Despite the many benefits of real estate investing, there’s one obvious barrier that keeps beginners out of the game: its exorbitant cost of entry.
Unlike the stock or bond market, buying property has traditionally always required a substantial down payment, particularly on a conventional 30-year mortgage with 20% cash down. However, that model is now changing with the introduction of various platforms that offer fractional real estate investing opportunities. On top of the upfront cash needed for a down payment, other costs like loan origination fees and other closing fees, as well as renovations, can quickly add up and require an investor to have a lot of capital on hand.
While it’s certainly difficult to invest in real estate without a huge amount of savings, it’s not impossible. From finding private money loans to partnering with a friend or family member, there are still ways to get your foot in through the front door of a new property without a ton of cash on-hand.
From tapping into hard money loans, to syndicating, to utilizing different loan products, Insider has compiled the stories of five real estate investors who got their start by entering partnerships with like-minded investors.
At just 20 years old, Jabbar Adesada owns a multi-unit real estate portfolio, from which he earns about $3,000 per month in profit. It’s even more astonishing when taking into consideration that Adesada started out with only $2,500 in savings two years ago. And as an active-duty Marine, his take-home pay is roughly around $1,800 a month from the military.
To save for his first investment property, Adesada diligently built up his savings and for extra cash picked up side hustles, like delivering food for DoorDash and taking on other Marines’ assignments and 24-hour weekend posts. Adesada was able to use a Veterans Affairs loan to buy his first house, of which he put down 5% of the 30-year mortgage, or around $12,300 in cash. Closing costs and furniture cost him an additional $10,000 out of pocket.
But while closing on his first investment property, Adesada was already thinking about the next one — especially after hearing from his friend about the lucrative market of short-term vacation rentals in the Great Smoky Mountains. Unfortunately, he’d already poured his entire savings into his first property.
“So then I was like, well, BiggerPockets says to just tell everyone you’re a real estate investor and tell everybody what you’re looking for. So that’s exactly what I did,” Adesada told Insider. “At the grocery store, at the supermarket. I would just meet people, ask about them, and then throw in there that I’m a real estate investor.”
Adesada clarified that he wasn’t necessarily trying to pitch these strangers, rather, he was just trying to spark some interest. Adesada also tried to pitch to his family and friends, to no avail. He even reached out to so many people in his network of short-term rental investors that there was some overlap where he discovered he’d sent the same message to multiple people.
At the end of May 2021, Adesada received interest from his first potential investor — the mother of someone he worked with.
“That was my first lead; it’s just because I shot it all over the place,” he said. Adesada was so nervous during the conversation that his voice was trembling and his hands were shaking, to the point where he hung up the call on purpose to recollect himself, he recalled.
“I just was like, ‘Oh, the call dropped. I’m so sorry.’ She did not give me money,” Adesada said, laughing. “But then after feeling that pain, I was like, okay, it’s not that bad.”
Eventually, the breakthrough came in June 2021, when Adesada was called into the office of a senior master sergeant who was about to retire and had heard through the grapevine about Adesada’s real estate prospects.
“It’s like me talking to upper, upper, upper, upper management. I have to ask for permission to talk to this person with my hands behind my back,” Adesada recalled, laughing at his own astonishment. “It is that big of a disparity between where I am and where he was.”
In total, Adesada borrowed $60,000 from the master sergeant, on which he pays $417 a month on a five-year balloon loan with 10% interest. This type of lending is commonly referred to as a hard money loan within real estate professional circles. Through a masterclass for young real estate investors, Adesada found someone else willing to partner with him on the deal, and the pair eventually closed on an upscale cabin in the Tennessee mountains for $600,000 in October 2021.
Adesada and his partner evenly split the house’s $20,000 closing costs and furniture, and even though the house’s 10% down payment of $60,000 was entirely covered by Adesada’s hard money loan, they also split the house’s equity evenly.
“It’s 50/50 because he’s the one who took the risk on a 19-year-old who had one property, and he’s carrying the mortgage in his name,” Adesada said. “The reality is, the first 10 deals you do in real estate are not as important as the experience you gain from it.”
20-year real estate investing veteran Tony Javier, who’s based in San Diego and owns close to 100 properties, according to property records verified by Insider, exclusively borrows from private lenders and hasn’t used any bank or hard money loans in the past 15 years.
“That’s how we’re able to do such a high volume of deals, is using private money and bringing individuals in on deals to help us fund those deals and pay them well,” he said on an episode of the “Money Tree” podcast last year. “It’s a win-win situation.”
While he’s aware that going to a bank could save him “a little bit of money,” the tradeoff is that banks require appraisals that prolong the time it takes to close on a property — as much as 30 days — while Javier said that with a private lender he can close within as little as seven days once title work is complete. On the other hand, hard money lenders — who are easier to deal with — don’t take quite as much time as a bank, but charge investors much more.
