How to Buy a Rental Property with No Money: 10 Smart Options

You have always wanted to invest in rental properties, but the problem is, you do not have enough cash to get started. Having little to no money down is not necessarily a deal breaker if you are looking to buy these types of assets. Did you know there are many strategies to buy property and NOT dip into your personal savings?

Yes, you heard it right—it is possible to buy a rental property with no money and start your journey as an investor. All you need to do is know the financing strategies that allow you to buy real estate without having to put much of your own money into the upfront cost of the purchase.

In this post, we will discuss the various ways to help you kick-start your rental property portfolio without having to spend every penny of your savings. We will also give you some tips on how to make things work and get the most out of your investments.

10 ways to buy a rental property with no money (1)

10 Strategies for Financing Rental Property with No Money

Of course, buying any real estate asset requires some form of cash investment. But with the following strategies, you can definitely purchase rental property with no money shelled out from your own pocket.

1. Use a Home Equity Line of Credit

A home equity line of credit (HELOC) lets you borrow money from your existing home’s equity. By taking out a HELOC, you can use the funds to purchase a rental property without having to dip into any of your own cash.

(P.S. – I did this to be able to purchase my second Airbnb property!)

The amount that you can borrow using a HELOC will depend on the value of your home and how much equity you currently have. Typically, lenders will allow borrowers to take out up to 80% of their total available equity depending on their financial situation.

When using a HELOC to finance your rental property, you can have access to the line of credit for a period of 5 to 10 years (the typical draw period for HELOCs) and use it as needed. The interest rate is variable, so it may change over time depending on market conditions. You will also be expected to make minimum monthly payments in addition to paying off the loan within its term period. Keep in mind that lenders may require that you purchase private mortgage insurance if you are unable to meet their down payment requirements or if your home’s value has decreased since the time of purchase.

A HELOC is an incredibly useful tool when investing in rental property with no money upfront. However, make sure you will be able to make your payments on time and in full.

2. Take Advantage of Cash-Out Refinancing

Another popular strategy that new investors use when financing rental property with no money is cash-out refinancing. This process involves taking out a loan to pay off your existing mortgage and then using the additional funds (the difference between the amount of your original loan and the new loan) for making further investments.

Unlike HELOCs, cash-out refinances are considered long-term loans and usually come with lower interest rates than other types of financing options. Depending on the size of your original loan, you may be able to access up to 85% of your home’s equity in cash.

The biggest advantage of using a cash-out refinance is that it allows you to borrow more money than you would typically qualify for through traditional loans or lines of credit. However, keep in mind that this type of financing can be expensive due to the fact that you are required to pay closing costs and any other applicable fees associated with your loan.

3. Find Existing Mortgages to Assume

When you take the time to explore the real estate market, you may come across properties that already have existing mortgages. This can be a great way to buy rental property with no money down on your part since the current owner has already paid for some of the purchase price of their home.

Assuming an existing loan is usually done through a process known as “assumption financing”. In this case, the buyer agrees to take over the seller’s mortgage and continue making payments on it. Depending on your financial situation, some lenders may waive the need for a down payment, or you might just have to pay a smaller amount than what was originally due.

However, before you jump into this kind of deal, you should think about the risk of defaulting on your payments. If this happens, you could end up losing your home as well as any money that was put down for the initial purchase. Be sure to budget accordingly and choose a property that fits within your means so you can maximize your returns without exhausting yourself financially.

Also, keep in mind that you should always have legal representation when taking over an existing loan agreement. A lawyer or real estate specialist can help ensure that all parties involved are protected from potential disputes or misunderstandings during the process.

4. Try the BRRRR Strategy

Popular among house flippers, the “Buy, Rehab, Rent, Refinance, Repeat” (BRRRR) strategy is also a great way to buy a rental property with no money. The idea behind this strategy is that you acquire a distressed property using a home improvement loan, make the necessary renovations on it, rent it out for income, and refinance the loan to pay off the initial purchase price.

The key to success with the BRRRR strategy is being able to accurately calculate how much you need to spend on repairs and renovations in order to increase your home’s value significantly enough for refinancing at a profit. You should also take into account any applicable taxes or fees associated with buying and renting out properties since these can add up quickly.

In general, this type of financing works best when you are dealing with single-family homes or small multifamily units.

In this strategy, you’ll do a cash out refinance after your renovations are complete. The goal is to get as much cash back as you put into the deal, leaving little to no money on the table.

