9 Ways to Buy Rental Property with No Money Down

Having a rental property is one of the best ways to invest your money. It can make you a millionaire within a short time if you know your way around it.

And, contrary to popular misconceptions, you don't have to be overly rich before you can purchase a rental property; there are many smart and interesting ways to go about it. That's why you have to read this article to the end.

Oftentimes, people are discouraged to buy rental properties because of the upfront payment, which might be too much or inconvenient.

But you don't have to worry about that anymore because, in this article, we shall be explaining the 9 easy ways to purchase rental properties without paying money down.

Before that, we shall talk about what an upfront payment means and why you don't need to pay one when purchasing your rental property.

 

What Does an Upfront Payment Entail?

An upfront payment is a specific fee that you pay ahead of time or during the settlement of purchasing a rental property.

In other words, it is the money you pay in advance before purchasing a rental property or real estate. It can be very difficult to afford when you want to purchase an investment property.

This is why you need to avoid it as much as possible, especially when you are not financially buoyant.

The good news is that you can still purchase a rental property with no money down. This might seem unbelievable, but after reading this article, you’ll be adequately enlightened about the ways you can purchase the property you’ve always wanted without the need for an upfront payment.

Before we proceed with the topic, it is pertinent that you know what rental properties are all about, and the key features a rental property should possess before you buy one. This will aid in a great return on investment.

 

What is a Rental Property?

A rental property is a type of property that’s mainly used to generate income (rental income). It could be a building or any leased property or asset.

There are certain things to consider when purchasing a rental property. You must ensure that the property has some key features that will make it beneficial and profitable to you in the long run.

 

Things to Consider before Purchasing a Rental Property

• The area or neighborhood the property is situated

 

Before purchasing a property, you need to access the neighborhood to ascertain how viable it is for your property or business. You should be able to provide answers to the following questions:

Is it a crowded neighborhood? Is the neighborhood the type with less rent vacancy or high rent vacancy?

Knowing these will enable you to determine whether the rent is seasonal, and also make you discover how quickly you will be able to get tenants to rent your property. It will equally let you know if the neighborhood is profitable enough to allow you not to run at a loss.

 

• Schools

When your rental property is close to a place where schools are situated, it helps to attract more people to the area. This will drastically increase your tenancy rate and help to increase your profit in the long run.

 

• Crime Rate

You must adequately ensure that you don’t purchase your property in an unsafe place or places with a very high crime rate. Investigate the cases of burglary and theft in the area to make you determine the crime rate of that area and how fast the situation is being attended to.

This will prevent you from buying a property in a location vulnerable to crime.

 

• An Area with High Job Opportunities

Neighborhoods that have companies and different businesses could have an increment in tenancy rate since various individuals who work in those companies will be on the lookout for rental properties to lease.

Hence, purchasing a property in such a place will be a great deal for you. Bear in mind that there might be competitors around, so endeavor to make your property as standard as possible to determine how high or low your rental income will be.

 

• Good Infrastructural Amenities

During your search for a property to purchase, the infrastructural amenities in the area should be considered. There should be good roads, electricity, a good water supply, and a good health care system around the neighborhood.

Your property's proximity to the market, park, and shopping mall could also be very advantageous. This is because they will attract many people to the neighborhood, which could increase your rental profit tremendously.

 

• Cases of Natural Disaster

You must endeavor to avoid places where natural disasters are common. No one will want to risk their lives to rent an apartment in such places.

Therefore, ask about cases of natural disaster and how frequently it occurs before you purchase a property in a location. This will help you to know if it is something you can deal with, upon weighing the risk. 

 

How to Buy a Rental Property with No Money Down

After determining the aforementioned features before you decide to buy a property, below are the various ways to purchase your rental property with no money down.

 

1. Purchasing a damaged house at a low price

By purchasing such property, you get to repair it to your taste, then rent it out. The house repair expenses will be gotten back from the rental income.

But ensure that the cost of repairing the house is not excessive so that you don't end up becoming financially bankrupt.

If you are successful with this method, you can repeat this process with other properties and become the owner of multiple rental properties, which will give you multiple streams of rental income.

 

2. Loans from family or friends

You can get a loan from family members or close friends to purchase the property, then you pay back the loan from your rental income. But this is generally based on the agreement you reach with whoever lends you the money.

You both should make the terms and conditions clearly stated in a written agreement to ensure transparency and accountability. This process is oftentimes one of the most secured and convenient ways of purchasing a rental property without any upfront or down payment.

 

3. Loans from individuals or companies

Here, you get a loan and use the property as collateral. In this case, you must make the right choice of purchase. This means that you must make enough rental income to pay off your debt or you lose the property.

This method is quite risky but you can always weigh the level of risk involved to know if it is worth it.

 

4. Payment by installment

Even though this method is not very common, it is one of the easiest ways to buy a rental property with no money down. This process is one in which the buyer pays in installments (often on monthly basis) until the money is completed for the acquisition of the property.

What is required of you is to negotiate with the seller and come to an agreement. Ensure that you get a good and understanding seller because not all sellers allow installment payment.

Also, you must make sure that the payment is one that you can keep up with. And make your negotiations clear so that there will be no misunderstanding in the future.

 

5. Partnership

If you can't afford to buy a rental property alone, you can always get a partner. It could be a family member, business partner, or friend. Also, you can get two or more partners to purchase it if the rental property is a very big and profitable one.

Once the profit starts rolling in, you all can share the rental income equally or based on the percentage you've all agreed on.

 

6. Buying a multifamily house

This is called "house hacking", which has to do with buying a multifamily or multi-unit property where you can take a unit for yourself to live in and put out the remaining units of the house for rent.

By doing this, you will be able to pay off any outstanding loans and expenses, and also get to make money from the property in the long run.

And whenever you decide to move out, you’d already have a rental property at your disposal, which will keep bringing you income.

 

7. Going Cashless

This is another simple way to purchase a rental property with no upfront, and in most cases, without paying a dime. Here, you can give out valuable things aside from money or render service in exchange for the house. 

You only need to discuss with the seller to enable you to know what the seller needs. After that, you both can reach an agreement on how you can exchange goods or services for the property.

Some of the things you can trade for rental property include a piece of land, car, jewelry, ship, and shop. It all depends on what the seller wants.

 

8. Assuming the seller's loan

In this case, you could assume the seller's loan and negotiate to pay the loan instead of upfront. Once you’ve both agreed and you pay the seller's remaining debt, the property will be yours.

However, this method is only possible if the seller has a pending debt to pay, and if the seller is willing to let you pay the debt. As the buyer, you should equally endeavor to know if the debt is worth paying so that you won't eventually run at a loss.

 

9. Saving

This method of acquiring a rental property is the safest, easiest, and most convenient, even though it requires a lot of patience and perseverance.

When you begin to save money for a property, you should have a targeted amount to save and work hard on meeting the target. But this has to do with the price of the property you intend to purchase.

It might take a while for you to save up for the property if it is a very expensive one, but it will eventually be worthwhile once you can buy it.

 

Final Words

Having a rental property can be very profitable and fulfilling. However, if you don't have the money to pay upfront for one, there are other feasible ways to go about it without having to break the bank, as explained above.

Therefore, we hope that the above alternative ways of purchasing a rental property with no money down will help you to make the right decision as you begin your real estate journey.