Can I Buy A Rental Property With No Job? — 6 Ways Explained
Can you buy a rental property with no job, is it possible? Yes it is and I will explain some of the methods below for you.
Buying a rental property is an exciting venture that can take you out of the rat race and put you on the road to financial freedom.
Yet, investing in a rental property poses several challenges to a new investor who does not have a job and has little money in savings.
You may have heard stories about people in their early 20’s who started with little or no money in the bank and bought a rental property. Within a few years, they now have a dozen or more rental properties and make thousands of dollars a month in profit.
How did they Buy A Rental Property With No Job or Little Money?
There are many ways to buy rental properties, even if you do not have a job and very little money. Nothing is free in life, but there are several options you can pursue to help you buy your first rental property with no job or little or no money down.
6 Ways To Buy A Rental Property Without A Job
Option 1 — Hard Money Loan
You probably have a negative idea of what a hard money loan is, but it is not as bad as you think. A hard money loan is just like any other loan. A private business or individual lends you money, and you pay the loan back within a certain amount of time.
Real estate investors turn to hard money lenders all the time to fund fix-and-flip projects to purchase long-term rental properties.
Buying rental property without a job is not a problem with a hard money loan. You can get a hard money loan without a credit check, income verification, or proof of employment.
The lender is only interested in the property value and how much money the property will generate for you to pay back the loan. You can usually receive the funds from a hard money loan within a few days after applying for the loan.
There are some drawbacks to hard money loans. These loans generally have a short-term of around 12 months and a high-interest rate of 15% or more plus the loan fees.
You should develop multiple exit strategies, like refinancing the loan or selling the property before obtaining a hard money loan.
Option 2 — Form a Partnership
Forming a partnership is generally how new real estate investors without a job and limited financial resources purchase a rental property. You can start a partnership with members of your family or your circle of friends.
It can also benefit you if you can find a partner who has some experience investing in real estate and can guide you through the process.
In this partnership, everyone contributes money or time to purchase a rental property. In return, everyone owns an equity stake in the property. The percentage of equity ownership depends on the amount of money or time each partner contributes.
The equity stake and monetary contributions are negotiable, and both sides should agree to the terms before making a deal.
There are several benefits to forming a partnership.
First, you can contribute a relatively small amount of money with the other partners toward purchasing a rental property.
Second, you have an opportunity to buy a bigger, multi-family rental property when all the partners pool their money together.
Third, you can learn from the collective knowledge of the members on how to be a successful real estate investor.
Option 3 — Owner or Seller Financing
Owner or seller financing is a way for you to obtain a rental property without dealing with a real estate agent or going through the hassles of getting a loan. In some cases, you may not need to make a down payment.
The homeowner becomes the bank when they offer owner or seller financing. You can negotiate the terms of the financing, such as the interest rate, down payment, balloon payment, and other requirements with the homeowner.
The homeowner also maintains title to the home until you pay off the terms of the financing agreement.
This method of buying a rental property when you do not have a job works best when the homeowner does not have a mortgage on the home. They either paid off the mortgage on the home, or they inherited a home they do not want.
The homeowner essentially wants to receive monthly income payments and a quick settlement after a certain amount of time.
You benefit from owner or seller financing by acquiring a rental property at a low cost , you do not have to deal with getting approved for a loan and there are no Realtor commissions.
You can rent out the house and use the rent money to pay off the financing agreement.
Very Important: Make sure you have everything clearly detailed in writing.
Option 4 — Apply for a HELOC
You can borrow money from the equity in your home to purchase a rental property by getting a home equity line of credit. A HELOC is a loan that typically does not exceed 80% of the value of your home.
You can use all HELOC money at once, or you can draw on it when you need the money. You can use the money from the monthly rent payments for your tenants to pay back the HELOC.
There are many ways you can use money from a HELOC. You can use the money for a down payment on another rental property, contribute money to a real estate investment partnership, or use the money to renovate a rental property.
Option 5 — Private Money Loan
A private money loan is a relationship loan. You can ask to borrow money from your family or close friends. You need to prove yourself to be a trustworthy person with integrity for someone to loan you thousands of dollars.
Make sure to negotiate the terms and interest rate for the private money loan and create a contract for the loan.
The private lender does not take an equity stake in the rental property. Having an equity stake in the property would make them a partner. They will benefit by getting a higher rate of return than if they keep their money in the bank.
You will benefit by having enough money to put a down payment on a rental property.
Option 6 — Real Estate Crowdfunding
A great way to invest in real estate when you do not have a job and limited financial resources is to go into real estate crowdfunding. Crowdfunding allows you to pool your money together with other investors to purchase a commercial or residential property.
You own a percentage of the property and receive dividend income payments.
There are many benefits of going through a crowdfunding site like Fundrise or Roofstock. First, real estate crowdfunding companies offer a low entry fee to start. Opening an account generally starts at around $500.
Second, you do not need to manage the properties. The crowdfunding company that you go through manages all the properties in its portfolio.
Third, you can diversify your real estate portfolio with a blend of commercial and residential properties.
Investing in real estate through a crowdfunding site is easy, but there are some drawbacks. These sites have management fees, advisory fees, and other expenses that can cut into your profits.
When you invest you tie up your money for a given length of time, for example 12–24 months. You therefore do not have quick access to the money in your real estate investments if you have an emergency. You should consider buying real estate through a crowdfunding site as a mid to long-term investment.
Real estate crowdfunding is a relatively new concept. Many real estate crowdfunding sites have been in business for less than 10 years, so make sure to pick reputable crowd funding sites and do lots of due diligence into the project being offered.
My Final Thoughts ON How To Buy A Rental Property With No Job
So as you can see from this post, all is not lost when it comes to buying a rental property without a job. There are many options open to you. The key is to keep an open mind, be fully focused on your goal and go out there and put into practice everything you need to achieve that goal.
The real estate dream is not just open to the rich and famous, you too can achieve financial freedom if you put in the consistent effort in the right areas.
I would love to hear from you now please.
Tell me about your experiences as a new real estate investor with limited finances. How did you manage to buy your first rental property without a job? What advice would you give to new real estate investors? Let me know about your successes and how you overcame challenges.
Originally published at https://freedomviaproperty.com on November 15, 2021.