If you’re starting a short term rental, using a DSCR mortgage loan for an Airbnb is your best options here.

house keys to rental property exchange

5. Find a Co-Borrower to Handle the Down Payment and Closing Costs

If you have a relative, friend, or colleague who is willing to help you with your purchase, then you can have them as a co-borrower. This means that instead of having to come up with a large down payment and closing costs on your own, they would be responsible for these expenses.

In this situation, both parties would share the responsibility of making payments on the loan, as well as any associated fees, such as insurance premiums or property taxes. Make sure you discuss all details related to the loan agreement carefully so that everyone involved has an understanding of who will be responsible for what.

Also, it would be good if your co-borrower can get something from your agreement as well. After all, they would also like to see some returns from their investment. For example, you could negotiate a share of any profits you make from renting out the property.

When using this strategy, it is important that both parties trust each other and maintain open communication throughout the loan term in order to ensure a smooth and successful investment.

6. Use Seller Financing

If you are unable to secure traditional financing, then you can consider this strategy for no money down real estate investing. In this case, the seller of a property becomes the lender and provides you with all or some of the funds necessary for your purchase.

This type of transaction usually involves negotiating an agreement that is beneficial for both parties. For example, you can negotiate lower interest rates than what you would receive from a bank, while the seller may be offered a higher return on their money than if it were deposited in a savings account.

Seller financing also requires less paperwork compared to other types of financing options and can help you access funds quickly when needed.

7. Take Out a Hard Money Loan

Hard money loans are a type of financing that involves borrowing from private investors, typically real estate professionals. This is one of the no money down real estate options that are usually used as a last resort when all other financing options have been exhausted, as it involves higher interest rates and much stricter repayment terms than traditional loans.

These loans are secured by an asset, such as your property, and you will be responsible for making payments to the lender according to the agreement. Typically, the loan amount is based on the value of the property rather than any existing debt, giving you access to more capital upfront if needed.

Since hard money loans are very short-term in nature (often lasting from three months to three years), they can often be used to finance projects that would not qualify for traditional financing. However, in exchange for providing the capital upfront, hard money lenders may require additional fees than normal loans. This makes them a less appealing option if you are looking to invest in long-term rental properties.

These loans can be beneficial if your goal is to buy distressed properties that need immediate repairs or improvements.

8. Use Your Credit Card

While not many people recommended using your credit card to buy a rental property with no money, this option can be a viable solution if you have no other alternatives. Depending on the card issuer, some credit cards may allow you to advance cash up to a certain limit and use it as a down payment for your purchase.

You will need to review each credit card’s rules and regulations in order to determine if this is an available option. Also, make sure that you have enough room on the card for the amount needed and pay attention to any fees associated with using the service as these could add up quickly if left unchecked.

In essence, using your credit card should only be considered when all other financing options are unavailable or inadequate for your needs. Be sure to make payments on time so that you do not incur any additional penalties.

9. Find Down Payment Assistance Programs

Some financial institutions, such as banks and credit unions, may offer down payment assistance programs for borrowers who meet certain criteria. These programs usually involve the lender matching your deposit up to a certain amount or providing you with additional funds to be used as a down payment on the loan.

In order to qualify for this option, you will typically need to demonstrate good creditworthiness and have enough income to cover monthly payments. Be sure to thoroughly research all available options in your area so that you can determine which one is the most appropriate solution for your situation.

10. Explore Government Grants

Of course, when we speak about no cash investment rental properties, we cannot forget about government grants. While they are difficult to come by, it is possible! Access funding through federal and state housing programs that offer assistance with purchasing a property.

Like down payment assistance programs, these grants typically have specific requirements that must be met in order to qualify. You will also likely need to submit an application and complete a series of interviews or paperwork.

So, there you have it! With these strategies, you should be equipped with all the starting info you need on how to buy a rental property with no money (check out for more tips). Remember that no single strategy works for everyone, so you should carefully assess your own financial situation and determine the best option for your needs.

how to buy a rental property without using your savings

Final Thoughts

To buy a rental property with no money is entirely possible if you know where to look and have some patience. With careful planning and research, you can make it happen without having to spend a single dollar out of pocket.

For more handy tips on real estate investing, please check out our other posts. Good luck!

As a recap, here are the strategies we talked about in this post to buy rental property with no money (or close to it!)

Hey, I’m Melissa.

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