If you wish to invest in single-family rental homes but lack the requisite capital, you are not alone. Gratefully, there are many different ways to invest in rental real estate, even if you are short on funds. You may need to be a bit creative when funding an investment property with little or no cash. By adopting one or more of the alternative approaches stated below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
One of the best ways to buy your first rental property is to buy yourself a house, even though it seems contradictory. Unlike loans for investment properties, several programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are typically lesser, and interest rates are often cheaper for owner-occupied properties.
Many rental property owners initially purchase a residence, inhabit it for around one year, and then convert it into a rental. This can be an excellent strategy to get your foot in the door and start your investment portfolio.
Buy a Duplex
Buying a duplex is another option that is comparable to the initial one. The reason behind acquiring a duplex is to occupy one side—thus qualifying for some of those advantageous programs offered to owner-occupied properties—and rent out the other. Sharing one’s residence with a renter presents a discernible disadvantage. Nonetheless, the advantageous element 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.
Open a HELOC
If you’re not interested in relocating or living in close quarters with your renter, a third alternative is to secure a home equity line of credit (HELOC) on your residential property. If your property values have improved in the past year or two, your home may have enough equity to enable you to borrow against it and use the funds to buy an investment property. However, it is critical to keep in mind that most lenders will not give you more than 80% of your home’s value. Therefore, you need to keep a close eye on your property values and commence the application process only after accumulating significant equity.
Reduce Closing Costs
If you possess adequate cash for a down payment but cannot manage other expenses, you can contemplate asking the seller or your lender to cover all or a portion of your closing costs. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Additionally, if you’ve got a very motivated seller, they may be willing to cover the closing costs to expedite the transaction.
Numerous alternatives exist for persons willing to invest the requisite effort to make your dream of owning a portfolio of single-family rental homes come true. Real Property Management MidTown’s professionals are willing to help! We collaborate with rental property investors in Euless and adjoining areas, from newbies to knowledgeable individuals, to help assess prospective rental properties, find off-market deals, and deliver professional advice, including marketing and rental rates, among others. More details can be acquired if you Contact us online or call 817-583-6121.
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.