1. Buy a Primary Residence
It may seem counterintuitive, but one of the greatest methods to buy your first rental property is to buy yourself a house first. Unlike loans for investment properties, there are many different programs available to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are commonly much more advantageous for owner-occupied properties. Numerous rental property owners started by buying themselves a house, living in it for a year more or less, and then turning it into a rental. This can be an excellent method to get your foot in the door and begin your investment portfolio.
2. Buy a Duplex
One more option, identical to the first, is to purchase a duplex. The concept behind purchasing a duplex is to reside in one side – thus qualifying for some of those favorable programs offered to owner-occupied properties – and rent out the other. The apparent disadvantage in this situation has to share your home with a renter. However, the upside is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and enabling you to save up for your next investment purchase.
3. Open a HELOC
If moving around or living in close quarters with your renter does not seem to be viable options, a third option is to acquire a home equity line of credit (HELOC) on your residential property. If your property values have increased in the last year or two, there may be sufficient equity in your home to let you borrow against it and use the money to buy an investment property. Most lenders will not lend you more than 80% of your home’s value, though, so you’ll need to keep a close eye on your property values and start the application process only when you have built up a substantial amount of equity.
4. Reduce Closing Costs
If you have sufficient funds for a down payment but are running a bit short on other expenses, another strategy you could attempt is to ask the seller or even your lender to pay all or part of your closing costs for you. Some lenders provide rebates or other programs to help reduce the amount of money you’ll need to bring at closing. Plus, if you’ve got a very motivated seller, they may be eager to cover the closing costs to achieve a rapid sale.
For people who are prepared to put in the effort, there are various methods to make your dream of owning a portfolio of single-family rental homes come true. Our professional Livonia property managers can assist! In addition, we cooperate with rental property investors, from beginning to experienced, to help assess prospective rental properties, locate off-market deals, and offer expert advice on everything from rental rates to marketing (and beyond). Contact us online to learn more.