If you’ve been dreaming about investing in single-family rental homes but lack the necessary capital, you are not alone. Luckily, there are many different ways to invest in rental real estate, even if you are short on funds. Creativity may be required when funding an investment property with little or no cash. By using one or more of the alternative approaches detailed below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It may appear paradoxical, yet an astonishing method to buy your first rental property is to buy yourself a house. Dissimilar to loans for investment properties, many programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are usually less expensive for owner-occupied properties.
Many rental property owners initially acquired a house, occupied it for a year or so, and then converted it into a rental. This can be an exceptional strategy to get your foot in the door and start your investment portfolio.
Buy a Duplex
An alternative option, similar to the initial one, is to buy a duplex. The rationale behind acquiring a duplex is to reside on one side—thus qualifying for some of those helpful programs offered to owner-occupied properties—and rent out the other. The evident disadvantage is the necessity of sharing your residence with a renter. However, the plus side is that you will be collecting rent that may closely cover your mortgage payment, reducing your living expenses and facilitating you to save up for your next investment purchase.
Open a HELOC
If dwelling or living in close quarters with your renter seems unwise, one alternative is to establish a home equity line of credit (HELOC) on your residential property. If your property values have risen over the last year or two, your home may have enough equity to allow you to borrow against it and utilize the money to buy an investment property. Most lenders will not provide more than 80% of your home’s value; therefore, it is essential to keep a close eye on your property values and initiate the application process only after accumulating substantial equity.
Reduce Closing Costs
If you possess sufficient cash for a down payment but are lacking in other expenses, an alternative strategy is to request that the seller or your lender compensate 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. In addition, if you’ve got a very motivated seller, they may be willing to cover the closing costs to ensure a swift transaction.
For individuals prepared to exert effort, there are various methods to make your dream of owning a portfolio of single-family rental homes come true. The professionals at Real Property Management Endeavor can help you! We work with rental property investors in Chesterfield and its vicinity, ranging from amateurs to experienced individuals, help assess prospective rental properties, explore off-market opportunities, and grant knowledgeable assistance on everything from rental rates to advertising (and beyond). For more info, contact us online or call 636-244-5959.
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.