If you are contemplating investing in single-family rental homes but lack the necessary funding, you are not alone. A favorable aspect is that there are many different ways to invest in rental real estate, even if you are short on funds. Innovative thinking may be required when funding an investment property with little or no cash. By executing one or several alternative approaches suggested below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It may appear unconventional, but one of the most effective strategies for buying your first rental property is to buy yourself a house. Unlike loans for investment properties, numerous programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are generally lowered, and interest costs are frequently significantly more beneficial for owner-occupied properties.
A lot of rental property owners initially purchased a home, lived in it for around one year, and then converting it into a rental. This presents an ideal time to get your foot in the door and start your investment portfolio.
Buy a Duplex
An alternative option, similar to the original, is to buy a duplex. The purpose of acquiring a duplex is to inhabit one apartment—thus qualifying for some of those advantageous programs offered to owner-occupied properties—and rent out the other. The evident drawback in this scenario is the requirement of cohabitation with a renter. Nevertheless, the advantage is that you will be collecting rent that may almost cover your mortgage payment, reducing your living expenses and helping you save up for your next investment purchase.
Open a HELOC
If relocating or living in close quarters with your renter seems suboptimal, an alternate strategy would be to secure a home equity line of credit (HELOC) on your residential property. If your property values have increased over the past couple of years, your home may have enough equity to enable you to borrow against it and use the money to buy an investment property. Most lenders would not extend more than 80% of your home’s value, so it is critical to keep a close eye on your property values and commence the application procedure only when you have accrued a significant amount of equity.
Reduce Closing Costs
If you possess plenty of cash for a down payment but are somewhat deficient in covering other expenses, one strategy you may contemplate is soliciting the seller or your lender to cover 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. Additionally, if you’ve got a very motivated seller, they may be interested in covering the closing costs to facilitate a swift deal.
For those prepared to dedicate effort, there are various opportunities to make your dream of owning a portfolio of single-family rental homes come true. The experts at Real Property Management Evertrust are willing to assist you! We assist rental property investors in Westbrook and neighboring areas, from beginners to skilled, to help assess prospective rental properties, locate exclusive offers, and offer expert guidance on numerous aspects, such as rental pricing and promotion (and more). Contact us online or call 207-550-0776 for extra information.
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.
