If you’ve been wanting to invest in single-family Freehold rental homes but don’t have the capital, you’re not alone. Good thing is that there are many different ways to invest in rental real estate, even if you are a bit short on funds. Funding an investment property without the necessary cash might require you to get a bit creative. There are alternatives listed below. Going through any of these will make it possible for you to finally realize owning rental real estate.
1. Buy a Primary Residence
Though it sounds almost too basic, there is wisdom in buying your own house first before investing in a rental property. Unlike loans for investment properties, there are many different programs designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are often much more favorable for owner-occupied properties. It’s a common way to go about things among many rental property owners; to buy their own house, then convert it to a rental after some time. You can then use this as a great start to building your own investment portfolio.
2. Buy a Duplex
Of course, one excellent choice would be to go for a duplex, instead. The programs that come with owner-occupied properties are made available to you while being able to rent out the other half to someone else. The disadvantage to this is that your home will be shared with a renter. But the upside is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and allowing you to save up for your next investment purchase.
3. Open a HELOC
Living with a renter might not be a comfortable thought for others, so there’s another option: opening a home equity line of credit (HELOC) on your residential property. It’s likely that your property values will grow and your property will build equity. That amount can be borrowed in a line of credit, and you can use that to purchase an investment property. Take note, though, that lenders will almost always only offer up to 80% of your home’s actual value. So, regularly check on your property values and keep an eye out for the equity that’s been built up.
4. Reduce Closing Costs
You can have the total amount ready for a down payment, but be short on the budget for other expenses. In this case, you can try to ask your seller or lender to cover your closing costs. It’s possible that a lender will offer you a rebate so that you won’t have to pay more cash for closing. There’s no harm in trying. For all you know, your seller might even offer to cover the closing costs to close the sale.
If you really put your mind to it, the possibility of owning a portfolio of single-family rental homes is truly within reach. Our professional Freehold 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.
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