How to Buy an Investment Property with No Money Down
Whether you’re on the property ladder or not, there are many legitimate ways to fund investment real estate. From the BRRRR method to savvy co-borrowing, multiple methods exist to build your portfolio with little to no capital up-front.
11 Ways to Buy an Investment Property with No (or Minimal) Money Down
11 ways to build your property investment portfolio
What is the best way to buy an investment property with no money down?
11 ways to build your property investment portfolio
There are many options for buying an investment property with no money down—and these are 11 of the most realistic.
- The BRRRR Method: This stands for buy, rehab, rent, refinance, repeat—and is a model that both beginner and experienced investors can successfully follow. In brief, the money to purchase a distressed property and carry out the necessary improvements is funded by a hard money lender and agreed against the potential rental yield. Once the work is complete, the property is rented out, it’s refinanced, and another property is purchased.
- Rent your primary residence: If your home property is mortgage-free (or has minimal remaining), use the capital from this as collateral to finance a second home. You then live in this and use the rental income from the first property to pay the mortgage/s.
- Home Equity Line of Credit: More commonly referred to as a HELOC loan, this allows you to access the equity in your home as you need it—a bit like you would a credit card. You’ll be given a limit according to the property’s worth and a finite amount of time to draw against it. This can then be used to finance an investment property.
- Rent-to-own: Such a lease charges slightly higher than normal monthly charges, the excess of which is funneled into the purchase of the property.
- Seller financing: This is when a seller takes on the role of financing the property—usually if they’re mortgage-free (if they’ve inherited some real estate, for example). A bespoke legal agreement is drawn up between the seller and the buyer.
- A hard money loan: These include fix & flip loans, and the amount lent is determined by what the property can be sold for. A BRRRR loan is also considered a hard money loan. The common denominator of both is that the finance is based on the future worth, rather than the borrower’s credit score and/or income.
- Taking on an existing mortgage: As this suggests, it’s where a buyer simply takes over an existing mortgage—often with little to no down payment. You will, however, be required to pass all the regular credit and affordability checks to do so.
- Cash-out refinance: This is where your current mortgage is replaced with a new, larger one. You can then use these funds to purchase an investment property.
- House hack: Involves the purchase of a multi-unit property, where you live in one and rent out the others to cover the mortgage payments. If you qualify for a VA (Veterans Association) or FHA (Federal Housing Administration) loan, then this can often be achieved with little to no upfront payment.
- Co-investing: If you lack the finances but have a friend or family member who has the money but no time, you could enter into a mutually beneficial agreement. They provide the funding—you provide the time and effort.
- Use the equity in your home: Leverage the equity in your existing home and use this to fund an investment property purchase.
What is the best way to buy an investment property with no money down?
There is no “best” way to purchase an investment property with no money down—it will be dependent on your circumstances. For some, the BRRRR method is the best way forward… For others, using the equity in your primary house might be better.
Whichever way you choose, be sure to take the necessary financial advice and understand the risks before doing so. There are pros and cons to each, and it’s up to the borrower to carry out due diligence to ensure that whichever method they use doesn’t represent too high a risk.
Ready to Discuss Options. Contact BRRRR Loans and Let’s Make It Happen…!
Property investment is no longer solely the realm of the uber-rich. Many (and we mean many!) people are quietly making a substantial—and often passive—income through investment property—and with no money down upfront.
BRRRR Loans is one of the country’s leading lenders, offering a wide range of products from BRRRR, fix & flips loans, bridging loans, and more.
Find out more at https://www.brrrr.com and call us today to discuss your options.
Buy, Rehab, Rent, Refinance, & Repeat. A nationwide direct lender to real estate investors. If you have a project that needs to be funded, you’ve come to the right place.