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Do you want to know how to buy an investment property with no money down?

This article discusses Ways to Buy an Investment Property with No Money Down.

People are constantly looking for ways to invest their money to make a passive income and build wealth.

According to connectedinvestors.com, slightly more than 2 million Americans are real estate investors, and yahoo finance reports that about 145 million adults own cryptocurrency or stocks. There are many reasons for the disparity between people who invest in real estate and those who don’t. Some believe that you need to have thousands of dollars saved up before getting started, but this isn’t true! People often choose to invest in other, less stable assets because they think it will make them rich quicker and with less personal financial investment. However, we’re here to change that belief! If you’re wondering how to buy an investment property with no money down– read till the very end of this article!

By the end of this article, you’ll know how to buy investment property with no money down.

1. Invest in multifamily.

For first-time investors, purchasing a multifamily property could be the wisest decision. Especially, If you’re stuck between buying an investment property or a residential home, a multifamily duplex or triplex is the perfect solution. You’ll be able to make money by renting out one unit and living in another. A standard commercial loan requires a down payment of at least 20%. Fortunately, by buying an investment property you’ll live in, FHA or Conventional loans with 3% or 3.5% down payments are available.

Even though 3-5.5% for a downpayment looks much better than 20% down for a commercial loan, we still have to answer the main question of how to buy an investment property with no money down.

With some time and research, you can find a seller willing to cover your closing costs and offer seller’s assistance.

What is the sellers’ assistance?

Sellers’ assistance is where a seller agrees to pay some or all of the buyer’s closing costs to increase the chances of a sale. Seller’s assistance works for both parties as it lowers the buyer’s buying cost and encourages them to purchase while also helping out the seller by increasing their chance of selling.

The seller’s assistance is typically equal to or less than 6% of the sale price, which likely will only cover some of your closing costs and down payment. Luckily, there are plenty of government programs available that can help. However, these programs vary from state to state, so it’s crucial to find a lender who knows about the options in your area.

So, using seller’s assistance and government help for first-time home buyers, you will be able almost entirely pay for your real estate purchase.

Short-term and long-term benefits of buying a multifamily property:

A stable cash flow. Cash flow can be considered a long-term and short-term benefit, so you can live for free or earn extra income.
Untaxable capital gain. You can take advantage of the benefits of untaxable capital gain. Purchasing a multifamily property is an answer to how to avoid capital gains tax on real estate. If you or your family live in one of the units for more than two years, you sell your house without paying taxes on the capital gain. The capital gain on this property will be the difference between the sales and purchase prices. Yes, it sounds unbelievable, but it’s true: You can live for free, get extra cash, and receive tax-free money when you sell your property.
Tax Benefits (Depreciation). Living in your investment property means deducting a portion of the purchase price and maintenance fees from your taxes.
Equity Growth. Refinance and re-invest. Invest your money wisely by refinancing and investing. If you choose to keep this property and purchase a new one, you will also benefit! Property values have historically increased, so your property value will likely increase in value as well. By refinancing your home, you can take advantage of increased property value to get cash out to purchase a new rental property. By refinancing, you always have the opportunity to receive a lower rate. Investing your money will allow you to make the most of what you have earned.
Use your extra cash to buy the home you’ve always wanted. By keeping your multifamily property, you can reap the rewards again if you decide to buy a dream home for yourself. The money you make from your investment property will go towards the monthly payments of your dream home. For many lenders, you will need at least one property for rent to be considered an “experienced” landlord. A great thing about investing in a multifamily property is that if you live in one of the units and rent out the others, lenders will see you as an experienced landlord. That means when you buy another house to live in and keep your multifamily as an investment. Most lenders will pull 75% of your rental income towards the extra money you make each month. The more money you make monthly, the larger your budget for buying a new home.

2. Use a Community Seconds mortgage to pay your downpayment and closing costs.

A Community Seconds loan could help you become a homeowner if you don’t have any money for a down payment and closing costs. You could finance more than 100 percent of your home’s purchase price if you qualify. This financing would cover your down payment and closing costs while leaving you with no upfront payments.

Creativity with financing will help you to buy a rental property with no money down. After living in this property for 1-2 years, you can always convert it to a rental property later.

What is a Community Seconds mortgage, and how does it work?

Eligible homebuyers taking out a Community Second mortgage can avoid paying closing costs and their down payment upfront, as mentioned before.

But where does this extra money come from? You can get it through a second home loan.

The second mortgage you take out to cover your down payment would be significantly smaller than the first loan, which covers the house’s costs.

Example of Community Seconds mortgage:

For instance, you are buying a $200,000 home and putting 3.5 percent down. In this case, your down payment would be $7,000. Your closing costs and down payment would total amount to $14,000.

For this example, let’s assume you don’t want to spend any money out of your pocket.

Your first mortgage loan would be $193,000 (the purchase price minus the down payment you contribute).
A $14,000 Community Seconds loan would cover the down payment and some of your closing costs.
You would not need to pay additional money out of pocket for closing costs.

You would borrow $214,000, 107 percent of the home price. Usually, you could only borrow up to 97 percent of your home value.

Where can I apply for a Community Seconds loan?

The following entities can help you with the application and information:

Municipalities, counties, and state governments
Federal agencies
Local housing finance agencies
Employer Assisted Mortgage (EAM) programs
A federally recognized Native American tribe
A regional Federal Home Loan Bank branch
Nonprofit organizations

Also, you can search online resources. For example, you can find programs offered by your local housing departments by searching online for “community second mortgage in (your city, county or state).”

Another way to search is through HUD’s State Pages. To find homeownership assistance in your area, click on your state and then select “Homeownership Assistance.” You will be provided with links and contact information for numerous programs.

3. Use 401(k) or other retirement accounts for the funds to a rental with no money down.

You can also use funds from your retirement account to buy real estate with no money down. This is excellent if you have savings and don’t want to pay interest on a loan.

Your 401(k) or other retirement account funds can be used for buying a rental property as long as you roll the funds into an individual retirement account (IRA).

Once you have rolled your funds into an IRA, you can use the money to purchase real estate with no money down. You’ll apply for a traditional loan and use the IRA funds to cover all your costs, including closing costs and other fees.

The great thing about using retirement savings for real estate is that you can avoid paying capital gains taxes when the property is sold.

Finally, if you use a home equity line of credit (HELOC) to purchase a rental property, this also counts as no money down. With a HELOC, you can borrow up to 85 percent of your home’s value and use the loan to cover the down payment and closing costs on your rental property purchase. This can be a great way to get started in real estate investing without putting any money down.

This article is about ways to buy an investment property with no money down.

CONCLUSION.

A large majority of millionaires invest in real estate. If you want to build a significant wealth portfolio, buying rental properties with no money down is a viable option. With the right strategies and resources, you can get into real estate investing without risking any of your savings. Community Seconds Loans, 401(k) funds, HELOCs, and other retirement accounts are all ways to purchase rental properties with no money down. With some research and dedication, you can start real estate investing today.

No money-down strategies for buying rental properties are a great way to start building wealth. You can jump into real estate investing with minimal risk with the right resources and knowledge. With this information, you can create a strategy and start building wealth with rental properties today! Good luck!

Here are some more articles on real estate investing:

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How to Buy an Investment Property with No Money Down.