If you want to invest in real estate, you must have money for a down payment. Unlike first-time homebuyers, you will not be able to purchase a rental property for 3.5 percent down. If you want to be given a loan for your investment property, you must have a sizable down payment available. Typically, you need to have at least 20 percent of the purchase price of the home. How can you save up this type of cash?
Take Out A Home Equity Loan
If you have equity in your primary residence, you might be able to take out a home equity line of credit, also known as a HELOC, against your primary residence. Then, you can use this money as a down payment on another property. A HELCO is flexible, affordable, and gives you access to a quick source of cash you can use to buy a rental property.
Consider Moving Into Your Rental Property
If you want to get away with a smaller down payment, you should consider moving into your rental property. Essentially, you can rent out your current house, move into your new property, and show that you are moving into your rental property. This could be enough to convince a lender to give you a loan with a smaller down payment.
Sell What You Don’t Need
If you need to come up with some extra cash, take a look at the junk you have laying around your home. There is a strong chance that you have items you no longer need. Therefore, consider selling them at a garage sale. You might be surprised at how much money you can generate. Or, you might be able to donate them to a local charity and get a sizable tax deduction you can put toward your new home.
Tap Into Your 401k
Finally, if you have a 401k, you may be able to tap into it as a down payment for your rental property. Of course, this is your retirement account, so you need to be careful with how you use it. You may want to talk to an accountant to make sure you don’t need to pay a penalty for withdrawing from your 401k early. You might be able to avoid this penalty if you are using it to buy property.
