5 Ways to Buy Rentals Without a Huge Bank Account
Summary
This article from BiggerPockets discusses five financing strategies for buying rental properties, focusing on how hosts can use less cash upfront. It highlights FHA and conventional loans, partnerships, and other people's money (OPM) strategies, giving hosts various options to invest in real estate.
Key Insights
- •FHA loans require a lower down payment, typically 3.5%, but come with more inspection requirements than conventional loans. Conventional loans are backed by government agencies like Fannie and Freddie.
- •Partnerships allow new investors to leverage their time and knowledge with someone else's capital or lending capabilities to get into the real estate market.
Action Items
- ✓Hosts should consider using FHA loans for house hacking by renting out extra rooms or units to generate income while meeting the primary residence requirement.Effort: lowImpact: medium
- ✓Hosts should research and understand the nuances of FHA inspections, including required property upgrades, to avoid deal-breaking issues during the purchase process.Effort: mediumImpact: medium
- ✓Hosts looking to form partnerships should network at real estate events, entrepreneurial gatherings, and events frequented by potential investors with capital to build relationships.Effort: mediumImpact: medium
Tools & Resources
- →The Real Estate Partnerships: Partnerships can be explored in the book, The Real Estate Partnerships, by Ashley and Tony.(biggerpockets.com/partnerships)
Common Mistakes
- ⚠Hosts should be careful when structuring partnerships to avoid falling under SEC regulations if bringing in passive partners. Ensure partners have an active role.
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