Numerous people want to invest in single-family rental homes but may not have enough cash yet. Fortunately, there are many different ways to invest in rental real estate, even if you are short on funds. You might need to be a bit creative when funding an investment property with little or no cash. By adopting one or more of the alternative approaches stated below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It might seem contradictory, but one of the fastest ways to buy your first rental property is to buy yourself a house. Unlike loans for investment properties, multiple programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are usually lower, and interest rates are often better for owner-occupied properties.
Numerous rental property owners initiate their ventures by acquiring a residence, residing in it for approximately one year, and then converting it into a rental. This can be an effective means to get your foot in the door and start your investment portfolio.
Buy a Duplex
An alternative, similar to the initial option, is to buy a duplex. The strategy for acquiring a duplex is to reside in one unit —thus qualifying for some of those beneficial programs offered to owner-occupied properties—and rent out the other. The primary drawback is cohabiting with a renter in your residence. However, the advantageous aspect is that you will be collecting rent that may virtually cover your mortgage payment, reducing your living expenses and permitting you to save up for your next investment purchase.
Open a HELOC
If moving around or living in close quarters with your renter isn’t the best choice for you, one alternative is to contemplate obtaining a home equity line of credit (HELOC) on your residential property. If your property values have appreciated in the past year or two, your home may have enough equity to let you borrow against it and use the money to buy an investment property. Most lenders will provide financing up to 80% of your home’s value. So, it’s essential to keep a close eye on your property values and initiate a loan application only when you possess sufficient equity in your home.
Reduce Closing Costs
If you have enough cash for a down payment but lack resources for further expenses, you may contemplate requesting the seller or your lender to take care of 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. On top of that, if you’ve got a very motivated seller, they may be inclined to cover the closing costs to ensure a rapid deal.
If you are prepared to exert considerable work, numerous avenues exist to make your dream of owning a portfolio of single-family rental homes come true. The team at Real Property Management NW Indiana is here to assist you! We help rental property owners in Lowell and surrounding regions, regardless of their expertise level. We help assess prospective rental properties, identify deals that aren’t listed publicly, and provide expert guidance on several aspects, such as rental prices and marketing. Contact us online or call 219-525-1277 for more details.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.