5 Low Down Payment Options to Get Started as a Real Estate Investor

We all know that buy and hold real estate investing is one the best ways to achieve financial freedom and a secure retirement. 

"Real estate investing, even on a very small scale, remains a tried and true means of building an individual's cash flow and wealth." -Robert Kiyosaki

The biggest challenge new investors face is the high barrier to entry. Real estate is expensive, and conventional investment financing requires 25% down. With many 4-plexes selling for over $600k, you need at least $150,000 for a down payment. 

5 Low Down Payment Options

Here are the Top 5 ways to get started if you’re not sitting on at least $150,000 in your savings account: househacking joe nalley real estate

  1. House hack a multi-family property - FHA loans can get you in for as little as 5% down, but if you have a VA loan you could get in with no money down. You have to live in one of the units for at least a year, but you are free to move on to another property after that.
  2. Live in flip – If you sell a home that has been your primary residence for a couple years, you might be able to exclude a couple hundred thousand in gains and even more if you’re married. This is not a deferral but an exclusion; if you meet the requirements, you’ll never pay tax on this gain. I’m not a tax professional or a lawyer so check with your tax advisor for the details before attempting this strategy.  
  3. Short-term rental house hack If you currently own your home, find a way to include an Airbnb or other short-term rental in your existing house. Some people have MIL units they rent on Airbnb, but others just rent a bedroom in their home. If you’re buying a house, think about these opportunities in addition to a traditional house hack.  Real estate investing joe nalley
  4. House Hack a single-family residence – If you’ve been living with roommates, this is the easiest way to get started. I’ve known several people that rented out their extra bedrooms and covered their entire mortgage. If you’ve lived on your own for a long time or have a family, this may not be a move you’re willing to make, but if you’ve been living with roommates in a rented apartment, this is really no different except it’s your house.
  5. BRRRR Ownership Buy, Reside, Relocate, Rent, Repeat. You buy a house to live in for at least one year with owner-occupied financing, then relocate and rent it out. This exceptionally powerful when combined with the other strategies, especially house hacking.

Joe Nalley Real Estate

When implementing any of these strategies, it’s important to develop an investor mindset and make your purchase with your investment plan in mind. You might have to take a little bit of a lifestyle hit or deal with a slightly longer commute in the short run, but in the long run, you’ll own your future and have even more options to live the life you want. There is no one size fits all. If you’re planning to house hack, buying a one-bedroom condo in the heart of the city might not be a good option, but if you want to live in flip, you could benefit from the fast appreciation in a hot neighborhood.

It’s important to work with an investment savvy real estate broker to help develop and execute your plan.


Joe Nalley Sagareus Real Estate Advisor

 

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