Several people want to invest in single-family rental homes but may not have enough money yet. The good news is that there are many different ways to invest in rental real estate, even if you are short on funds. You might need to think outside the box when funding an investment property with little or no cash. By employing one or more of the alternative approaches listed below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It might seem strange, but one of the best ways to buy your first rental property is to buy yourself a house. Unlike loans for investment properties, a lot of programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are usually smaller, and credit rates are often better for owner-occupied properties.
Many rental property owners begin by purchasing a house, living in it for about a year, and then converting it into a rental. This can be a good way to get your foot in the door and start your investment portfolio.
Buy a Duplex
Another choice, like the first one, is to buy a duplex. The plan for getting a duplex is to live on one side and rent out the other side —thus qualifying for some of those beneficial programs offered to owner-occupied properties—and rent out the other. The main disadvantage is having to live with a renter in your house. But the good thing is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and empowering 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 a good choice for you, another option is to consider opening a home equity line of credit (HELOC) on your residential property. If your property values have increased in the last year or two, your home may have enough equity to allow you to borrow against it and use the money to buy an investment property. Most lenders will only offer you up to 80% of your home’s value. So, it’s important to keep a close eye on your property values and start applying for a loan only when you have enough equity in your home.
Reduce Closing Costs
If you’ve got enough cash for a down payment but are low on other expenses, you might consider asking the seller or your lender to pay 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. Besides, if you’ve got a very motivated seller, they may be eager to cover the closing costs to guarantee a rapid deal.
If you’re ready to work hard, there are several approaches to make your dream of owning a portfolio of single-family rental homes come true. The team at Real Property Management Main is here to help! We help rental property owners in Livonia and nearby, whether they are new or experienced. We help assess prospective rental properties, find deals that aren’t listed publicly, and offer expert advice on everything from rental rates to marketing (and so on). Contact us online or call 248-852-6204 to get more details.
Originally Published on Mar 18, 2022
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.
