The Supplemental Income

How to Invest in Rental Property With No Money Down

Investing on rental properties

Investing in rental property can be an excellent way to build long-term wealth and passive income. However, the perceived barriers to entry like large down payments prevent many people from getting started. The good news is that with the right financing strategy, you can invest in rental properties even if you have little cash on hand.

This article will explore creative ways for new investors to enter the rental property market with minimal money out of pocket. We’ll look at the pros, cons, and key tips for making each approach work.

This is just the tip of the iceberg! Share your experiences or questions in the comment section below. Let’s unlock the full potential of this topic together 😉👌

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Rent Out Your Primary Residence

One strategy is to take advantage of low down payment programs for owner-occupied properties. Here’s how it works:

  • Rent out your current primary residence. Since you already own it, no cash is needed upfront.
  • Use the rental income to cover the mortgage. You may need to obtain permission from your lender first.
  • Buy or rent a new place to live in as your new primary residence. FHA loans allow down payments as low as 3.5%.
  • You can now generate rental income from your previous home with no extra cash invested.


  • Requires no extra money to purchase the rental property
  • Take advantage of low down payment on new primary residence


  • Need lender approval to rent out current mortgage property
  • Managing remote rental property can be difficult


  • Shop around for the best low down payment mortgage for your new primary home
  • Hire a property manager if remote rental property

Leverage Home Equity

If you have considerable equity built up in your current home, you can tap into it to fund a rental property purchase:

  • Use a cash-out refinance or home equity line of credit (HELOC)
  • This unlocks part of your equity as a lump sum payment you can use for a down payment
  • As long as you qualify based on income, credit score, and existing mortgage terms


  • Allows investing without large cash reserves
  • Can fully fund down payment and closing costs


  • Risks further leveraging your primary home
  • HELOC may have variable interest rates


  • Shop for best HELOC rates and flexible terms
  • Be conservative with cash-out amount to avoid over-leveraging

Buy a Multi-Unit Property

Also known as “house hacking”, this involves purchasing a 2-4 unit multi-family property to live in one unit while renting the others.

  • FHA, VA, and USDA loans work for owner-occupied multi-unit homes
  • Lower down payment requirements compared to investor loans
  • Earn rental income from units immediately to offset mortgage


  • Little cash needed for down payment and closing
  • Get started with rental property investing quickly


  • Must be willing to live on-site as owner-occupant
  • Need solid screening and property management skills


  • Look for move-in ready multi-family properties to minimize renovation costs
  • Screen tenant applications thoroughly to find good renters

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Try the BRRRR Strategy

The “buy, rehab, rent, refinance, repeat” (BRRRR) method leverages renovations to pull out cash.

  • Purchase rundown property that needs updates using a rehab loan
  • Use funds to renovate and increase property value
  • Rent out for income to cover costs
  • Refinance into standard rental mortgage and repeat


  • Can start with little to no cash out of pocket
  • Cash-out via refinancing recycles capital for next deal


  • Rehab costs can be unpredictable
  • Needs extensive real estate knowledge


  • Aim for 70%+ increase in value from renovations
  • Get contractor estimates to budget rehab costs

Find a Business Partner

If your credit or finances aren’t ideal, partnering up can be a win-win.

  • Find someone to co-invest with who offers strengths you lack
  • For example, they provide cash while you manage renovations
  • Share mortgage responsibility and split profits


  • Combines complementary skills and resources
  • Reduces risks compared to investing solo


  • Need extensive legal agreements
  • Disputes can upend partnerships


  • Thoroughly vet potential partners on values and temperament
  • Get partnership structure reviewed by real estate attorney

Lease With Purchase Option

Lease-to-own arrangements let you invest now with the option to buy later.

  • Make an agreement to lease a property for 1-2 years
  • Option to purchase at already-fixed price during or after lease
  • Part of each rent payment goes toward the purchase


  • Little to no money needed upfront
  • Time to save up for purchase during lease


  • Strict contract terms if deal falls through
  • Repairs still required even though not owner yet


  • Have purchase option price locked in early
  • Ensure lease-purchase contract reviewed by real estate lawyer

Assume Existing Financing

You may be able to take over the seller’s current mortgage when purchasing.

  • Requires lender approval with review of income/credit
  • Skips mortgage application and underwriting process
  • Lower interest rate possible if original mortgage is old


  • Bypass down payment and closing costs
  • Potentially low fixed-rate financing


  • Due on sale clauses can prevent assumption
  • Older loans may have prepayment penalties


  • Review title and loan documents thoroughly first
  • Get all mortgage assumption terms in writing

Explore Seller Financing

Some sellers may be willing to act as the bank and hold a mortgage for you.

  • Seller finances all or portion of purchase price
  • Make payments directly to seller per negotiated terms
  • Often on homes inherited or owned free and clear


  • Little to none of your own money needed
  • Below market interest rates potentially


  • Limited inventory with willing sellers
  • Less predictable than bank financing


  • Search property listings specifically advertising “seller financing available”
  • Hire real estate attorney to review contracts and loan terms

Turn to Hard Money Loans

Hard money loans are a short-term financing option based on the property’s value rather than your credit.

  • Useful for rehab projects needing quick financing
  • Loan-to-value ratios around 60-70%
  • Higher interest rates and shorter repayment terms


  • Fast approvals and funding
  • Loan amounts based on home value, not your credit


  • Higher rates increase costs
  • Usually need another take-out loan


  • Vet lenders for fair rates and terms
  • Have exit strategy to repay in 6-12 months

Leverage Low-Rate Credit Cards

While risky if not paid quickly, an intro 0% credit card can provide short-term financing.

  • Use card with 12+ months 0% APR for balance transfers
  • Make down payment, closing costs, or renovation purchases
  • Refinance ASAP to repay credit card debt


  • 0% APR minimizes interest costs
  • Fast financing while waiting on other loans


  • Credit limits may be insufficient alone
  • High penalty rates kick in after 0% period


  • Make payments during 0% to pay down principal
  • Time applications so new financing set before period ends

The Bottom Line

Investing in rental property with minimal cash is possible but often comes with higher risks. Arm yourself with knowledge and partner with experienced professionals. Thoroughly evaluate financing options and have an exit strategy planned upfront. With the right preparation and expectations, leveraging these creative techniques can help you overcome low capital and start building your rental property portfolio.

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