Real Estate Investing With Little Money Down

person pointing on the screen of a laptop

Real estate can be a pathway to building wealth through rental income and property appreciation. But coming up with a big down payment can deter new investors. Luckily, various options exist to invest in real estate and buy rental property with low down payments.

Leverage FHA Loans

FHA loans only require a 3.5% down payment for owner-occupied residential properties. This government-backed financing makes it easier to buy a small multi-family rental property or house hacking opportunity.

Use Seller Financing

Ask the seller to finance a portion of the purchase price over time. This reduces the mortgage amount and your needed down payment. Seller financing works best with private individual sellers.

Partner to Raise a Down Payment

Team up with other interested investors to pool your money for a larger down payment on a property. Set up an LLC partnership and clear operating agreements for allocating income, expenses, ownership, etc.

Borrow from Retirement Accounts

You can tap up to 50% or $50,000 of vested balances from a 401(k) or IRA without tax penalties to fund real estate purchases through a short-term loan. This capital can give you more down payment flexibility.

Find Low Down Payment Programs

Explore down payment assistance programs offered in your state or municipality. These programs provide grants or low interest second loans to cover most of the required down payment for eligible home buyers.

Hard money and private lenders also offer loans for real estate investing with little money down. The tradeoff is higher interest rates and costs. With creativity and leveraging the right financing tools, you can begin investing in rental real estate without large capital reserves.

Leave a Reply

Your email address will not be published. Required fields are marked *