Rental properties can definitely be great investments. But is it possible to get into the property rental business without a lot of money?
Fortunately, you do not need to have a lot of money on hand or be rich to purchase your first rental property. In fact, many temporary management businesses start out with a single property. Then they work their way up to owning an entire apartment complex. Below, you will discover several ways to obtain mortgage financing for rental properties. Know that you, too, can start building your real estate portfolio immediately.
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A great way to get into the temporary or permanent rental property business is to purchase as an owner occupant. How this works is that you buy a home or condo that you believe will be a profitable rental property. Now, the catch is that you must live in the home for 12 months or longer. This is in order to satisfy the owner occupant loan requirements.
Owner occupants are often lucky enough to score the best financing terms. With FHA financing, you could get by with only putting down 3.5%. This would make the investment worthwhile. When you are ready to make the home a rental, you will just move out and the loan will stay in place with the original terms.
The great benefit of an owner occupant loan is that it gives you plenty of time to learn the property. You can also fix any issues and renovate before you actually rent it out.
Straight Rental Property
As mentioned above, you do not need to be rich to have a rental property business. In fact, all you need is a 20% down payment. This is what you will need if you want to purchase the property as straight rental property.
Additionally, do your research first, as you would with any other investment. For example, if you decided to invest in cryptocurrency, you would be certain to check the latest ethereum forecast before investing. In any case, make sure all of your I’s are dotted and your T’s are crossed.
Buying as a straight rental property does come with some requirements. These include a 20% percent down payment. Moreover, you’ll have renovation costs and closing costs. So, you should expect to pay approximately $40,000 up front.
However, be sure to check out the Freddie Mac and Fannie Mae investor properties before signing on the dotted line. That’s because these lenders will sometimes have 10% investor properties available. This would significantly reduce the down payment requirement.
Finding the Best Mortgage Rates
Scoring a good mortgage rate will improve your chances of acquiring multiple rental properties. Of course, it is never easy to get a great rate. However, with comparison shopping and a good credit score, you very well could reach your goal. Even though mortgage rates only vary by a few percentage points, the difference could be a lower monthly payment.
One thing that lenders are looking for is a well qualified applicant. If you are not the total package, then the likelihood of your getting a great mortgage rate is slim to none. In the first place, your FICO credit score must be high. That’s really the only way to get a decent mortgage rate.
In addition to a high credit score, you must have steady employment. Most lenders will only consider candidates with steady employment for the past two years.
Speak with Family Members
If you want to get the funding you need with no strings attached, speak with friends and family members. There is a good chance that you know someone who has a little money. With luck, there is a possibility that they’ll be willing to invest in your venture.
If this is the case, you’ll likely be able to convince them to loan you the money without high interest rates or other pressures. However, do not abuse your relationship. Make sure that you will indeed pay the entire loan back at the agreed-upon terms.