Everybody knows this! Real estate is capital intensive – and to buy investment properties, you must put down a large sum of money.
But there’s another way!
4 Ways to Buy an Investment Property
Wholesale is a popular “no money down” method.
Similar to flipping, wholesaling is a fast real estate investment strategy, but the wholesaler makes no repairs. The wholesaler contracts with a seller and then advertises the home to potential buyers. When the wholesaler assigns the contract to the buyer, the wholesaler makes a profit between the contract set up with the seller and the amount the buyer pays. The wholesaler must find a buyer before the contract with the seller ends.
With this method, you just collect a fee and move on. Usually these fees are pretty low, however, considering how much time you typically invest.
2. Joint-Venture (Equity)
The most common type of joint venture is with two parties contributing cash for the down payment and getting a bank loan for the remainder. However, here is a more creative example:
- Partner A: $1K
- Partner B: $1K
- Partner B shorter-term loan: $8K
- Bank Loan: $60K
The second partner’s short-term loan is due within one year. If it’s not repaid by the company, debt is converted to equity, and then Partner B owns 60% of the deal.
In this scenario, you still own 40% of a deal and you got this ownership for only $1K.
3. Private Loan
Private loans are loans between a private lender and you.
What makes this different from other strategies is that you can negotiate the terms to fit your deal.
4. Secured Line of Credit
If you have substantial equity in your current primary residence, you might want to consider a home equity line of credit (HELOC). These loans have very low-interest rates, and the payments are generally very low, as they are interest-only payments.
With lines of credit, banks like to see the balance move up and down. Therefore, if you plan to buy and keep the property as a rental, use the line of credit to buy and rehab, and then refinance the property with a more permanent type of loan.