1. Buy a Primary Residence
This may come off as elementary, but it makes sense to buy your own house first, prior to investing in a rental property. Unlike loans for investment properties, there are many different programs designed to help first-time or other homebuyers purchase a home. Down payment requirements tend to be lower, and interest rates are often much more favorable for owner-occupied properties. There are a good number of rental property owners who have done the same thing — buy themselves a house, and after some time, convert it to a rental. This is certainly one way to kick the ball rolling towards your very own investment portfolio.
2. Buy a Duplex
Much like the first option, buying a duplex would also be a good choice. The idea is that when you buy a duplex, you can avail of the same programs offered to owner-occupied properties, but you can rent out the other unit. The only issue with this is that you will be sharing a home with a renter. But the upside is that you will be collecting rent that may nearly cover your mortgage payment, reducing your living expenses and allowing you to save up for your next investment purchase.
3. Open a HELOC
Living in the same home with a renter might be too intrusive for you. So, what you can do is you can open a home equity line of credit (HELOC) on your residential property. As time passes, your property values will most likely go up and build equity. As such, you can borrow from a line of credit total to the amount of that equity and use that money to buy an investment property. Generally, lenders will not go beyond 80% of your home’s value, so it’s best to keep an eye on your property values and keep track of how much equity has actually been built up.
4. Reduce Closing Costs
While you may have the down payment ready, there are other expenses you need to think of. If you end up short on those expenses, you can try to ask your seller or lender to handle the closing costs for you. You might land yourself a lender who will offer you a rebate to try and help get the cash needed to a minimum for closing. It might even be possible that your seller just really wants to get it over with, so much so that he will offer to handle the closing costs for the sale.
The possibility of owning a portfolio of single-family rental homes is but an arm’s length away from those who are determined to reach it. Our professional Boerne property managers can help! We work with rental property investors, from beginning to experienced, to help assess prospective rental properties, locate off-market deals, and offer expert advice on everything from rental rates to marketing (and beyond). Contact us online to learn more.