Real estate investment properties offer a great way to invest your money and grow your wealth. If you’re looking for a low-risk investment, one of the most significant benefits of investing in real estate is that it’s relatively simple to get started with minimal down payments. We’ll go into how you can support the property with little or no money upfront and how these options may affect your investment’s total return. We’ll also offer some advice on how to find a property that fits your budget.
- Improve Your Credit
A mortgage is one of the most popular ways to finance real estate investments. It’s important to note that lenders will require a specific credit score before you’re approved for a loan, so to raise your score, you’ll need to improve your behavior as a borrower. To get started, check your credit report annually at AnnualCreditReport.com. Ensure all the information is correct, and dispute any errors you find with the bureaus directly. According to Property management in Houston, you can improve your credit by making timely payments on all your credit cards and loans, keeping your balances low, and taking steps to increase your available credit.
- Use the BRRRR Method
One of the easiest and most common ways to invest in real estate is through a “buy, rehab, rent, resell” deal. In this scenario, you would buy a property close to the market value, fix it, and rent it out. When you feel the property has appreciated enough that rental income won’t cover your mortgage payment (and thus requires you to sell), you can purchase another property with a little down and repeat the process.
One great way to leverage your down payment is through a “cross-collateralization” approach, where you buy and collect rent on a property while you get money from an unrelated loan. A cross-collateralized loan, or “subordination agreement,” is a legal document stating how two or more loans are linked together through loan modifications. Getting started can be challenging if the only thing you’ve ever done with real estate is bought and sold.
- Move in for a Year
Some real estate investors choose to move into a house themselves for a year and pay the rent out-of-pocket to get their money back upfront. This strategy is not for everyone, but if you’re young and have no other responsibilities (like a family), it can be worth your while. Accordingly, moving into a house for a year before selling the home can save you quite a bit of money.
- House Hack a Multifamily
Another possibility is to buy a smaller multifamily property, like a duplex or triplex, and live in one of the units. You would pay your mortgage from the rental income you receive from the other two units. This can be pretty lucrative if you’re looking for a long-term investment. Accordingly Property management in Houston, you can make a lot of money with a house hack.
- Borrow the Down Payment
You can also work with a bank or a family member to get a loan for your down payment. Lenders will often require you to put 20% down on any new mortgage, but if you have that much money, you may as well use it yourself. If not, you might be able to borrow from friends or family to put the money down on a property and then pay these loans back from rental income and the monthly mortgage payments.
Minimal Down Payments On Properties can be an enriching experience if you don’t mind investing time and effort. As mentioned above, it is vital to keep up with your credit, dispute any incorrect information, and do your best to keep the balances on all of your credit cards and loans low. You can also apply for a loan from friends or family or through a program like Prosper’s first-time homebuyer program if they lend you the money.