If you’ve been visualizing investing in single-family rental homes but don’t quite have the money to do it, you’re not alone. The great news is that 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 resourceful when funding an investment property with little or no cash. Implementing one or more of the alternative approaches itemized below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It may look like an inconsistency, but one of the greatest approaches to buying your first rental property is to buy yourself a house. Different from loans for investment properties, several programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lesser, and interest charges are typically much more beneficial for owner-occupied properties.
Lots of rental property owners started by obtaining themselves a house, dwelling in it for a year or so, and then converting it into a rental. This can be an effective option to get your foot in the door and start your investment portfolio.
Buy a Duplex
Another way, akin to the first, is to buy a duplex. The objective behind acquiring a duplex is to reside on one side—thus qualifying for some of those advantageous programs offered to owner-occupied properties—and rent out the other. The evident shortcoming here is needing to share your home with a renter. On the other hand, the good thing is that you will be collecting rent that may almost cover your mortgage payment, reducing your living expenses and permitting you to save up for your next investment purchase.
Open a HELOC
If relocating or living in close quarters with your renter doesn’t seem like a good choice for 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 permit you to borrow against it and use the means to buy an investment property. Numerous lenders won’t deliver more than 80% of your home’s value, though, so you’ll need to keep a close eye on your property values and commence the application procedure only after you’ve got a decent amount of equity built up.
Reduce Closing Costs
If you’ve got plenty of cash for a down payment but are running a little short on other expenses, another approach you could try is to request 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. And, if you’ve got a very motivated seller, they may be keen to cover the closing costs to guarantee a quick transaction.
For people who are prepared to put in the effort, there are numerous tactics to make your dream of owning a portfolio of single-family rental homes come true. The specialists at Real Property Management Unlimited can aid you! We partner with rental property investors in Brookhaven and adjoining areas, from inexperienced to knowledgeable, to help assess prospective rental properties, pinpoint off-market agreements, and deliver professional advice on everything from rental rates to promotion (and beyond). Contact us online or call 516-875-1600 if you have questions.
Originally Published on Mar 18, 2022
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