The Secret to Getting Rich in Real Estate with No Money—Government Grants

If you are interested in real estate investing, you may have been quickly turned away from the possibility when you saw investment loans require 20% down payments. With the median price of homes hovering around $400,000 over the past couple of years, you would need $80,000 to make that down payment.

But fear not! We have a solution that will almost feel too good to be true, but I swear in my French bulldog Stella's life, it's not! And I don't play about Stella. But first, here is a quick story to explain how I discovered this cheat code for real estate investing.

P.S. TLDR at the bottom if you’re in a hurry!

Government-Sponsored Zero-Down-Payment Mortgages

You may have heard of zero-down-payment mortgages, which many states provide to help their residents become homeowners by providing a second loan that gives you the money to cover the down payment for the standard mortgage. But don't worry, you won't need to find two different companies because any lender that works with the state on their no-down mortgages will help with both as one smooth process (if you choose the right lender).

If your state doesn't provide it, you still have options, as private lending institutions like the Chenoa Fund essentially offer the same product.

The craziest part is that sometimes these government-sponsored loans’ interest rates are lower (meaning a cheaper payment for you every month) than a mortgage on the open market. I used to be a mortgage originator, and when I saw that it was the case at my company, I was shocked.

Let’s get to the How-to get RICH part!

Using these loans, you can receive up to 5% of the home's value for the down payment and closing costs. For an explanation of closing costs, click here!

If the 5% the state gives isn't enough to cover the closing costs and down payment—although it should come close—you can ask your realtor to negotiate with the seller. The seller may be willing to contribute additional funds to help cover the remaining balance needed to close.

This process is how you will buy the house for nothing out of pocket, although the “catch” is that you will probably need to have some money saved for your deposit to make an offer that the typical seller will accept, but it's not required. Expect a minimum of $3,000, with many requiring $5,000. A much smaller percentage will ask for more, but typically, that is on expensive homes you won't be offering anyway.

Here's the exciting stuff! The worst part of these no-down-payment deals is that you must stay in the home for the second loan they provided to be forgiven. “Forgiven” is mortgage jargon for saying you won't owe them any money after a certain number of years in the home, ranging from 3 to 30 years (I would plan for it to be at least 10 years in today's market).

But you won't need to worry about that, because you have a better plan now!

You're going to sell that home after a few years. I have to be vague about the time because the market will determine how you will need to execute this plan. If you are lucky enough to see prices skyrocket as they did from 2020-2022, you may not even need to wait an entire year, but if you are in a market similar to what we've seen between 2023-2025, you could be waiting for a while.

You must wait because selling a home will cost you money, and we're here to make money. So, to offset the selling costs, which may be 3-5% of the home value, depending on the realtor you choose, you need appreciation to work in your favor. Appreciation refers to the increase in a home's value due to inflation or market conditions.

You may be unaware that home prices, in the aggregate, have always gone up in the United States in the long run. The increase in values is primarily the result of inflation, but also because our housing market is so historically valuable to investors that we always have 10s of thousands bidding on homes. When more people are looking to buy a home than sell one, the buyers will get into a bidding war that allows the seller to raise the asking price.

If you follow the rest of the plan, appreciating home values will allow you to become rich. I will discuss the numbers quickly, but I promise to keep it simple.

Hypothetical Scenario

Let's pretend you purchased your home for 100 dollars, and to do so, the government gave you 5% of the value to use for your down payment, or $5.

Now, if you decide to sell, you will have to give that back, which sucks. Still, it is well worth it because if you wait until you have seen the value of the home increase by at least 15% or $15 for our simplified example, you would be able to pay them back with the profit from your home sale, and still have $10/10 percent remaining to use as a down payment on your next home.

This next step is how things get lucrative: once you buy this new home with your profits, you will not need to borrow money for the down payment. If you’re paying attention, you may be thinking, but you said the government loan is a great deal, so why would I want to get a loan without it?

Because it is a great deal in the short term, but in the long term, most of these $0 down programs are FHA loans, government-sponsored, which means you have mortgage insurance for the life of the loan. Click here for an explanation.

You want to cut that cost because, with our plan, mortgage insurance is not a desirable feature.

Alright, enough explanation. What is the plan?!

The Master Plan to Get Rich!

You are going to repeat the process you used to buy the second home repeatedly, except you aren't going to sell the home you're living in now. Instead, you will lease the home to a renter and use that money to pay your mortgage. And repeat and repeat. The beauty and struggle of this process is that it will start slow.

