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4 Alternative Funding Ideas to Begin Your Real Estate Journey

Real estate investor shaking hands to close a deal.Many individuals aspire to invest in single-family rental homes but may find themselves lacking the necessary funds to proceed. The good news is that there are many different ways to invest in rental real estate, even if you are short on funds. Exploring innovative strategies may be necessary when funding an investment property with little or no cash. By employing one or more of the alternative approaches provided below, you can make your dream of owning rental real estate a reality.

Buy a Primary Residence

It might seem contradictory, yet one of the most efficient approaches to buying your first rental property is to buy yourself a house. In contrast to loans for investment properties, many programs are designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and the interest rates frequently present more advantages for owner-occupied properties.

Many rental property owners initially purchase a house, reside in it for approximately a year, and then convert it into a rental. This approach presents a valuable opportunity to get your foot in the door and start your investment portfolio.

Buy a Duplex

A comparable alternative to the initial suggestion is to buy a duplex. The concept of purchasing a duplex involves residing in one unit—thus qualifying for some of those favorable programs offered to owner-occupied properties—and renting out the other. One significant drawback in this situation is the necessity of sharing your living space with a renter. However, the advantage lies in the fact that you will be collecting rent that may roughly cover your mortgage payment, reducing your living expenses and permitting you to save up for your next investment purchase.

Open a HELOC

Should the prospect of relocating or living in close quarters with your renter appear unappealing, an alternative approach would be to establish a home equity line of credit (HELOC) on your residential property. If your property values have increased in the past year or two, your home may have enough equity to allow you to borrow against it and use the money to buy an investment property. Most lenders won’t give you more than 80% of your home’s value. Therefore, it is essential to keep a close eye on your property values and initiate the application process only after you’ve built up a good amount of equity.

Reduce Closing Costs

In situations where you have sufficient cash for a down payment but are experiencing limitations with other expenses, one potential approach is to negotiate with 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. And, if you’ve got a very motivated seller, they might be inclined to cover the closing costs to facilitate a swift transaction.

Individuals who are prepared to invest the necessary effort can explore numerous strategies to make your dream of owning a portfolio of single-family rental homes come true. The professionals at Real Property Management Ascension can help! Our services cater to rental property investors in Ringgold and surrounding areas, ranging from novices to seasoned professionals. We assist in assessing prospective rental properties, identifying off-market opportunities, and providing informed guidance on various aspects, including rental pricing and methods of advertising. For more information, contact us online or call 706-760-7912.

Originally Published on Mar 18, 2022

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