4 Ways To Increase Your Chances of Getting Money For Buying Rental Properites

Some ways you can alter your approach to getting money for buying rental properties without having  to find money elsewhere are as follows:

1. Seek low money down  loans  with private  mortgage insurance: Some lend- ers may offer you a mortgage even though you may be able to put down only 10 percent of the purchase price. These lenders will likely require you to purchase private  mortgage insurance (PMI) for your  loan. This insur- ance generally costs several hundred dollars per year  and protects the lender if you default on your  loan. (When  you do have  at least 20 percent or higher equity in the property, you can generally eliminate the PMI.)
2. Delay  your gratification: If you don’t  want  the  cost and  strain of extra fees and  bad  mortgage terms, postpone your  purchase. Boost your  sav- ings rate. Examine  your  current spending habits and  plan  to build  up a nest egg to use  to invest in your  first rental. Often real estate investors get started by actually buying a new home and  simply  keeping their old home as a rental. For more information, see  the  section “Make saving  a habit” later in the  chapter.
3. Think smaller:  Consider lower-priced properties. Smaller  properties and ones that need some work can help  keep  down  the  purchase price and the required down  payment. For example, a duplex where you live is one unit and  rent out  the  other is also  a cost-effective way to get started.
4. Turn to low entry cost options: For the  ultimate in low entry costs, real estate  investment trusts (REITs) are best. These stock exchange traded securities (which can also  be bought through REIT-focused  mutual funds) can be bought into for several thousand dollars or less.  REIT mutual funds can often  be purchased for $1000 or less  inside retirement accounts. (See Chapter 4 for more on investing in REITs.)