If you’ve considered investing in single-family rental homes but don’t quite have the funds to make it happen, you’re definitely not alone. It’s great to know that there are many different ways to invest in rental real estate, even if you are short on funds. Getting a bit creative can be helpful when funding an investment property with little or no cash. Using one or more of the alternative approaches listed below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It might seem a bit contradictory, but one of the smartest ways to buy your first rental property is to buy yourself a house. Unlike loans for investment properties, several programs are designed to help first-time or other homebuyers purchase a home. You’ll find that down payment requirements are usually lower, and interest rates can be quite favorable for owner-occupied properties.
Lots of rental property owners began their journey by purchasing a home, living in it for a year or so, and then converting it into a rental. This is a wonderful opportunity to get your foot in the door and start your investment portfolio.
Buy a Duplex
Another possibility, much like the first, is to buy a duplex. Buying a duplex is a great idea! You can live on one side, which helps you qualify for those nice programs offered to owner-occupied properties and rent out the other. One thing to consider is the need to share your home with a renter. On the bright side, you’ll be collecting rent that could almost cover your mortgage payment, reducing your living expenses and allowing 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 sound like the best choice for you, another option could be to consider opening a home equity line of credit (HELOC) on your residential property. If your property values have increased over a period of time, your home may have enough equity to allow you to borrow against it and use the cash to buy an investment property. Most lenders won’t offer more than 80% of your home’s value, so it is a good idea to keep a close eye on your property values. It’s best to start the application process once you’ve built up a solid amount of equity.
Reduce Closing Costs
If you have the necessary cash for a down payment but are a bit tight on other expenses, you could think about requesting the seller or your lender to pay all or part of your closing costs. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Moreover, if you’ve got a very motivated seller, they may be open to covering the closing costs to help make the sale happen quickly.
If you’re ready to put in some effort, there are plenty of ways to make your dream of owning a portfolio of single-family rental homes come true. The professionals at Real Property Management Performance are here to assist you! We collaborate with rental property investors in Freehold and the neighboring regions, whether you’re just starting out or have plenty of experience. Our goal is to help you assess prospective rental properties, identify off-market deals, and offer knowledgeable advice on everything from rental rates to marketing (and beyond). Contact us online or call 732-289-9337 to find out more
Originally Published on Mar 18, 2022
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