If you’ve been envisioning the opportunity to invest in single-family rental homes but find yourself short on funds, you’re certainly not the only one. Luckily, there are many different ways to invest in rental real estate, even if you are short on funds. Getting a little inventive might be necessary when it comes to funding an investment property with little or no cash. By exploring the alternative approaches outlined below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It might seem in conflict, but one of the most effective strategies for buying your first rental property is to buy yourself a house. In contrast to loans for investment properties, numerous programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are generally less demanding, and interest rates frequently offer more advantageous terms for owner-occupied properties.
Numerous rental property owners began their path by purchasing a home, residing in it for a year or so, and then converting it into a rental. This can be a wonderful chance to get your foot in the door and start your investment portfolio.
Buy a Duplex
An alternative, akin to the first, is to buy a duplex. The concept of purchasing a duplex involves residing in one unit—thus qualifying for some of those favorable programs offered to owner-occupied properties—and renting out the other. The clear drawback in this situation is the necessity of sharing your living space with a renter. However, the benefit is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and helping you to save up for your next investment purchase.
Open a HELOC
If moving around or living in close quarters with your renter doesn’t feel like the best decision for you, another choice to take into account is opening 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 allow you to borrow against it and utilize the money to buy an investment property. Typically, most lenders will limit you to 80% of your home’s value, so it is essential to keep a close eye on your property values. Begin the application process only after you’ve accumulated a substantial amount of equity.
Reduce Closing Costs
If you have sufficient cash for a down payment but find yourself a bit tight on other expenses, one approach you might consider is requesting that the seller or your lender 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. And, if you’ve got a very motivated seller, they may be prepared to cover the closing costs to help with a swift transaction.
For those ready to invest their time and energy, numerous opportunities exist to make your dream of owning a portfolio of single-family rental homes come true. The professionals at Real Property Management Steel City can help! We connect with rental property investors in Rye and adjacent areas, catering to everyone from novices to seasoned professionals. Our services include assessing prospective rental properties, finding exclusive deals, and providing expert insights on various aspects, including rental pricing and marketing strategies. Contact us online or call 719-948-8155 to find out more.
Originally Published on Mar 18, 2022
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