There is no doubt that traditional real estate investing is profitable, but it’s not right for everyone. People have different circumstances and financial abilities which is why the best way to invest in real estate can vary from one person to another. So, if you’re someone who is having trouble getting into rental properties traditionally, there are creative real estate investing strategies to try out. Now, some people believe that creative real estate investing strategies don’t really work. But here are 3 that can work. They really can help you get into the world of property investments.
Related: A Guide to Creative Real Estate Investing
Owner Financing
When it comes to creative real estate investing strategies, owner financing (seller financing) is a great option. So listen up if you’re someone who doesn’t qualify for a loan (whatever the reason)!
Owner financing is, in essence, the same as borrowing money from the bank, providing a down payment, and repaying the loan monthly. Except that, with owner financing, the lender is not the bank but the property seller him/herself. So, here’s the scenario:
You are getting started in real estate investing, and you find a profitable rental property that you want to purchase. The only problem is that you did not qualify for a mortgage and the bank rejected your application. So, what do you do? You go to the property seller him/herself. You set an agreement to provide a specific down payment, and you pay the rest in monthly installments.
Sure enough, you can acquire ownership of the investment property immediately which means the seller is no longer the owner but is acting like the money lender.
Not So Fast…
For this type of creative real estate investing strategies to work, you’ll have to be convincing. By that, we mean that you will have to be able to show the owner that you can make the monthly payments without causing them any headache. And because a bank has already refused you, make sure you put together a killer real estate investing business plan that shows that you’ve done your homework and have a plan to maintain positive cash flow every month. So do your due diligence which includes an investment property analysis and a comparative market analysis! This is, of course, if the investment property for sale isn’t listed with the possibility of owner financing.
House Hacking
House hacking is one of the best creative real estate investing strategies out there. If you have a roof over your head, that will do! Essentially, this strategy involves living in the property you are renting out. That way, any rental income covers your living expenses and you can save up money to move onto bigger real estate investments.
There are a few ways you can go about house hacking:
#1. You can rent out an extra room in your house either long term or short term. This way, you can cover your current mortgage payments and the money that would have gone towards those can be saved up for a down payment for a rental property in a few years.
#2. Purchase a single family home with multiple rooms. The key is to do this in an affordable real estate market and work with a mortgage broker who can find you the best investment property financing. Just like the previous option, live in one room and rent out on a room by room basis. The exciting thing is that you can make way more money when renting single rooms. Also, single family homes appreciate faster than other types of real estate. Therefore, after a while, you can sell it and purchase a multi-unit property.
Related: Real Estate Investing Tips: How to Find Investment Property for Sale Below Market Value
#3. You can buy a multi-family home, move into one unit, and rent out the rest. In this way, you will be able to live entirely or almost for free in your own house. The best part of this is the low down payment. FHA lenders require about a 3.5% down payment if you plan on living in one unit. It’s a common way for how to buy rental property with no money (practically).
Related: The House Hacking Guide for Millennials
Rent to Own
Rent to own is one of those creative real estate investing strategies that are financially convenient. So, if you don’t qualify for a mortgage due to bad credit or whatever other reason, this might be the perfect choice for you.
Rent to own is when you rent a property with the agreement of eventually buying it. You rent it for around 2-5 years, then apply for a mortgage and purchase the investment property. Here are the advantages of this investing strategy:
#1. You can move into the investment property right away.
#2. It is one of the best creative real estate investing strategies because it buys you more time to work on improving your credit score. Therefore, by the time the purchase period approaches, you’ll qualify for a loan.
#3. A portion of your rent goes towards the purchase price. Eventually, when the time comes for the purchase, it will be deducted from it.
#4. You buy the investment property at the current market value. In other words, any increase in the property price is not your problem!
But, to protect yourself from any possible scams, do the following:
1. Get a home inspection before you seal the deal. Make sure there are no damages in the property that might cost you extra money.
2. Get a certified home appraisal report, and document that in the agreement.
3. Creative real estate investing strategies do not mean they are easy to do on your own. Hire professionals to work with you. You will need a real estate agent as well as a real estate attorney due to the complicated legal details.
Final Thoughts,
There are many creative real estate investing strategies and techniques that can get you into the world of property investments without much effort. All you have to do is due diligence. To help you out with the process, Mashvisor has the best services to offer. Click here to find out how we can help get you started and make the right decisions with creative real estate investing strategies. If you feel like you need to consult with a professional, feel free to schedule a demo.