Investing in real estate can be your first step towards personal financial freedom. Here, we will highlight a few strategies for earning passive income through real estate investments with little to no money out of your own pocket
Work With a Partner
If you have your eye on a fixer-upper but don’t have the capital, consider bringing a partner on board. In this kind of partnership, one partner often funds the venture while the other brings the deal to the table, manages the rehab, and takes care of the sale of the property.
Live-In House Flip
Unless you can get a 0% down mortgage, this method will require you to come up with a bit of cash – usually around 3% down. The goal here is to find a fixer-upper that is still suitable to live in and renovate it room by room as you live there.
Similar to a live-in flip, house hacking requires an initial down payment. The idea here is to find a multi-bedroom house and rent out the other rooms to cover your mortgage payment and any repairs or renovations the house may need. Most lenders will require you to occupy the property for a full year before you can turn it into a rental property not occupied by the borrower.
Home Equity Loan or Another Line of Credit
If you have established equity in your current home, you have access to a home equity line of credit (HELOC). There are different ways to get a HELOC, and you can often get up to 90% of your home’s value, minus your remaining mortgage. This credit line is technically yours to use however you please, and you only pay interest on what you use.
Hard Money Loan
Another way to invest with little money up front is to acquire a hard money loan. These loans generally have more flexible underwriting requirements than bank loans and can be secured quickly, but the tradeoff here is that they come with a higher interest rate. Hard money loans can be written to cover both the property purchase and rehab, but your lender will usually want to see that you have some skin in the game as well as some rehabbing experience.
Private loans are structured similarly to hard money loans, but instead of coming from a lending organization you would acquire it from an individual lender – often a friend, family member, or professional acquaintance. Unlike a hard money loan, you don’t necessarily need to have previously invested anything in the project.