How to Buy Rental Property with Little Money
Do you dream of owning a rental property?
Can you hardly wait for the day when tenants send you checks every month?
Maybe you’re even interested in pursuing property investment as your sole source of income.
Whatever the case, for people who don’t have massive budgets, a dream is about as far as they ever get to this kind of future.
Fortunately, it’s possible to buy a rental property with little money.
How to Buy Rental Property with Little Money – 3 Options to Consider
In fact, learning how to buy rental property with little money is actually fairly simple. While it may take a bit of patience to execute these strategies, any of the following could give you an investment property even if your budget is modest.
1. Look for Seller-Financing from Motivated Homeowners
The easiest way to buy a home without spending a lot of money is through seller-financing.
This strategy has become popular among those who can’t buy rental properties because they don’t have the money to meet traditional lenders’ requirements – mainly the deposit – for receiving a mortgage.
The idea behind this approach is that you can buy a rental property with little money because you don’t actually need a traditional lender. Instead, you work out a deal with the current owner where they essentially lend you the money required.
Then, you pay them back over time just as you would with a bank.
While you’ll need to find a motivated seller for this arraignment, the terms you can negotiate are far better than anything you’ll receive from a traditional lender.
A similar option is a seller-held second mortgage.
If the homeowners will just cover your deposit (as a second mortgage), you can use it to secure a traditional mortgage. You’ll have to check with your lender to make sure they’ll allow this, but if they do, you can literally purchase a home using two mortgages but not actually spending a dollar.
2. Assume the Seller’s Current Mortgage
Another option is to take over the seller’s current mortgage and continue making payments on it for them.
For example, say the homeowner still has five years left on their mortgage. If they don’t sell, they’ll have to continue paying $1,000 a month to cover it.
By assuming their mortgage, you’d pay the remainder, which would be $60,000.
Now, that may still be too much for your budget, but if you only have to cover 10% of that to take out a loan to cover it, you could buy a house for only $6,000. Even with the extra amount the homeowner may tag on to agree to these terms, you’d still be paying a lot less for the property.
3. Buy a Duplex and Move In
Finally, duplexes are great for new investors because you can live in one of the units while renting out the other.
You can often charge the equivalent of your monthly mortgage payment in rent to your tenant, meaning you basically get to live there rent-free. Of course, all the while, you’re building equity, which you can later use to buy yet another home.
Ideally, if you can use one of the above methods to lock in a duplex, you’ll need even less money to get started with real-estate investing.
The Best Way to Buy a Rental Property with Little Money
If you want to buy a rental property with little money, the best way is by learning how to do so from a mentor.
Follow the lead of someone who already owns multiple rental properties and understands how this entire process works. Otherwise, it’s far too easy to waste money on beginners’ mistakes.
At A Team Property, we’d absolutely love to help. Real-estate investment is our passion, one we love sharing with people who are just getting started.
Contact us today and let’s discuss what your budget looks like and what your goals are.