Over the last few years, more and more investors have taken to rental property investment. Demand for rental property has increased with real estate dealers reeking in millions from sales. This rush for property ownership is quite understandable. Rental property investment is one with very promising returns. Do you know about buying rental property with no money down? Well, let us discuss how to acquire rental properties without putting all your money down.
Even though it's a more than worthy investment choice, investing in rental property is not always an easy ride. There's for instance the all too familiar case where you haven't enough capital to let you invest in property. This can leave you with very limited choices or even no choice at all. Are you currently short of funds? If yes, this needs not to quash your dream of owning a rental property. There are several ways in which you can still buy rental property with no money down.
How To Buy Rental Property With No Money
Gone are the days when real estate investment was a preserve of the very wealthy. Nowadays, even persons with limited financial resources can own real estate property. One only needs to explore the available options to find a way of owning property. In regards to buying rental property with no money down, one of the best options you can try out is that of borrowing. There are a good deal of lenders out there who can readily loan you the amount you need to buy a rental property.
With the help of banks and other lenders, you can easily acquire loans for rental property. Most banks will only require you to have satisfactory financial credentials. Things such as a high credit score, etc act as proof of your ability to repay their loans.
Seeking external funding is not just a way to fulfill a financial necessity. It is in itself a quite witty decision. Look at it in this aspect, you get to own rental property without breaking your back or exhausting all your savings. Banks offer a reasonable loan repayment duration. This being the case, you can always organize yourself and get to grow your rental property portfolio using loans.
Buying Rental Property With No Money Down – Loan Options
No lender will lend you money with no money down, and no seller will carry a note without you putting some money down even if it's a promise to do money in the future. There is no such thing as no money down in any type of real estate investment because the money is going to come from somewhere. Investors borrowing money for rental property investment can choose from this list of loans.
6 Ways To Buy Rental Property With No Money Down
1. FHA Owner-Occupancy Loans
FHA loan for homeowners is one of the quickest loans you can get for a buying rental property with no money down. Based largely on your credit score, owner-occupancy loans generally tend to have better terms. They attract lower interest rates and also call for quite minimal down payments.
Opting for FHA's owner-occupancy loan however only has one major setback, you must use the property as your residence for the first year. It's only after the first year following the purchase has elapsed that you can convert it into a rental. Only go for this alternative if you have the patience and discipline to do so.
2. Hard Money Loans
From the phrase “hard money”, you can tell that there's something that isn't quite okay here. Anyway that aside, hard money loans are an easy way to buy rental property with no money down.
With hard money loans, a lender doesn't gauge your merit on your credit score. Rather, lenders try to look at the prospects of your intended investment. What is its market value? What returns does it hold for the future? These are some of the questions that they (lenders) first ask themselves. A lender can finance even up to the entire cost of the property once they feel sure of its viability.
Given the fact that they aren't based on good credit, hard money loans do have harsher terms. For one, they attract very hefty interest rates and fees. Additionally, they are also likely to come with shorter repayment periods. Only apply for hard loans if you're certain that your property will constantly generate a high flow of cash.
3. Real Estate Partnership
A real estate partnership is not typically a loan or mortgage. It's in essence an agreement to share investment real estate ownership with another party. The agreement spells out the responsibilities of each partner as well as the terms of any transactions involving the shared property.
With a real estate partnership, the partnership company may agree to fund your entire rental project on certain conditions. One of these may be that you contribute to the project in a major way – like funding its management.
4. Private Loans
Private loans are loans from friends and loved ones. This is another loan option for buying rental property with no money down. Although many of us would rather borrow from banks and financial institutions, we have to understand that desperate times call for desperate measures. You sometimes just have to mix business with familiarity and borrow from your immediate circle.
The beauty of borrowing from friends and family is the “softer terms” involved. Everything isn't as scripted and predetermined as is the case with formal lenders. You can for example agree on much lower interest rates and more flexible repayment duration.
Away from its simpler terms and flexibility, it is most important that you honor the loan deal. Respect your terms of agreement and promptly meet your end of the bargain.
5. Purchase-Money Mortgage
Have you ever heard of a situation where a seller directly finances the buyer? Chances are high you haven't but this is exactly the case with purchase-money mortgages. The rental property seller offers you a loan to buy their property with. These kinds of loans are however not quite common.
6. Lease To Buy Later
If you by all means wish to buy a rental property yet it's currently impossible, you can try out this option. Simply lease a property than buy it later when you're ready. With this arrangement, you pay to rent and have the option to buy the property after a few years.
Benefits of Buying Rental Property With No Money Down
When you buy rental property with no money down, you'll essentially be buying with other people's money (OPM). The benefit of buying rental property with no money down is that you can keep your ‘meager' savings intact. You won't have to empty your bank to be able to own a rental property.
OPM also generally suffices for rental property ownership. Banks usually give money enough for down payments and may also in some cases cover the full cost of a property. Investors often make an income through rental properties and those who are not interested in the details of owning a rental property can still make money flipping homes. Take advantage of such loans to scale up your rental property investment.
If you are interested in buying rental properties and portfolios at this time, you can go to the Houston real estate market. Houston has everything: the people, the diversity, the business climate, being world renowned in energy, medicine, space, and manufacturing, and above all a booming real estate market.
References
- https://www.mashvisor.com/blog/how-to-buy-rental-property-with-no-money-down/
- https://www.google.com/amp/s/www.entrepreneur.com/amphtml/285242
- http://smallbusiness.chron.com/real-estate-partnership-agreement-74119.html