You are not alone if you have been fantasizing about investing in single-family rental homes but just do not have the capital necessary to make it happen. Thank goodness, there are many different ways to invest in rental real estate, even if you are short on funds. You may need to get a bit inventive when funding an investment property with little or no cash. Applying one or more of the alternative approaches given below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
Although it seems counterintuitive, one of the greatest methods to buy your first rental property is to buy yourself a house. Compared to loans for investment properties, numerous programs are designed to help first-time or other homebuyers purchase a home. Interest rates and the amount of down payment requirements for owner-occupied properties are typically more beneficial.
Buying a house, living in it for a year or two, and then converting it into a rental was the initial plan for many rental property owners. This can be an excellent technique to get your foot in the door and start your investment portfolio.
Buy a Duplex
One more choice that is comparable to the first is to buy a duplex. The idea behind buying a duplex is to live on one side—thus qualifying for some of those favorable programs offered to owner-occupied properties—and rent out the other. Having to live in close quarters with a tenant is the most noticeable drawback. On the bright side, you can expect to collect rent that will cover your mortgage payment, reducing your living expenses and enabling 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 seem appealing to you, another alternative would 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, your home may have enough equity to allow you to borrow against it and utilize the profit to buy an investment property. Most lenders will not lend you more than 80% of your home’s value, so you must keep a close eye on your property values and wait to apply for a loan until you have accumulated a substantial amount of equity.
Reduce Closing Costs
If you have ample cash for a down payment but are still short on other expenses, another option to consider is asking the seller or your lender to cover some or all your closing costs. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. On top of that, if you’ve got a very motivated seller, they may be ready to cover the closing costs to ensure a fast transaction.
For those willing to put in the work, there are a lot of opportunities to make your dream of owning a portfolio of single-family rental homes come true. For assistance, contact the experts at Real Property Management Excelled. Whether you’re just starting out or are an experienced investor in Renton, we can help you assess prospective rental properties, find off-market offers, and give you expert advice on marketing, rental rates, and more. Contact us online or call 253-275-5999 for additional information.
Originally Published on Mar 18, 2022
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