Investing in real estate requires you have plenty of available cash. The average mortgage lenders prefer borrowers to have 20 percent down, which can quickly deplete your financial resources, especially if you buy multiple properties. It can take years to save up enough to buy again.
If you currently invest in real estate this way, that’s great. The reality is, however, that most investors rarely have that kind of cash for a down payment. In fact, the most successful investors are extremely creative when it comes to financing their deals. You can buy an investment property with very little cash on hand, and below are five ways to buy your first investment property for cheap.
Seller Financing
Seller financing is one of the most popular ways for someone to buy investment property. Essentially, as the name suggests, the seller provides the financing and sets the terms of the deal. In most cases, an investor needs little to no money down in order to obtain ownership of the property in a seller-financed deal. This option is especially beneficial for investors with less-than-perfect credit or those who lack enough capital for a traditional down payment.
Wholesaling
Wholesaling is another way investors make a profit in the real estate market. In this venture, the real estate investor never really owns the property, but instead, contracts with the seller to find a buyer. Once the investor finds a buyer, he then signs the contract over to them and collects his profit, which is the difference between the seller’s contracted price and what the buyer actually pays.
Equity Joint Venture
This is one of the best ways to own investment property without having to put a lot of money down. In an equity joint venture, two or more parties contribute funds to make the down payment. Percentage of ownership depends on the number of parties involved, but each shares gains and losses according to his or her percentage.
Private Loan
Of all the strategies for buying investment property for cheap, this one is the most beneficial. A private loan is a loan between a private lender and the investor. Terms of the loan are much more negotiable than traditional bank loans, and you often have the option of negotiating a no-payment period for up to one year, which allows you to make repairs and get the property ready for occupancy before making any payments.
Home Equity Line Of Credit
If you have equity in the home you live in, you can purchase an investment property using that equity. This type of loan typically carries a very low interest rate and payments are usually low as well since they are interest-only payments.
Many investors use this strategy to buy investment properties by obtaining a line of credit on a property that’s already paid off. Banks like this type of loan because they are usually first mortgages. The best way to utilize a home equity line of credit is to purchase and repair the rental property, and then refinance it with a more permanent type of loan.
There are many ways to buy your first investment property for cheap. If your dream is to own investment property, don’t disqualify yourself just because you don’t have enough capital for a 20-percent down payment. Consider the options above to make your dream a reality.
