How To Buy Investment Property With No Money Down

Investing in real property is exciting. Either residential or commercial, it is an excellent way to diversify and improve your assets, as it is continuously increasing in value. However, the most significant factor that prevents anyone from investing in real property is the lack of funds for the money down requirement.


As real estates become expensive, so is the 20-30% of the total value of the property, which is usually what sellers and realtors ask for as the money down. But, there's some good news. For you to come up with the money down is no longer a hindrance in buying an investment property. To make real estate more accessible, sellers, brokers, and investment companies have come up with ways on how to purchase one, despite the lack of initial funding.


This article will show you how to buy an investment property with no money down:


1. Narrow down your options

Before you make a final determination on what property you are going to purchase, narrow down your options to those that you can better afford first. If you cannot find any property within the same budget or if it goes beyond your limit, do not make a choice that can become quite too ambitious to finance.


Doing this will help increase your success with your investment property, and also lower your financial liability. If you are still looking for prospective properties, you can start your search by checking this directory.


2. Borrow the money needed.

If you do not have the money to invest in your real property at the moment, the easiest way for you to come up with the funds is to borrow money. Here are some sources where you can borrow funds:

  • A family member, relative, or close friend who has some extra money that they will not be using at the moment, and is willing to let you borrow.

  • A lending company that offers a low-interest rate.

  • Apply for a home equity or home purchase loan.

  • Come up with an agreement with your broker to borrow their commission first, so you can purchase the property, and slowly pay it out in installments along with the remaining mortgage that you have to pay.


3. Enter into an FHA Owner-Occupancy Loan Agreement

FHA Owner-Occupancy Loan Agreement allows you to borrow money so that you can purchase a rental property for business purposes, with a low-interest rate. This agreement is often very flexible in its terms as well, for as long as your credit scores and ranking is right.


The only catch to it is that you must occupy the property first, or a portion of it for the first year before you are allowed to successfully rent it out to others as a source of passive income. On the positive note, when you are allowed to rent out the property to others, you can use these rental payments to help defer your loan and the succeeding installment payments that you have to make.


4. Take on a financing agreement with your seller.


In some instances, if you are honest enough with your seller that you do not have enough money to come up with the cash requirement, the seller can waive this. You can both come into a financing agreement, which allows the purchase of the property without the need of a down payment.


They will be more than willing to accommodate your request especially if they are disposing of the property mainly for any of the following reasons:


  • They inherited the piece of property and had no intention of doing anything at all with it.

  • They live far away from the property.

  • The property might need a few repairs here and there that the seller would not like to it handle anymore.

  • The seller is moving to another state or location.


More often than not, they will be more than happy to be able to dispose of the property while accepting regular monthly payments from you. Plus, because you are taking on a financing agreement directly between each other, your seller does not have to deal with brokers and their commissions as well.


5. Enter into a partnership agreement.

If you agree that you will not be the sole owner of the property, then entering into a partnership agreement to own and manage real estate can be useful for you, especially when you lack the funds to pay for the money down requirement yourself.


You have two best partnership agreement options:


  • If you are looking to invest in property for personal or residential use only, then you can ask an immediate family member, perhaps a sibling, to co-own the property.

    You can do this especially if the investment property that you wanted to buy will only be your vacation or summer home. In this manner, you have someone to share the financial liability with as well.


  • If you are investing for commercial properties, you can still ask an immediate family member, a close and trusted friend or colleague who also has the same vision as you do. You can be business partners, sharing in the financial liability based on your financial capacities, and later on sharing in the profits, too.


6. Go for a lease with an option to buy.

There are lease agreements that will give you the option to buy the property at the end of the contract. In most instances, a portion of your lease or rental payments will be credited towards the final purchase price of the property itself. This is an excellent way for you to own property even if at the moment, you can only afford rental payments.


7. Negotiate the amount of the down payment.

In some instances, the down payment amount is often negotiable; all you have to do is be upfront and talk to your seller or broker about it. This negotiation is a perfect strategy for you, especially if you already have substantial savings on hand that is allocated to purchase an investment property.


However, these savings might still not be enough to meet the down payment. If the difference is not too substantial, your seller or broker can sometimes be willing to lower the down payment amount, such that the remainder is an addition to the installment price that you will have to continue paying.



All these means mentioned above will show you that there are ways for you to purchase an investment property even with the lack of funds to come up with at the moment. Nowadays, investing in real estate isn't as intimidating as it used to be, and it is not only limited and available to those who have more in life.
Even if your savings are still low, or if you are still young and have just started on your employment, you have a chance to diversify your asset portfolio through investment property as well. Remember, investing in real estate is always a good idea as it is an asset that does not depreciate.