Financing TipsHow to Buy a Vacation Home with No Money Down by Charles Mburugu September 3, 2020September 3, 2020 by Charles Mburugu September 3, 2020September 3, 2020Whether you are a beginner or experienced real estate investor, buying a vacation rental property is something you might want to consider. And the good news is that you can buy a second home with little or no money down.Before we learn how to buy a vacation home with no money down, let us look at some of the benefits of investing in vacation rentals:An extra income – One of the biggest benefits of buying a vacation rental investment is the opportunity to make more money. According to statista.com, the revenue from vacation home rentals is expected to grow to almost $18 million by 2023. Platforms like Airbnb have made it easy for homeowners to list their properties and find guests. As an Airbnb host, you can earn hundreds or even thousands of dollars every month from your Airbnb investment property. Other vacation rental sites you could get listed on include VRBO, FlipKey, Booking.com, Kid and Coe, and HouseTrip.Your own vacation spot – Besides hosting Airbnb guests, you can also use the home whenever you want to get away and unwind. You can also host your family or friends on special occasions. This will save you the costs of paying for accommodation or meals elsewhere.Tax benefits – Renting out your property means that you will have to pay tax on your income. However, the good news is that you can deduct many of the costs incurred to maintain the vacation home. For example, you can write off expenses such as hosting fees, occupancy taxes, cleaning costs, supplies, utility costs, insurance premiums, property management fees, and mortgage interest. Consult a local accountant or financial advisor to know what deductions you are entitled to.A nest egg – Owning vacation rentals that are cash flow properties can be a great way of preparing for retirement. You could continue collecting rent or sell it and use the return on investment to cover your costs of living, healthcare, travel, and more.So, What Does It Mean to Buy Property with No Money Down?Traditional lenders, such as credit unions or banks, require a down payment when you take investment loans to purchase income property. So how much money do you need? Well, the down payment is usually 20% of the buying price. For example, if you are purchasing a home worth $500,000, the down payment will be $100,000. It would take the average property investor a long time to raise such an amount.When we talk of buying a vacation home with ‘no money down’, it means that the real estate investor is putting very little or none of their own cash into the investment upfront. Buying an Airbnb property with no money down will greatly enhance your chances of making a higher return on investment.Related: How to Invest in Real Estate with No Money: A Beginner’s Guide5 Investment Property Financing Strategies to ConsiderWondering how to buy a vacation home with no money down? Here are some strategies you can use for investment property financing:1. Leverage other property If you own another home with equity and have a good credit score, you can leverage the equity and apply for a home equity loan or home equity line of credit (HELOC). With this kind of financing, you can take out a line of credit or loan up to 80% of your home’s equity. For instance, if you own a home worth $300,000 and you owe only $100,000, you could pull out $160,000 of the home’s equity in cash. This money can then be used for financing a vacation home. So, depending on the equity you have built, you can easily purchase a vacation rental property with very little or no money down.2. Use seller financing As the name suggests, seller financing is where the owner or seller of the home holds financing for the buyer. In other words, the owner or seller of the property plays the role of the lender for the buyer. The buyer is then expected to repay the loan according to the terms laid down in a formal agreement. This agreement will outline terms such as interest rate, repayment period, and down payment. Looking into owner financed homes as a method of financing a vacation home is a great strategy because there is room to negotiate for no money down.3. House hackingHouse hacking is becoming an increasingly popular strategy for beginner real estate investors that want to buy property with no money down. It involves making one unit of a multi-unit property your primary residence and renting out the other units. Using a second home mortgage such as the 203k loan or the Federal Housing Administration (FHA) loan, you can purchase a home with as little as 3.5% down payment.Now, house hacking is not the strategy to use if you’re looking for a true vacation home that you can enjoy. After all, you’ll be living next door to the empty unit(s). However, if your main goal is to own a vacation rental property that you rent out for cash, then house hacking is a great method. Also, you can eventually move out of the property and rent out all the units. So, if you have the flexibility, you can buy the investment property in a location you’d eventually like to visit as a vacation destination once you move out and elsewhere.4. Real estate partnershipsWhy not use other people’s money to buy a vacation home rental?Another great strategy you can use to buy a second home with no money down is to leverage other people’s money (OPM). For instance, you can look for a funding partner or private lender that is willing to provide the cash required to purchase the investment property. Partners could be friends, family members, or members of your investment group. With real estate partnerships, the rental income, appreciation, and equity is usually shared between the partners as agreed.5. Assume a seller’s mortgageAlso referred to as buying ‘subject to’, assuming a seller’s mortgage is another option for buying a vacation home with no money down. With this no money down mortgage plan, you simply purchase a home based on the terms of the owner’s current mortgage.Related: How to Find Vacation Homes for Sale to Rent OutConclusion When it comes to how to buy a vacation home with no money down, you can use one method or a combination of strategies. Analyze each strategy to see what works best for you. Purchasing a second home with no money down is definitely worth giving a try.Check out some of the best locations for investing in vacation rental properties: 10 Best Places for Buying a Vacation Home in 2020. Start Your Investment Property Search! START FREE TRIAL Down PaymentEquityHouse HackingNo Money DownPartnershipsVacation Rental 0FacebookTwitterGoogle +PinterestLinkedin Charles MburuguCharles Mburugu is a HubSpot-certified content writer/marketer for B2B, B2C and SaaS companies. He loves writing on topics that help real estate investors and agents make better choices. Previous Post #1 Website to Find Investment Property for Sale Next Post How to Find Hard Money Lenders for Real Estate Related Posts Where Can You Find the Best Financing for Flipping Houses? Buying Investment Properties With No Money A Guide to Creative Financing for Real Estate Investors Do You Have to Put 20% Down on a Rental Property? 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