These days, buying a house with no money down isn’t a widespread practice. In fact, most people think you have to have at least 10 or 20% down in order to buy a house. We’re here to tell you that’s not the case. There are creative methods for purchasing a property that don’t require thousands of dollars in down payments.
Keep in mind that these ideas won’t always work. They all have caveats and limitations. But if you find a property that allows you to utilize any of these methods, it can really benefit you by eliminating the need for you to hand over thousands of dollars all at once! Here are 6 ways to buy investment properties with no money down.
1. Rent-to-own contracts
Sometimes, a seller will be open to a rent-to-own (RTO) arrangement that will allow you to take control of the property now and buy it a few years down the road. Oftentimes, part or all of the rental amount will go toward the down payment when you eventually buy, making it a low or zero down payment purchase.
2. Investment partner
Short on money for a down payment, but know another investor who has the cash? If you go into a purchase with an investment partner, you can arrange it so that they make the initial down payment and you make the monthly payments. Then, the two of you can split the profits later on.
HELOC stands for Home Equity Line of Credit. Do you own a property with equity? You may be able to use that equity in place of a down payment when purchasing another property. However, fewer lenders are allowing this option these days due to the higher level of risk and the 2008 financial crisis. Still, it’s an option worth exploring, as it can work very well if you can get it.
4. Seller financing
Some sellers will be willing to finance the property themselves with no down payment. In that case, the seller is essentially acting as the bank—you make your payments (plus interest) directly to them. This really only works if there’s no existing mortgage on the property, but when it works, it works really well!
5. Loan assistance program
If you’re a veteran or a first-time homebuyer purchasing in a rural area, you can easily get 0% down. Those two things don’t apply to you? You can still ask your bank what types of loan assistance programs are available. If it’s your very first investment, you have a good chance of getting loan assistance that can reduce or eliminate a down payment. There are plenty of loan assistance programs, so even if you don’t think you’re eligible, it doesn’t hurt to ask.
6. Trade properties
This is not very common, but in some cases, you may be able to trade properties with another investor. This is one more reason why it’s good to network extensively with other investors! Perhaps someone is looking to get out of duplexes and into bigger multifamilies, while you’re looking to replace your apartment building with a few smaller properties—so you trade your apartment building for 2 or 3 of their duplexes. You put no money down and you both avoid capital gains associated with selling a property.