“So instead of paying 10% interest to our private lenders, we would pay 10% to 12% to hard money lenders, and then on top of that, they would charge us 2% of the loan upfront as an origination fee and then also charge admin fees and a bunch of other junk fees as well,” he explained to Insider in an interview.
As for sourcing these private lenders, Javier has met them through conversations in random places like the gym. His “coolest” meeting, he told Insider, was chatting up a fellow hiker six years ago in Switzerland who eventually became both a good friend and investor in Javier’s real estate business.
Married real estate investing couple Kenny Simpson and Krystle Moore have also used investor partnerships to scale their investments, especially when they were first getting started. Today, they’ve accumulated a 47-unit real estate portfolio worth $19 million dollars, according to property documents verified by Insider.
Despite receiving almost half a million dollars in tax-free profit from the sale of their first fix-and-flip in 2014, Simpson and Moore still couldn’t afford to buy an apartment building on their own due to the “crazy high” prices in San Diego, where they still reside. Adding to the problem was that the buildings sometimes had higher vacancies where banks would then require a 30% loan-to-value ratio — meaning that the couple would have to cough up 70% of the down payment.
So for their first few deals, they partnered with other investors who primarily provided hard-money private loans with around 8% to 8.5% interest rates, while allowing Simpson and Moore to run the overall projects.
“If we’re going to partner with someone, then I need to be able to have the control to run the renovations, the leasing, the management, the budgeting, the costs, and what makes most sense to do,” said Moore. “They were mainly just money guys for us.”
Moore recalled renovating these first few properties “as quickly as humanly possible” by just putting “a little bit of lipstick on the units” before flipping them. When the couple eventually had enough capital on hand to buy their own properties, they began vacating their buildings to complete more extensive renovations.
Simpson and Moore have also recently began passively investing through real estate syndicates, which they found through a group course with coach Brad Sumrok to learn more about asset management and syndication. The couple estimated that they’ve so far invested around $350,000 in a total of 259 units, which nets them nearly $24,000 in annual cash flow.
Sean Allen, who used real estate investing to pay off $81,000 in debt and build a $1 million net worth, got started with $8,000 in savings. It wasn’t enough to buy a place on his own, so he went in on his first property with his friend David Shea.
Combined, they had about $16,000 in cash. They worked backwards and figured they could afford something around $60,000. That purchase price would allow them to put 20% down ($12,000) and have $4,000 left over to go towards closing costs.
They were both living in southern California and figured they probably weren’t going to come by a $60,000 property in that market. So they started looking in Greensboro, North Carolina, where Allen went to college.
They flew to Greensboro to meet with a real estate agent, looked at properties, and found one they could afford: a 2-bed, 2-bath short sale property they got for $53,000. They put 20% down (about $10,600) and did a few minor home-improvement projects, like cleaning the carpet and adding fresh paint to the walls.
After finding tenants, they started profiting about $220 a month. It all went into an account earmarked for future real estate investments. Today, Allen owns six properties, is debt-free, and financially independent thanks to his real estate portfolio.
Becoming a property investor all started with a conversation back in 2013 with Shea.
“It’s very important to facilitate conversations about what you’re interested in with as many people as you can. If you’re interested in real estate, you might find a business partner, a loan officer, another investor, a mentor, a tenant, or a roommate,” said Allen.
“We often shy away from talking about money, debt, and investments because they’re personal. But one of the things I’ve learned is you can learn from other people’s lessons and mistakes before you make the same ones. It will save you money, time, and stress.”
Seattle-based real estate investor Ludomir Wanot was interested in buying real estate immediately after graduating college. But he knew that mortgage lenders would want to see a stable income history before offering him a loan, so he got his foot in the door by partnering with his older brother, Jan.
Jan, who’d been working a corporate job for about two years, qualified for a loan and the brothers started searching for properties in the Seattle area in 2016. Jan would be listed as the buyer but they agreed to split expenses and profits evenly.
“I knew from my Craigslist experience that there were so many opportunities out there at a discount,” said Wanot, who would specifically seek out properties listed for sale by their owner, which cut out agent commissions and typically meant a lower sale price. “So we just set up searches on Craigslist and, as soon as a property popped up that was for-sale-by-owner, we would call the homeowner and try to buy their property at a discount.”
They found a single-family, fixer-upper listed for $150,000. “I was able to negotiate her down to $138,000,” said Wanot, who was living in his mom’s apartment at the time to save on housing. “I knew that every dollar mattered for us.”
The brothers financed it with an FHA loan, which is a government-backed mortgage that gives people the opportunity to buy a home with lower credit scores and down payments as low as 3.5%. They ended up using what’s called an FHA 203(k) loan, which finances the purchase and renovation of a home.
Without this specific type of loan, they wouldn’t have been able to afford renovations, which ended up costing $30,000. But since they rolled the remodeling costs into the loan balance and put down 3.5%, “we were in for no more than $10,000,” said Wanot.
They split the upfront costs, meaning they each paid less than $5,000.
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