If you are contemplating investing in single-family rental homes but lack enough money to do so, you are not alone. Thankfully, there are many different ways to invest in rental real estate, even if you are short on funds. Funding an investment property with little or no cash may necessitate creativity. You can make your dream of owning rental real estate a reality by employing a couple of alternative approaches mentioned below.
Buy a Primary Residence
Buying yourself a house is one of the optimal ways to buy your first rental property, despite the fact that this may appear paradoxical. Unlike loans for investment properties, numerous programs are designed to help first-time or other homebuyers purchase a home. Owner-occupied properties generally feature lower down payment requirements and considerably more beneficial mortgage rates.
A lot of rental property owners began by acquiring a home for themselves, dwelling in there for a year or so, and then converting it into a rental. This can be an effective way to get your foot in the door and start your investment portfolio.
Buy a Duplex
Buying a duplex is an alternative option that parallels the initial choice. he reasons for acquiring a duplex is to lease one unit while residing in the other—thus qualifying for some of those beneficial programs offered to owner-occupied properties—and rent out the other. The primary disadvantage in this situation is cohabitation with a renter. The advantage, however, is that you will be collecting rent that may virtually cover your mortgage payment, reducing your living expenses and empowering you to save up for your next investment purchase.
Open a HELOC
Establishing a home equity line of credit (HELOC) on your residential property serves as a third option if you prefer not to live in close quarters with your renter. If your property values have increased over the last year or two, your home may have enough equity to enable you to borrow against it and use the funds to buy an investment property. However, since most lenders would only give you 80% of your home’s value, you need to keep a close eye on your property values and wait to apply until you have amassed a sizable amount of equity.
Reduce Closing Costs
Requesting the seller or your lender to finance all or a portion of your closing costs is a viable strategy you could take if you have sufficient cash for a down payment but are slightly short on other expenses. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Moreover, if you’ve got a very motivated seller, they may be keen to cover the closing costs to guarantee a speedy settlement.
There are several means to make your dream of owning a portfolio of single-family rental homes come true if you are willing to exert the necessary effort. The experts at Real Property Management Teague are here to help! We assist newbies and seasoned rental property investors in Latham and the adjacent area in assessing prospective rental properties, identifying off-market deals, and offering knowledgeable guidance on everything from marketing to rental rates (and more). Contact usonline or call 518-612-4900 for more information.
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