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4 Alternative Funding Ideas to Begin Your Real Estate Journey

Real estate investor shaking hands to close a deal.If you’ve wanted to invest in single-family rental homes but don’t have the funds, you’re not alone. The excellent news is that 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, you may need to go outside the box. Utilizing one or more of the alternative approaches outlined below, you can make your dream of owning rental real estate a reality.

Buy a Primary Residence

It may seem counterintuitive, but one of the finest methods to buy your first rental property is to buy yourself a house. Compared to loans for investment properties, several programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are typically much more advantageous for owner-occupied properties.

Several rental property owners began by purchasing a home, residing in it for about a year, and then converting it into a rental. This can be an excellent method to get your foot in the door and start your investment portfolio.

Buy a Duplex

Another alternative, identical to the first, is to buy a duplex. The concept behind purchasing a duplex is to reside on one side—thus qualifying for some of those advantageous programs offered to owner-occupied properties—and rent out the other. The obvious disadvantage here is having to share your home with a renter. However, the positive side is that you will be collecting rent that may almost cover your mortgage payment, reducing your living expenses and enabling you to save up for your next investment purchase.

Open a HELOC

If relocating or living in close quarters with your renter does not appeal to you, a third alternative is to acquire a home equity line of credit (HELOC) on your residential property. If your property values have increased in the recent year or two, your home may have enough equity to help you borrow against it and utilize the proceeds to buy an investment property. Several lenders will not lend you more than 80% of your home’s value, though, so you’ll need to keep a close eye on your property values and begin the application procedure only when you have accumulated a significant amount of equity.

Reduce Closing Costs

If you have sufficient cash for a down payment but are short on other expenses, you might consider asking the seller or your lender to cover all or part of your closing costs. Some lenders offer rebates or other programs to help reduce the cash you’ll need to bring at closing. Furthermore, if you have a very motivated seller, they may be eager to cover the closing costs to facilitate a rapid sale.

For those willing to put in the effort, there are several approaches to make your dream of owning a portfolio of single-family rental homes come true. The pros at the Real Property Management Summit can assist! We engage with rental property investors in Staunton and surrounding areas, from beginners to experienced, to help assess prospective rental properties, find off-market offers, and provide expert advice on everything from rental rates to marketing (and more). For further information, contact us online or call 540-315-8090.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

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