Last week, I started talking to you all about how to raise a down payment and I mentioned these three ways: Home Equity, Retirement Accounts, and Lines of Credit. I’ll cover the last three today! If you missed last week’s blog, I highly recommend checking it out here.
- Credit Cards (Cash Advances): Now to be completely honest, I’m not a big fan of this method. But I know investors I trust who have really made this plan work! That said, I would only recommend this if you really understand how to invest in real estate.Personally, I prefer to build relationships with local banks. And if you say your credit is not any good–I say go sit down with a local bank. They’re not always that concerned about a credit score. But, all that said, you can get cash advances on your credit card depending on what your interest rate is. And if that’s something you are prepared to manage carefully, then it might be worth a try.
- Partners: Another way to raise a down payment is to find a partner. A lot of real estate investors miss this one. While you handle the real estate part, your partner puts the money up. Put the mortgage in your name or the partner’s, and and then split the profits on the sale, rents, or a 50/50 refinance. To break it down more, you bring the knowledge in how to invest and the deals, and you oversee the rehab. You also set up a manager if you buy and hold or you handle selling the property. If you have positive cash flow from your rents, then you would split them with your partner. Or, when you sell or refinance the property, you split 50/50. But your partner is the one making it all possible.
- Seller: Now this option is creative but it’s not overly difficult. You can find sellers who are willing to carry back from 10-30% of the purchase price as a down payment. A lender is not going to go anymore than 80%. They’re willing to loan 80% on any home based on the purchase price (as long as the appraisal backs up the purchase price). A lot of lenders will lend you the 80% as long as you provide an income statement that will handle the cost. And the seller likes that. Especially if they’ve had difficulty selling and they don’t owe much on that property, they like it because they are getting their money back. They carry the second mortgage. You put it in your name, and then in 12-36 months, you refinance and take the seller out of it. They’re happy and you just purchased a property for no money down. That’s a way to get a seller who will actually carry back a second mortgage.
I hope these ways to raise a down payment really help your real estate investment game! If you have any questions, please feel free to let me know in the comment section below. Thanks!
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That format of raising down payment can in our developing world- countries
if not how best can i go about it
Absolutely it will work. I’m not familiar with the lending laws in most African countries. However, there definitely are mortgage loans that are there that are becoming more and more available for residents. Just find out what criteria are in your area.
Hope that helps.
Please expand on using Retirement accounts to purchase real estate. I’ve been told by attorneys and accountants that you cannot do this legally. Please help with this confusion.
Thanks & Blessings,