How to Buy Rental Property With No Money Down: A Beginner’s Guide
With an increasing population, the demand for rentals has doubled. More and more real estate dealers are bagging millions from consumers looking for rental property investment since it has promising returns. It generates ongoing passive income and is a good long-term investment since the value increases over time (if you’re being smart about it).
You probably want to make an investment in rental property as well, but do not have enough capital. Well, worry not. There are some properties that you can buy even with no money down. Because of this new advantage, you are not boxed-up with a limited set of choices.
Here’s how to bag that rental property with no money down.
1.Hard money loans
Hard money loan is the most convenient way to purchase a rental property without anything. With this, your lender will look at the prospect for investment. They will seek the property’s market value, return on investment, and property valuation.
They can actually help finance the property if it proves to be worth it. Since these loans are not based on credit score, it will have higher rates and fees. Most likely, since the risk is higher, there are also shorter repayment periods.
If you are still looking for prospective homes, you may check out the Best Real Estate Directory online.
2.Rent-to-own or lease-to-buy deals
If you still can’t afford to make a down payment, you can try out a rent-to-own scheme. With this option, your rent can stand as amortization payments for your home.
Instead of your rental payments going nowhere, you can own a property in the end with it. After a few years, you are also given the option to buy the property you are renting.
There are many matters to consider when purchasing a new home especially for beginners, and this arrangement is one of them solely because of practicality and affordability.
Although you can borrow from banks, the most convenient way to loan is to borrow from your closest friends or relatives. With this arrangement, you can get leaner terms and conditions. You may also agree on a more flexible repayment schedule and lower interest rates.
However, since this is with those people around you, it is crucial that you honor and respect the loan deal. You would not want any complications and misunderstandings with them just because of it.
Another way to purchase a rental property without any cash is to assume the seller’s mortgage and pay the monthly amortization to the bank on their behalf. With this arrangement, you will only need to pay the remaining balance of the loan.
In this case, you will no longer need to file a new loan application. You’ll just be paying off an existing one. The sellers that usually do this are the ones who need the money immediately or are in the rush of getting the property off their hands. You can find some of this deals with your real estate agent.
5.Real estate partnership
To own a rental property with this type, you will no longer need a mortgage or loan.
Coming from the name itself, the arrangement is to share ownership of the investment of real estate with someone else. Both of you will sign an agreement stating the duties, responsibilities, terms, and conditions involving this transaction. Through this partnership, you can agree on how much funding you need to make and interest rates as well.
The only disadvantage to this arrangement is having to share ownership of your own home, which may pose some complications or inconvenience in the future. Make sure you iron out all terms and conditions in the contract with a lawyer present.
Another strategy is to use the buy, renovate, rent, refinance strategy. With this arrangement, you are required to fix and repair the property. Although this may require a little bit of cash at first, it is way lower than making that down payment up front.
Once the renovations and repairs are completed, you may refinance the property with lenders and get the cash you used for renovations and home improvements back.
The days when you had to have much wealth to invest in real estate is long gone. Anyone can have several options to find a way to own rental property without having to make a down payment. Just follow the guide above, and you will be able to own property without breaking the bank.