Can you buy a house with no money down? The answer is yes. But can you buy a house with no money down for real estate investing? YES!
Sounds too good to be true? Well, with a little investigation and some creative real estate investing, a real estate investor can learn how to buy a house with no money down and use it as a real estate investment.
While creative real estate investing is at the top of the list for how to buy a house with no money out of pocket, there are some investment property financing options as well. If you want to stop asking “Can you buy a house with no money down?” and get started in real estate investing with little to no money, then keep reading.
Can You Buy a House with No Money Down? You Can with Creative Real Estate Investing!
Certain strategies of creative real estate investing require either a small down payment or no down payment at all. Some creative real estate investing strategies, like wholesaling real estate, don’t leave a real estate investor with an actual investment property to make rental income from. However, there are others that do just that.
Keep in mind, it’s important to investigate further into each of the real estate investment strategies mentioned. Each has its own advantages and disadvantages. Decide which one is the right for you.
Buying Rental Property with Owner-Financing
Owner-financing (seller-financing) is when a real estate investor goes about buying rental property without using a conventional bank loan. Rather, the investment property financing comes from the seller of the real estate investment. The buyer pays monthly mortgage payments to the owner of the investment property and then a kind of balloon payment when the amortization period is up.
While some owners will ask for a down payment, those who agree to owner-financing are likely to waive this payment in favor of completing the real estate investment deal and getting the rental property off their hands. They benefit from passive income without rental property management or maintenance fees, after all, while the real estate investor buying the rental property avoids a down payment.
At the very least, you should be able to negotiate the down payment when it comes to owner-financed real estate investments (more so than with a conventional bank loan).
Can you buy a house with no money down? Sure, if you take the time to learn all about owner-financing with this guide: Everything You Need to Know About Selling and Buying a Home with Owner-Financing
Rent-to-Own Real Estate Investment
A rent-to-own real estate investment will grant you the opportunity of avoiding a hefty down payment to a bank while being able to make money in real estate. Instead, real estate investors typically pay anywhere from 2.5-7% of the purchase price for what is called an option fee or option money. This secures the fact that the real estate investor plans to buy the property after a set amount of time (usually 1-3 years).
While not completely considered to be “no money down”, it is less than half of a typical down payment. Can you buy a house with no money down for real estate investing? A lot of the time, you can get very close to no money down and avoid a conventional bank loan altogether, just like with rent-to-own homes.
Buying Rental Property That Is “Subject To”
One overlooked way of how to buy a house with no money down is buying rental property with an existing mortgage. In this case, the real estate investor assumes the monthly mortgage payments of the current investment property owner, thereby avoiding a down payment.
This is especially great if the current owner’s mortgage rates are low (as mortgage rates are on the rise in 2018, leading to a seller’s market). Not only will you avoid a down payment, but you’ll avoid the higher mortgage rates as well.
Read More About “Subject To” Investment Properties Here: A Guide to Creative Real Estate Investing
Can You Buy a House with No Money Down? You Can With Real Estate Syndication!
Real estate syndication is a great way of how to buy a house with almost no money out of pocket. Essentially, a real estate investor finds someone else to fund an investment property while paying as little as 5% of the purchase price. He/she then takes care of procuring the property, closing the real estate investment deal, and dealing with the rental property management. This hard-working real estate investor gets a cut for all the work, while the other real estate investors get a profit proportional to their cash investment. With real estate syndication, you get to make a profit from a rental property after purchasing it with no money down.
To start looking for and analyzing the best investment properties for real estate syndication, click here.
Learn More: The Ultimate Guide to Real Estate Syndication
Can You Buy a House with No Money Down? You Can with These Financing Options!
When it comes to actual investment property financing from more traditional institutions (excluding banks), there are two main options for real estate investors.
FHA Loans and FHA 203K Loans
Can you buy a house with no money down? If you are okay with being an owner-occupier, you definitely can. Federal Housing Administration (FHA) loans are offered with the main purpose of easing the financial aspects of buying and owning a home for the average citizen. However, it is meant for primary residences. In order to qualify with an investment property, you have to be living in one of the units.
Luckily, becoming an owner-occupier is actually a great real estate investment strategy. A real estate investor purchases a duplex or a multifamily home, lives in one unit, and rents the other out. This is ideal, considering you won’t have to pay rent elsewhere or mortgage payments on a primary residence!
The down payment for FHA loans is typically 3.5%, allowing a real estate investor to buy a house with essentially no money down. FHA loans even allow for the down payment to be a gift or borrowed from someone else. While you can opt to apply for a conventional loan and borrow the down payment from family or friends, or borrow the money to pay in full cash for an investment property, an FHA loan allows you to borrow a much smaller sum, which for many people is just more realistic.
Similar to FHA loans, FHA 203K loans will also require a real estate investor to become an owner-occupier. This investment property financing is meant for a fixer-upper property as it will provide a loan for the repairs as well.
Related: What Are Your Options for Financing Rental Properties?
Hard-Money Lenders
Hard-money lenders are also an option for buying investment property with no money down. These lenders are considered private lenders. The great thing is that they don’t look at the creditworthiness of a real estate investor. You do, however, need a great real estate investment deal. Hard-money lenders look at the value of the investment property in order to decide if you qualify for a loan or not.
While some hard-money lenders do require a down payment (even up to 20-30%), shop around for those who don’t. They do exist. One important thing to remember is this: Be sure to perform an accurate real estate market analysis to find out the value (or after repair value) of the investment property. If the real estate market analysis you perform returns a value lower than that from the analysis carried out by the hard-money lenders, you’ll be asked to pay for the difference. This can end up being as high as a traditional down payment.
Want to guarantee an accurate real estate market analysis? Use Mashvisor’s investment property calculator to, not only find real estate comps, but also get all the data you need on them to find an accurate real estate market value.
Related: Investment Property Calculator for Analyzing Real Estate Investments
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Can you buy a house with no money down for real estate investing? Yes, you definitely can if you consider any one of these options. Whether you try your hand at creative real estate investing, go for real estate syndication, or explore your investment property financing options, you can save some money on a down payment and still make a great return on investment.
Want more answers to questions like “Can you buy a house with no money down?”? Keep reading on Mashvisor.