Investing in real estate is a great way to build wealth. However, many people are hesitant to buy because of the large down payments usually required for investment properties. A downpayment is a percentage of the total price of a home that you pay upfront. If you are buying an investment property, you may be uncomfortable putting down a large amount of money. Think about your situation and how to get the maximum benefit for your money. Fortunately, there are many ways to buy an investment property with a minimal downpayment. Here are some options to consider.
- Improve Your Credit Score
There are a lot of factors that affect your credit score. A good credit score can help you get approved for a loan with a low-interest rate and minimal downpayment. One way to build your score is by paying off your bills on time and keeping your usage low. Always keep your balance low on credit cards, loans, or any other type of debt you may have accumulated. Your credit score will show that you are a responsible borrower. If your credit looks good, you can get approved for an investment property loan with a minimal downpayment.
- House Hack a Multifamily Property
Multifamily properties are homes or apartments in which there are more than one unit. You can use one of your units as a residence and rent the other one. The rent from the second unit can help pay for the mortgage. You will not have to put down a large amount of money, and you can build equity in the property over time. When choosing a property, check the value and see how much you can expect to return on your investment. If you do not want to transfer any equity, you can house-hack a single-family home. When considering Property management in Houston, find a company that will handle everything from keeping track of the finances to guaranteeing your property is well maintained.
- Take Out a Home Equity Loan
A home equity loan is similar to a mortgage, but it is only based on how much equity you already have in your home. This type of loan is an excellent option if you already have some equity in your home and can be used for an investment property. This loan is often a better option than taking out another type of bank loan with high interest. To qualify for a home equity loan, you must have more than 20 percent of the purchase price of your investment. There are different home equity loans, but the most popular one is a second mortgage. The terms of these loans vary greatly depending on your credit score, the value of the property, and how much money you want to borrow.
- Help From Family or Friends
Another solution is to ask your family or friends for a loan. This option will likely have very low interest. There are some risks involved with asking family and friends for a loan. It can be not easy if the lender wants their money back immediately instead of allowing them to pay it back over time. Choose your friends carefully before you approach them. Discuss your plans to help them decide if they feel comfortable enough to invest in your project. Have everything in writing, including the terms and conditions of the loan.
- Move-in for a Year
An owner-occupied mortgage is a loan in which the borrower lives in the home. This type of loan is generally easier to get approved for because you can show that you will be living there and paying off your mortgage instead of just trying to invest. This can be an excellent way to get a minimal down payment and start building equity immediately. While living in the home, you can use the mortgage payment to pay off the remainder of your down payment.
Knowing your options can help you get started in the right direction. Talk with a property management company about your options and how much money you need for your down payment. A professional can help you decide which method is best for your situation.