If you’ve been considering investing in single-family rental homes but lack the cash to make it occur, you’re not alone. The positive aspect is that there are many different ways to invest in rental real estate, even if you are short on funds. It might be necessary to think outside the box when funding an investment property with little or no cash. By employing one or several alternative approaches laid out below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It might seem odd, but one of the most successful approaches to buying your first rental property is to buy yourself a house. Unlike loans for investment properties, many programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are generally reduced, and borrowing costs are frequently significantly more advantageous for owner-occupied properties.
A lot of rental property owners began by acquiring a home, residing in it for about a year, and then converting it into a rental. This can be a perfect opportunity to get your foot in the door and start your investment portfolio.
Buy a Duplex
A different choice, akin to the initial one, is to buy a duplex. The intention of purchasing a duplex is to reside in one unit—thus qualifying for some of those valuable programs offered to owner-occupied properties—and rent out the other. The clear disadvantage in this situation is the necessity of living together with a renter. However, the plus side is that you will be collecting rent that may almost cover your mortgage payment, reducing your living expenses and supporting you in saving up for your next investment purchase.
Open a HELOC
If transferring or living in close quarters with your renter does not look to be an ideal choice for you, an alternative approach would be to establish a home equity line of credit (HELOC) on your residential property. If your property values have surged over the past couple of years, your home may have enough equity to allow you to borrow against it and use the money to buy an investment property. Most lenders won’t provide more than 80% of your home’s value, so it is important to keep a close eye on your property values and initiate the application process only once you’ve accumulated a substantial amount of equity.
Reduce Closing Costs
If you’ve got plenty of cash for a down payment but find yourself slightly lacking in other expenses, one approach you might consider is requesting the seller or your lender to provide all or part of your closing costs. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Apart from that, if you’ve got a very motivated seller, they may be interested in covering the closing costs to allow for a fast transaction.
For individuals ready to invest energy, there are numerous avenues to make your dream of owning a portfolio of single-family rental homes come true. The experts at Real Property Management Faith can help! We engage with rental property investors in Indianapolis and nearby, from beginners to skilled, to help assess prospective rental properties, locate unique offers, and offer expert guidance on various aspects, including rental pricing and promotion (and more). Contact us online or call 317-219-4363 for more data.
Originally Published on Mar 18, 2022
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