If you’ve been fantasizing about investing in single-family rental homes but are short on the necessary cash to do so, you are not alone. Conveniently, there are many different ways to invest in rental real estate, even if you are short on funds. When funding an investment property with little or no cash, it may be critical to utilize unconventional approaches. Executing one or more of the alternative approaches mentioned below can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It may appear to be a paradox, but one of the great methods to buy your first rental property is to buy yourself a house. Dissimilar to loans for investment properties, lots of programs are designed to help first-time or other homebuyers purchase a home. Interest rates are often more helpful for owner-occupied properties and down payment requirements are typically lower.
Many rental property owners initially purchased a residence, occupied it for roughly one year, and then converting it into a rental. This can be an excellent approach to get your foot in the door and start your investment portfolio.
Buy a Duplex
An additional option, similar to the initial one, is to buy a duplex. The intention behind buying a duplex is to reside on one side—thus qualifying for some of those beneficial programs offered to owner-occupied properties—and rent out the other. The most apparent shortcoming is that you are bound to cohabitate with a renter. Alternatively, the advantage is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and letting you save up for your next investment purchase.
Open a HELOC
A third alternative is to open a home equity line of credit (HELOC) on your residential property if relocating or living in close quarters with your renter does not seem like a viable choice. If your property values have increased in the past few years, your home may have enough equity to permit you to borrow against it and leverage the money to buy an investment property. The majority of lenders won’t give you more than 80% of your home’s value, however, so you must keep a close eye on your property values and start the application process only after you have gathered a substantial quantity of equity.
Reduce Closing Costs
Another way you could consider is to ask that the seller or your lender cover all or part of your closing costs if you have enough cash for a down payment but are still short on other expenses. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Apart from that, if you’ve got a very motivated seller, they may be delighted to cover the closing costs to guarantee a fast transaction.
For those who want to invest the necessary time and effort, there are several methods to make your dream of owning a portfolio of single-family rental homes come true. The experts at Real Property Management Bay State West can give assistance! We deliver expert advice on a wide range of topics, such as rental rates, marketing, and more, to rental property investors in Northampton and the surrounding area, including both inexperienced and seasoned investors. We help assess prospective rental properties, discover off-market bargains, and beyond. Contact us online or call 413-514-0050 to find out more.
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