If you’ve been dreaming about investing in single-family rental homes but lack the necessary funds to do so, you are not alone. Opportunely, there are many different ways to invest in rental real estate, even if you are short on funds. When funding an investment property with little or no cash, it may be necessary to employ unconventional methods. Utilizing one or more of the alternative approaches enumerated below, you can make your dream of owning rental real estate a reality.
Buy a Primary Residence
It may appear to be a contradiction, but one of the great approaches to buy your first rental property is to buy yourself a house. Dissimilar to loans for investment properties, many programs are designed to help first-time or other homebuyers purchase a home. Interest rates are frequently more beneficial for owner-occupied properties and down payment requirements are typically lower.
A significant number of rental property owners initially acquired a residence, occupied it for approximately one year, and then converting it into a rental. This can be a beneficial approach to get your foot in the door and start your investment portfolio.
Buy a Duplex
An additional alternative, comparable to the initial one, is to buy a duplex. The idea behind buying a duplex is to live on one side—thus qualifying for some of those auspicious programs offered to owner-occupied properties—and rent out the other. The most apparent disadvantage is that you are compelled to cohabitate with a renter. On the other hand, the advantage is that you will be collecting rent that may almost cover your mortgage payment, reducing your living expenses and letting you save up for your next investment purchase.
Open a HELOC
A third option is to open a home equity line of credit (HELOC) on your residential property if moving around or living in close quarters with your renter does not seem like a viable option. If your property values have increased in the past year or two, your home may have enough equity to enable you to borrow against it and utilize the money to buy an investment property. The majority of lenders won’t lend you more than 80% of your home’s value, however, so you’ll have to keep a close eye on your property values and initiate the application process only after you have amassed a substantial quantity of equity.
Reduce Closing Costs
Another approach you could consider is to request that the seller or your lender pay all or part of your closing costs if you have sufficient cash for a down payment but are still 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 agreeable to cover the closing costs to guarantee a rapid transaction.
For those who are prepared to invest the necessary time and effort, there are numerous methods to make your dream of owning a portfolio of single-family rental homes come true. The professionals at Real Property Management Resources can help! We provide expert advice on a wide range of topics, including rental rates, marketing, and more, to rental property investors in Edmond and the surrounding area, including both novice and seasoned investors. We help assess prospective rental properties, identify off-market bargains, and beyond. Contact us online or call 405-787-4429 to discover more.
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