You are not alone if you want to consider investing in single-family rental homes but lack the resources to do so. Thankfully, 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, one may need to employ considerable creativity. By embracing one or more of the alternative approaches stated below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
Although it may seem paradoxical, buying yourself a house is among the most effective methods 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 lower, and owner-occupied properties benefit considerably from more favorable interest rates.
Several rental property owners first acquire a house, live in it for around a year or so, and then convert it into a rental. This can be a successful method to get your foot in the door and start your investment portfolio.
Buy a Duplex
Similar to the prior option, another alternative is to buy a duplex. The reason behind acquiring a duplex is to dwell on one side—thus qualifying for some of those favorable programs offered to owner-occupied properties—and rent out the other. The primary issue is the necessity of sharing your residence with a renter. But the advantage is that you will be collecting rent that may approximately cover your mortgage payment, reducing your living expenses and authorizing 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 convenient for you, an alternative option is to get a home equity line of credit (HELOC) on your residential property. If your property values have increased over the past year or two, your home may have enough equity to authorize you to borrow against it and use the funds to buy an investment property. Though most lenders permit financing up to 80% of your home’s value, you should keep a close eye on your property values and begin the application process only when you have established a substantial degree of equity.
Reduce Closing Costs
An alternative strategy to contemplate is requesting the seller or your lender to shoulder 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. Also, if you’ve got a very motivated seller, they may be interested to cover the closing costs for promoting a quick sale.
For those ready to put in the work, there are many choices to make your dream of owning a portfolio of single-family rental homes come true. The experts at Real Property Management Trusted Hands are here to help! We collaborate with rental property investors in Winter Haven and nearby regions, from beginners to veterans, to help assess prospective rental properties, explore off-market deals, and provide expert counsel on various aspects, including rental pricing and marketing strategies. For any inquiries, contact us online or call 407-794-7468.
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.