You are not alone if you have been thinking about investing in single-family rental homes but lack the means to achieve it. The good news is that, despite being short on funds, there are many different ways to invest in rental real estate. When funding an investment property with little or no cash, you might have to get rather imaginative. Applying one or more of the alternative approaches described below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
Though it sounds contradictory, buying yourself a house is one of the finest ways to buy your first rental property. Unlike loans for investment properties, many programs are designed to help first-time or other homebuyers purchase a home. In general, down payment requirements are less, and owner-occupied properties benefit considerably from often far more favorable interest rates.
Many rental property owners first purchase a house, live in it for a year or so, and then converting it into a rental. This can be an excellent method to get your foot in the door and start your investment portfolio.
Buy a Duplex
Like the previous choice, another is to buy a duplex. The outline behind acquiring 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. The clear problem here is having to share your home with a renter. But the perks are that you will be collecting rent that may approximately cover your mortgage payment, reducing your living expenses and empowering 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 like a good one for you, a third choice would be to open a home equity line of credit (HELOC) on your residential property. If your property values rise over the past year or two, your home may have enough equity to permit you to borrow against it and apply the funds to buy an investment property. Though most lenders would only allow you 80% of your home’s value, you should keep a close eye on your property values and begin the application procedure only if you have a decent level of equity developed.
Reduce Closing Costs
Another approach you might consider is asking the seller or your lender to pay all or part of your closing costs if you’ve got enough cash for a down payment but are somewhat short on other expenses. 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 willing to cover the closing costs to ensure a quick sale.
For those ready to put in the work, there are several ways to make your dream of owning a portfolio of single-family rental homes come true. The experts at Real Property Management Last Frontier can assist! We work with rental property investors in Palmer and nearby, from beginners 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). To discover more, Contact us online or call 907-268-4779.
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.