Most real estate investors ask whether it's possible to successfully buy with no money down or with little out-of-pocket cash. Although it is advisable to have some money when venturing into a desired real estate investment, it's possible to close down on a deal without needing to dent your savings. For halfway house investors, such a possibility presents an avenue for easy property acquisition that will help others and get you some passive income, although profit may not be the primary motivation. So, what does it mean to buy real estate without any down payment?
Investing in real estate with zero down payment
In a nutshell, traditional lenders such as banks and credit unions require a down payment if you make a rental property purchase. Typically, you'll have to pay about 20% of the purchase value. Depending on your type of property, a down payment can be equated to tens of thousands. In the case of “no money down real estate investment,” you put in no money or very little from your own pocket. This is achieved through various creative financing options and other stakeholders in the real estate industry relevant to your purchase scenario. Read on to understand the multiple ways in which you can invest in real estate with no money down.
Use an existing mortgage
Some real estate investors may utilize a “subject to” deal, in which the seller uses the buyer's existing financing to fund part of the purchase price. If the new loan has a low-interest rate, using the seller's existing financing is particularly beneficial. In this case, the investor avoids having to seek alternative funding from a different lender, and he or she reaps the benefits by paying off a debt further in the appreciation cycle.
In exchange for making mortgage payments, the buyer retains the deed to the home. However, this option is not always readily available. Some loans contain a due-on-sale provision that prevents the prospective buyer from assuming the mortgage.
Find an investment partner
This is a common method of investing in real estate using other people's money (OPM). You will be able to find a private investor or financing party willing to join you in the investment, providing you with the funds you need to purchase the property. The amount may be either the down payment or the entire purchase amount paid in cash in exchange for a part of the profit you get from the investment.