Investing in real estate isn’t just an option for the ultra-rich, in fact, expert investors already know how to buy a multifamily property with no money in the bank. There are many ways you can leverage assets you already own, form partnerships, or think outside of the box to begin investing in real estate without putting up a ton of cash. Let’s take a closer look at some options you might consider.
Home Equity Loans
If you already own your primary residence and have some equity built up, you may want to consider taking out a home equity loan. While these loans are typically used to pay for additional home renovations, paying for children’s college educations, or other big purchases, the money can also be used to invest in a second real estate property. You may be able to get a lower interest rate than your initial mortgage, providing an added bonus. Be sure to shop around to get the best possible rate and terms so you can make the most of your new real estate investment.
Depending on how much you are able to borrow, you can begin investing in multifamily real estate by purchasing a simple duplex or triplex. You can then rent out the property to create a passive income stream through your tenants’ monthly rent. If you’re willing to take on a property that needs extra work, you can also consider a distressed multifamily property, such as a small apartment building. While you’ll need to spend some extra money upfront to improve the property, having a building with multiple units will potentially add to your monthly income stream down the road.
House Hacking
Another way to buy a multifamily property with no money is house hacking. While the name may seem new, the concept has been around for a long time. With house hacking, you purchase a property with units available for rent, saving one for your primary residence. The rents tenants pay each month go toward covering the cost of your mortgage, property taxes, insurance, and other expenses. This essentially means your investment pays for itself while you keep your monthly living expenses to a minimum. If you also reinvest the rental income into the property, you can potentially increase the value of the property through forced appreciation until it’s ready to be sold at a profit.
House hacking can be done with no money through a number of ways, including taking advantage of certain loan programs like FHA loans. Smaller down payment requirements through the FHA make buying investment properties more attainable for individuals who don’t have a lot of money. Purchasing a multifamily real estate asset can qualify under some of these programs if you plan to use the property as your primary residence and if the property consists of four units or fewer, so it’s important to take this into consideration as you shop around for real estate properties.
Real Estate Investment Trusts (REITs)
While the other two options discussed consist of purchasing entire properties on your own, REITs let you invest in commercial real estate without having to take on the risk alone. REITs pool money from multiple investors to purchase a portfolio of different properties. Having multiple assets and multiple investors helps minimize risk, offering a hedge against inflation and stock market volatility for those looking to create a diverse investment portfolio. For as little as $500, investors can open an account and begin investing in multifamily properties, from small apartment buildings to sweeping apartment complexes. A simple way to begin building wealth, REITs take the responsibilities of being a landlord out of your hands so you can sit back and relax. You can learn more about how DiversyFund works here.
Finding the Investment Option that Works Best for You
Of course, there isn’t just one approach to learning how to buy a multifamily property with no money. Other options, such as co-investing with others, micro-lending, and crowdfunding all have their own benefits. You’ll want to consult with a financial expert before making any decisions, but remember you can start your road to real estate investment slowly. Starting with a REIT lets you share the risk with others and lets you take a hands-off approach. As you become more comfortable with real estate investment through a REIT, you can then decide if house hacking, home equity loans, or any of the other ways to purchase a single asset are right for you.