Many investors love the idea of the passive income that a rental property provides. Except for a few repairs here and there, rental property owners can collect monthly rent checks and see their return on investment grow. Perhaps the biggest challenge to owning a rental property is the initial financing of. Those who don’t have enough money to outright buy a property may have to turn to a variety of financing options. So what are investors’ options when attempting to finance a rental property?
- Finding A Partner To Co-Invest
- Getting Financing From The Seller
- Utilizing Retirement Savings
- Utilizing The Federal Housing Administration
Finding A Partner To Co-Invest
A great way to increase the down payment on a property is to co-invest with a trusted partner. This way, the seller is more likely to accept your offer of purchase. Co-investors will want to be sure to draw up an official contract before buying the property to establish things such as who owns what percentage of the property and who is responsible for the upkeep of the property.
Getting Financing From The Seller
It may sound counter-intuitive, but sometimes the best person to get financing from in the form of a loan is the person selling you the property. This may give you better access to funding than you would receive from a bank and provide a lower interest rate on the loan. An additional bonus to this technique is that the contract is far simpler than for getting a loan from the bank.
Utilizing Retirement Savings
This technique can only be utilized if you have a retirement account that allows you to invest in physical real estate as opposed to just stocks, bonds, and mutual funds. If the funds are available, they can be used to finance the ownership of the rental unit. This way, investors have recurring income from rent and the appreciating value of the property.
Utilizing The Federal Housing Administration
The Federal Housing Administration was created for the purpose of allowing people to buy property with very low down payments. If investors can find a property that the FHA will approve, they can gain access to the property for little down and may even be approved for lower interest rates than if they were to get financing from a private lender.