If you’ve been thinking about investing in single-family Rye rental homes but do not quite have the cash to do it, you’re not alone. The good news is that there are many different ways to invest in rental real estate, even though you are a bit short on funds. When it comes down to funding an investment property with little or no cash, you may need to get a bit creative. By employing one or more of the alternative approaches listed below, you might be able to make your dream of owning rental real estate a reality.
1. Buy a Primary Residence
It may sound like an irony, but one of the best ways to buy your first rental property is to buy yourself a house first. Unlike loans for investment properties, there are many different programs is intended to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are often much more satisfactory for owner-occupied properties. Lots of rental property owners started off by buying themselves a house, living in it for a year or so, and then renovating it into a rental. This can be a great way to get your foot in the door and start your investment portfolio.
2. Buy a Duplex
One other option, like the first, is to buy a duplex. The idea with ordering a duplex is to live in one side – thus qualifying for some of those favorable programs offered to owner-occupied properties – and rent out the other. The clear downside here is having to share your home with a renter. But the advantage 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 doesn’t sound like great options, a third way to go might be to open a home equity line of credit (HELOC) on your residential property. If your property values have gone up over the last year or two, there may be enough equity in your home to let you borrow against it and use the money to buy an investment property. Most lenders won’t give you more than 80% of your home’s value, though, so you’ll want to keep a close eye on your property values and start the application process only after you’ve got a good amount of equity built up.
4. Reduce Closing Costs
If you’ve got enough cash for a down payment but are running a little short on other expenses, another strategy you could try is to ask the seller or even your lender to pay all or part of your closing costs for you. Some lenders offer rebates or other programs to help reduce the amount of cash you’ll need to bring at closing. And, if you’ve got a very motivated seller, they may be willing to cover the closing costs to ensure a quick sale.
For those who are willing to put in the effort, there are many ways to make your dream of owning a portfolio of single-family rental homes come true. Our professional Rye property managers can help! We work 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.
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.
