Getting started in real estate investing seems so easy, but when that deal actually comes, finding the down payment is hard. That’s why you see so many books about investing with no money down. That can be done, but usually either means you get no upside (except for experience), or you take on a lot of extra work finding and negotiating a seller-financed deal. Not a bad way to do it, but here are some other ways:
- Family and friends. These guys are most likely to either give you money or a loan. Make sure you write up a legal agreement if going this route.
- Refinance current property. If you have some rentals already, you can refinance to take out some equity money. You could do this on your personal residence as well.
- Line of credit. This is my favorite. You can set this up and it is ready to go when you find the deal you want to buy.
- Partners. Good ones are hard to find and you should take your time before signing. But partners are a great way to buy something bigger than you could have otherwise.
- Seller Financing. As I said above, this is a lot of work. This is usually asked for when the deal can’t quite get done and you need just a little more down payment to get across the finish line.
- Take a 401(k) loan. This will cost you to pay back, but you can take a small amount against your retirement and then pay it back with interest.
- Self-Directed IRA. This is a way to use your retirement account to purchase real estate. You’ll need to talk to an experienced IRA professional and your accountant before trying this, but it can free up a lot of money.
There are more ways to do this, but high performers won’t need to dip into some of the other ways. Of course, there is the obvious save money and cut expenses, which you should be doing anyway. Think about getting the down payment ready well before you make the offer and your closing will go much more smoothly.
