You can have the best strategy in the world but if you can’t executive, your strategy is irrelevant.
One of the keys to buying a short-term rental with no money down is to learn how to execute on multiple fronts at once.
This means, picking a market and sticking with it. We can’t tell you how many people get stuck analyzing different markets and never picking one. So they never end up getting started.
From there, you need to build relationships so you can find great deals. You need to learn how to analyze deals so you don’t buy liabilities. You then need to learn how to spot hidden value and then go out and force appreciation. You need to build relationships with lenders or find other sources of money. You need to learn how to negotiate with the seller.
These are just a few of the things you need to learn in order to successfully buy a property with no money down. Sound daunting? It can be if you don’t learn how to do it. If you want to short-cut this learning, consider taking our short-term rental course, Accelerating Wealth. CLICK HERE to join the Waitlist now!
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