Investing with Limited Capital – Real estate investing is one of the best ways to create passive income and build wealth. If you are interested in getting into real estate investing but do not have a lot of capital to work with, there are still ways to reach your goals. Of course, you can team up with an investor who does have substantial capital, but even without that, there are ways to work your way toward owning multiple properties. Keep reading to find out how.
Investing with Limited Capital
House Hacking a Duplex
Have you heard of house hacking? There are a few definitions of this popular term, but to most people, it means buying a property that can be both your personal residence and your investment property. A duplex or other multi-family home is the perfect choice for this strategy.
Using the benefits of an FHA or Conventional loan, like down payment assistance or lower down payment, you can purchase the property as your personal home. Living in one of the units, the other(s) can be rented out. The rental income from this strategy often covers most or all of the monthly mortgage payment, allowing you to save for another investment or invest in the property through renovations and upgrades.
There are also many perks to being both the landlord and an on-site resident. Your tenants are less likely to trash the property, pay rent late, or break their lease conditions if they know you live right next door.
Live in Your Investment Property First
If buying a duplex is not the right fit for you, consider this instead. Using an FHA or Conventional loan, you can put 3% down to buy your first home. Live in this home for at least 2 years, possibly renovating it with your future goal of renting it out in mind. You might prioritize renovations with durable finishes or upgrades that will make it eligible for a high monthly rental rate during these two years.
After waiting at least two years, you can take out a HELOC (home equity line of credit) or a cash-out refinance from the appreciated value of the home and use that cash to fund the purchase of a second home without selling the first.
You can then make the second home your personal residence and rent out the first as your income property. This process can be repeated as many times as you would like, allowing you to get into the real estate investing game for only the initial 3% down payment rather than the typical 20% down for an income property.
Investing with Limited Capital while Self-Employed
Owning an investment property is a great strategy for someone who is self-employed. You schedule is likely flexible enough to handle the occasional property management tasks, and the monthly rent can be a predictable source of monthly income. However, many self-employed people are concerned about how to qualify for a mortgage in the first place.
If you want to work toward the goal of owning a rental property using one of the above strategies, you may assume you need the traditional 2 years of employment records and tax returns to qualify for a mortgage. There are other ways to reach your goals, too! You might be approved for a bank statement loan based on your monthly deposits, shown through your bank records rather than your tax returns. Talk to me today to learn more about whether a bank statement loan can help you more quickly reach your goals of investing in real estate.
Ready to learn more about Investing with Limited Capital in 2023? Contact us any time.
More Great Advice for Real Estate Investing
- DSCR Loans for Investors
- How to Use a Cash Flow Loan Instead of Tax Returns for Investment Property
- What to Expect When Financing a Rental