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How Much Money Do You Need To Start Investing In Real Estate

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“How much money do you need to start investing in real estate?”

This is a common concern for new investors. There’s always the thought that you may not have enough money to cover everything.

If you feel you don’t have enough money to start, that’s the perfect reason to start. You want to make deals to get money.

Photo by Stuart Miles from

Photo by Stuart Miles from

How To Start Real Estate Investing Without Cash

I started out without savings. In fact, I had a lot of credit card debt so I had all the motivation to make some extra money.

I had enough money to look at properties. That’s the only expense in the beginning – food and transportation while you go around looking at properties.

You start real estate investing the moment you start looking and analyzing properties to buy.

When I was starting out, I looked all over Metro Manila and even Laguna. I went as far as Valenzuela in the north and Sta. Rosa, Laguna in the south.

You don’t have to do that. If you look only at properties near your home or place of work, then you don’t have to spend a lot. You can just walk around or ride a bike to the properties. You get free exercise!

While looking at properties, start saving up for incidental expenses. Start networking and telling people about what you are doing. Along the way, you may find people who have the money but not the time to find good deals. They may be interested to form a partnership in the future.

My first deal was a partnership with other investors who I got to know while playing Cashflow 101. We pooled money and bought a 6-door townhouse with me as the industrial partner.

So the question, “How much money do you need to start investing in real estate?”, while valid, is the wrong question to ask.

How Much Money Do You Really Need?

To be perfectly honest about it, the answer is it depends on the deal.

Different properties will require different amounts of money.

Are you going to buy the property and hold it long-term? Then that would need a lot of cash from you.

Do you want to buy a vacant lot and build a multi-door apartment from scratch? That would also need a lot of cash.

Do you prefer to own properties in a nice, upscale and exclusive subdivision or condominium? That may also need a lot of cash.

If you don’t have a lot of cash, I suggest you find deals that you can quickly flip to another buyer or that you can acquire for little cash upfront. Let me cite a quick example here.

A few years ago, I bought a 2-bedroom condo in Pasay with a floor area of 74 sqm for only $1.5M.

However, the value of the property was around $2.2M. So when I applied for a bank loan to buy it, the bank gave me a loan of $1.54M, which was more than enough to pay for the property.

But there were incidental expenses. I paid for the loan processing fee of $3,500. I paid for closing costs which amounted to about $45,000.

I paid for minor renovation – which consisted of painting, updating of tiles and fixtures, and sanding of wood parquet floors. I don’t remember the exact cost but it was probably around $150,000 or $2,000 per sqm.

Now you might be wondering where did I get all that cash? That’s almost $200,000!

We have a saying in real estate deal-making – if the deal is good, the cash will follow. Find a good deal, and you can find investors to partner with you.

You can get an investor to partner with you on this deal and you just split the profit.

Or if you have good credit and you feel you can handle the risk, you can loan the money you need.

You can use your credit card, which I did, to pay for the materials during the renovation. You can then get a salary loan, which I also did, to pay for the labor and the closing costs.

Then after quickly flipping the property to a home buyer, I asked for a downpayment from the buyer and that paid off my credit card and salary loan.

It’s risky true but when you already know what you’re doing, the risk is lessened.

So the key is finding a good deal and knowing your numbers.

Common Costs Involved In A Real Estate Deal.

For those of you who are analytical and still need more details, here’s an overview of the costs involved in doing a deal.

#1. Getting around looking at deals. You will spend on fuel or commuting. You will also spend on food.

#2. Option Money or Downpayment. Some sellers will require some sort of down payment. This is negotiable. I’ve paid as low as $5,000 but some may ask for 10-20% down payment. This will depend on the seller.

#3. Financing Costs. If you will get a loan, you will pay for the loan processing or appraisal fee. This is about $3,000 to $5,000 depending on the bank. You will also pay a Mortgage Annotation Fee which depends on the value of the property. You will also need to pay the monthly amortization while you are marketing the property.

#4. Closing Costs. Some closing costs can be shouldered by the seller like the Capital Gains Tax (6%) and Documentary Stamps Tax (1.5%). Others will normally be shouldered by you – such as the Notarial Fee (1%), Transfer Tax (less than 1%), and Registration Fee (less than 1%).

#5. Marketing Costs. For marketing and advertising, you can sell a property without spending much. Post it online on various free real estate ad websites. Share it on social media. Call or text your friends. The most we spent is advertising on the Sunday edition of the Manila Bulletin. You can advertise for about $100 per line. We usually just get a 3-4 line text ad and post it for 4-8 weeks.

#6. Renovation Costs. This is the cost with the greatest variation. We’ve done minor renovations as low as $2,000 per square meter. But if you are going to do a massive renovation, be prepared to spend as much as $25,000 per square meter or even more. The costs depend a lot on the desired finishing. I suggest not to spend too much on renovation to keep the costs down.

I hope that gives you an idea of how much money do you need to start investing in real estate. This will allow you to plan ahead. Don’t let the costs intimidate you. If you make more money than the cost, you’ll make a profit which is the point of all these.

If you don’t have money to start, don’t be discouraged. As I shared earlier in the post, I didn’t have money to start. If you don’t have money, look for a good deal first because the money will follow.

Have any questions? Let me know below.

May Your Deals Push Through,

Ronald Cagape

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