As I mentioned, you may have to wait a few years to sell the first home you buy with government money. Likewise, you may have to wait a few years before your rental properties start to provide a profit every month. But if you are patient, you will see your rental income increase by around 2-3% per year, and the magic of compounding interest will make you rich.

To find the rent you will charge at the beginning of year 8, we apply a 3% annual increase for 7 years to the original rent of $2,500.

The formula for rent after 7 years is:

Final Rent=Initial Rent×(1+Annual Increase)Years\text{Final Rent} = \text{Initial Rent} \times (1 + \text{Annual Increase})^{\text{Years}}

Final Rent=Initial Rent×(1+Annual Increase)Years

Let's calculate it.

At the beginning of year 8, the monthly rent will be approximately $3,075.

There’s more!

The rental income increase is only a tiny part of the money-earning potential of this real estate investment strategy; the real goldmine comes from the appreciation of home values that take place over time. I'm sure you've heard stories about someone's grandparent buying their home for $50,000, now valued at over half a million dollars, right?

Well, you will be that grandparent to those in the future; one day, an average home will be worth over 1 million dollars because, on average, residential real estate historically increases in value by about 4% per year. So, using the average home value of approximately $354,711 as of January 31, 2025, we can estimate the future value of said home after 5, 10, and 20 years here…

• In 5 years: $354,711 × (1 + 0.04)^5 ≈ $431,500

• In 10 years: $354,711 × (1 + 0.04)^10 ≈ $525,000

• In 20 years: $354,711 × (1 + 0.04)^20 ≈ $777,000

If you did this 3 times over, in 20 years, not only would the majority of your mortgage be paid off, but you'd own over $2 million in your real estate portfolio, all without ever putting 20% down.

The only “catch,” so to speak, is that you need to make sure you invest in a good area that will see future growth. Please take time to research your market before purchasing to ensure a safe investment. Perhaps you will never truly use any of your money on the down payment because, to recap:

Too Long Didn’t Read…

Step 1)

You will purchase a home using a state-funded, or worst case scenario, a private lender's down payment assistance program to cover your down payment. The closing costs are usually estimated to cost around 2% of the home's value, so that will either need to be paid by yourself or will need to be paid by the seller at the request of your realtor during the negotiations for the purchase.

Step 2)

Once you own a home, you will need to either wait for it to appreciate enough in value that you can use the proceeds, or profit, from the sale of the first home purchased to come up with a down payment for the second or, you can save money to cover the cost of the second home's down payment that you will want to purchase using a conventional loan (think private lender, instead of the government-sponsored FHA loans most common in the down payment assistance world) because conventional loans don't have permanent mortgage insurance, which is essentially an additional payment on your mortgage when you don't put 20% down, or anytime you use an FHA loan.

Step 3)

You will buy and move into your next home Using savings or a cash-out refinance/HELOC mortgage (both tools to pull money out of your home with the equity you have built through appreciation). It is important to move into the home because if you aren't, you must pay 20% down with an investment loan. But instead of selling the home, you will rent it out this time, letting the rent pay off your mortgage for you.

Step 4)

You will repeat step 3 as often as you feel comfortable. Remember that you may be asked to provide a reason for your move, so consider purchasing a home in a new location or one that is an upgrade and use that as your reason for relocating. The critical thing to understand is that you won't make significant profits from renting out the houses in the early stages of this process. The rental income will be relatively small compared to the real opportunity, which lies in real estate appreciation. Appreciation refers to the increase in a home's value due to inflation or market conditions. However, I say "on average" because one crucial factor to remember is that you must invest in a good market to ensure these potential returns.

To break down how profitable appreciation can be for you…

On average, residential real estate increases in value by about 4% per year, so using the average home value of approximately $354,711 as of January 31, 2025, we can estimate the future value of said home after five, ten and 20 years here:

• In 5 years: $354,711 × (1 + 0.04)^5 ≈ $431,500

• In 10 years: $354,711 × (1 + 0.04)^10 ≈ $525,000

• In 20 years: $354,711 × (1 + 0.04)^20 ≈ $777,000

Keep in mind that this will feel like a slow process, and the returns will be relatively minuscule and disappointing at the beginning, but in those moments where things feel like they are moving too slowly, keep in mind the wise words of Albert Einstein: