Many individuals have contemplated investing in single-family rental homes but lack the requisite capital. Thankfully, there are many different ways to invest in rental real estate, even if you are short on funds. One may need to exercise creativity while funding an investment property with little or no cash. By adopting one or two of the alternative approaches mentioned below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
Although it may seem odd, buying yourself a house is among the best methods to buy your first rental property. Unlike loans for investment properties, a lot of programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements are generally smaller and interest rates are frequently more advantageous for owner-occupied properties.
The first step for rental property owners was to buy a home, reside there for a year or so, and then converting it into a rental. This might be a wonderful approach to get your foot in the door and start your investment portfolio.
Buy a Duplex
Buying a duplex corresponds to the initial option. The argument for purchasing a duplex is to stay in one unit—thus qualifying for some of those beneficial programs offered to owner-occupied properties—and rent out the other. This presents the evident disadvantage of necessitating cohabitation with a renter. Nonetheless, the advantage lies in the potential to collect rent that may nearly cover your mortgage payment, reducing your living expenses and enabling you to save up for your next investment purchase.
Open a HELOC
An additional option is to obtain a home equity line of credit (HELOC) on your residential property if moving around or living in close quarters with your renter is undesirable for you. If your property values have appreciated in the past year or two, your home may have enough equity to let you borrow against it and use the funds to buy an investment property. You must keep a close eye on your property values and wait to begin the application procedure until you have a sizable amount of equity built up, as most lenders would finance just 80% of your home’s value.
Reduce Closing Costs
Another strategy is to ask the seller or your lender to pay all or part of your closing costs if you have sufficient 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. Aside from that, if you’ve got a very motivated seller, they may be keen to cover the closing costs to promote an immediate transaction.
For those willing to invest the effort, there are many approaches to make your dream of owning a portfolio of single-family rental homes come true. Assistance is accessible from the specialists at Real Property Management Sugarland! We team up with rental property investors in Missouri City and nearby, from inexperienced to seasoned, to help assess prospective rental properties, determine off-market deals, and offer professional advice on various aspects like rental pricing and marketing strategies. Contact us online or call 832-333-9923 for extra knowledge.
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