| The single most obstacle that barricades potential real | | | | get the owner of the property to sell you it for no |
| estate investors from entering the lucrative arena of | | | | money down. |
| owning rental properties is funding. Finding different | | | | I personally have bought three properties using only |
| means of obtaining funds to pay closing costs, | | | | 5% down with the option of 0% down using a |
| putting money down on loans, and minor repairs if | | | | mortgage broker. It has worked great, but now I |
| needed upon purchase is not an easy task unless | | | | find that that method is getting harder to use. |
| your are already wealthy. Getting the money that | | | | Interest rates are rising rapidly, meaning that I must |
| you need to get started isn't necessarily easy, but | | | | now find homes that are extremely cheap relative to |
| below are a few methods that I personally found to | | | | monthly rent because interest rates are eating up my |
| work along with a few that I have heard work well | | | | profit. |
| but not yet tried. | | | | 3.) The old "second mortgage trick." With the entire |
| Methods for Funding Rental Properties : | | | | loan equaling 100%, take out a 30yr fixed loan for |
| 1.) Good Credit - I mention this method first because | | | | 80% of the total value. Next, take out a 15% down |
| this can often be more of a hurdle than a benefit. If | | | | payment at 15 years fixed to cover 15% of the |
| your credit is good (700s or so) then you have | | | | 20% that is going to be needed as a down payment. |
| already got an advantage over the rest of the | | | | Lastly, you must get 5% of the second mortgage. |
| crowd. Good credit ensures that you can get the | | | | This is great because it leaves you with only needing |
| best interest rates on the market (for investment | | | | 5% of the property value and it also gets you out of |
| properties) and easily obtain loans for thousands of | | | | paying PMI while giving you a tax-deductible second |
| dollars. | | | | mortgage. PMI is NOT tax deductible (This method |
| 2.) No-down payment - This method is a very real | | | | also works with a 20% second mortgage, giving you |
| method, but often comes with some prerequisites. | | | | a no-money down deal). |
| First, to get a no-money down loan you often have | | | | You will notice above that I use fixed rates for |
| to visit a mortgage broker. This isn't a bad thing, | | | | everything. Interest rates are rapidly rising in the |
| except you are certain to pay higher interest rates | | | | United States, and I would not encourage any real |
| than if using a traditional bank. Second, if you go to a | | | | estate investor specializing in long-term rental |
| traditional bank and have never purchased a home | | | | properties to use adjustable interest rate loans. They |
| before (including one for personal use), you may be | | | | quickly form alligators, or loans that get larger in size |
| able to fall into the category of a first-time buyer. | | | | every year even though you pay the entire monthly |
| This enables you to buy with no-money down and | | | | payment every month. This is because the interest |
| get out of paying PMI (private mortgage insurance). | | | | rate rises yet you continue to pay the minimum |
| Check your local banking system for more | | | | interest payment. Your equity quickly disappears. |
| information about that. Lastly, you may be able to | | | | |