How to Buy Your First Rental Property with No Money Down?

 Having a nice chunk of change to buy real estate property that will help propel your investing career is not the only way to start investing in real estate. Do you know that there are a lot of ways you can buy a property with no money down? If you are tight with your money or want to be more creative then these six ways of real estate investing with no money upfront.

What does it mean to invest in real estate with no money down?

Traditional banks require a minimum of 20% of the purchase price which is equal to tens of thousands of dollars. But in this blog, you don't need any upfront payment as I will show you how to buy an investment property with no money. 

When someone says that they are buying a property with no money down this means that they are putting no money upfront from their pocket. 

As an investor, you can use other people's money or creative financing options to eliminate a downpayment. This means that putting less money will give you higher returns but more you will be in debt. 

According to, big investors use a number of the following methods to cut down their upfront transaction costs.

1. Making your primary residence your first rental property.

2. Leverage other property

3. Use Seller financing

4. Assumes a seller's mortgage.

5. Get a hard money loan

6. Partnering on investments

Moreover, ''The difference between Rich and Poor is that poor say get out of debt but rich say how to control debt'', Robert T.Kiyosaki

How to Buy Your First Rental Property with No Money Down?

Strategy 1: Make your Primary Residence a Rental

Who says that your house should be a single-family house? House Hacking is the process in which you buy a multi-unit property and make it your primary residence. This means you live in one unit and use others as rentals. 

Tip for Teens: If you want to become financially independent I would recommend that you should buy your first property which has a basement. This means that you should use the basement for rent and live for free. 

You can take a mortgage from the bank with a 3% down payment and your tenants pay for your mortgage and you can live for free. This strategy made Kris Krohn retire at the age of 26 with 25 units. 

Using the downpayment assistance programs or low down payments like 203K & FHA you can buy property for as little as 3.5% down payment. This is still money out of your pocket but in contrast to a 20% down-payment, this is quite less. 

Strategy 2: Leverage Other Property

If you have a high credit score and properties with thousands of equity then you can get a home equity line of credit abbreviated as HELOC. This special type of financing allows you to take a loan or line of credit of up to 75% to 80% of your equity or as determined by a formal consideration. 

Eg, if you have $250000 and you owe 100K this means your equity is 150K and from that, you can pull down 112,500 up to 120K in cash to use it as a down payment or full payment to buy other properties. 

Depending on the equity in your properties you can easily buy properties with no money and this is the reason why you don't need to fully own your properties. 

Strategy 3: Use Seller Financing 

Seller Financing is also known as Owner Financing. It is a non-traditional form of financing in which the seller or owner of the property holds the financing of the buyer. This financing is similar to the lease option that means every time you will be paying part of the property after the contracted period you will own it. Most investors make a lot of money using this type of financing. 

Some sellers put their own terms for acceptance or hold for the financing, such as interest rate, down payment, or loan period while others negotiate. If you are a strong negotiator and can determine the seller's needs, you can negotiate financing without a down payment or let the seller make a second mortgage while you get the first mortgage from the bank. Typically this only works if it needs to be sold or if the required sale price exceeds the owner's wish for the down payment.

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Strategy 4: Assumes a Seller's Mortgage

Seller mortgage is another great type of financing from which you can buy an investment property with less to no money down. 

Also known as 'subject to'.

In the subject of deals, you buy a rental property by taking the owner's mortgage into account. This financing requires a small down payment but if you are dealing with a needy or motivated seller you can get the deal for no money down. 

Eg, if the investment property costs 100,000 and the mortgage is 65,000 with a 12 years period. This means you will pay the seller 35,000 and take over 65,000 mortgages, paying the amount due with interest and taxes. The investor avoids having to find any alternative financing source and pays off from the same date as scheduled.

This is a rare scenario, as many lenders include the ''due on sale'' clause this means the entire loan balance is due if the property is transferred or sold. 

Strategy 5: Get a Hard Money Loan

A hard money loan is a type of financing by local lenders. Usually used for properties that won't get approved by traditional financings, like fix and flip. If you use this financing with the BRRRR strategy then it is definite that you will get the property with no down-payment.

Investors can obtain financing for a property up to a certain percentage of the current or future value of the property's "after repair value", which includes the cost of renovating or repairs in the loan.

This means that if you bargain a lot at a low purchase price and meet the lenders' strict loan value requirements, you can buy the property with little or no money.

Hard money loans are usually short term loans from 12 up to 18 months but have high interest rates from 5% to 10% higher than a traditional mortgage. So this strategy is great if you have a good credit score and plan to do a cash-out refinance after the property is renovated and repaired.

Strategy 6: Partnering

One of the most common ways to invest in real estate without a down payment is to use Other People Money (OPM) to buy an investment property.

You can find private lenders or financial partners who are willing to assist in the investment and provide you with the funds needed to purchase real estate. This could be a separate down payment or the full cash purchase price in exchange for a return on your investment.

Partners can be your family members, friends, colleagues and there are a lot of ways to structure return on investment.

1. JV- Joint Venture is where ownership of the property or business is based on their respective percentages. Rental income, share capital, and appreciation are generally shared with partners separately.

2. Lending agreement, where the investor gets a better return on his or her initial investment.

3. Private financing, when the partner is paid a monthly payment, which could be interest-only with a balloon or principle and interest.

4. Combination of above 


Most successful real estate investors will use the various methods described above to make offers to potential sellers. You may encounter many rejections, but it is not uncommon to buy a property with little or no down payment. During my early real estate investment period, I purchased all of my investment properties without a down payment. Even now, only about 15% of the real estate I own is purchased with my own money. 

 In certain offers, it makes sense to deposit more funds in exchange for lower monthly payments and generally higher interest rates. Review each investment opportunity and see if these creative strategies make sense for the real estate you are considering. Buying a rental property without a down payment is not the easiest way to buy a property, but it is worth it and it is possible.


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