How to Buy a Rental Property With No Money Down in 2025

Can you buy a rental property with no money down?

Yes, you can buy a rental property with no money down. 

When house flippers, home buyers, and investors employ the "no money down" strategy, they're essentially acquiring real estate without committing a significant portion of their own money into the initial costs of a rental property.

While traditional property purchases usually require a hefty down payment, knowing how to buy a rental property without any money down can streamline your investment strategy. Moreover, real estate investors might find that using minimal personal funds to purchase rental properties can lead to a better return on investment (ROI). 

Exploring alternative financing options, such as leveraging home equity, securing investment property loans with no down payment, or partnering with co-borrowers, provides a potential path into the real estate market, especially when personal savings are limited.

In this article (Skip to...)

• Ways to buy with no money down
• Pros and cons
• FAQ
• The bottom line

Eight ways to buy a rental property with no money down

1. Rent out your primary residence

If you already own a home, you’re ahead of the game. One of the more common ways to become a real estate investor is by turning your current primary residence into a rental property. There are significant advantages to “backing into your first rental property” this way. Learning how to buy an investment property with no money can make this transition even more accessible.

• Traditional investment property loans require a larger down payment and come with higher interest rates. You can typically expect a 20% down payment requirement.
• The interest rate on an investment property is generally higher than the rate on your primary residence by a half percent or more.

The strategy is to rent out your current home and finance your next as a primary residence, securing a lower interest rate on both properties. And if you're still making mortgage payments, the rental income can help cover part or all of the mortgage. 

“Be prepared to provide a letter of explanation,” notes Jon Meyer, loan expert. “It may be requested depending on how long you have been in the original home.”

2. Tap into your home equity

If you own a home but prefer not to rent it out, using your home's equity to buy an investment property with no money down could be a viable option. 

Home equity refers to the difference between your home's current market value and the amount you owe on it. By tapping your home equity, you may find that you have enough money to not only cover a significant down payment but possibly to buy an investment property outright, depending on the amount of equity available.

To tap your home equity to buy an investment property, you have several options.

Home equity loan

A home equity loan provides you with a lump sum of money upfront, which you then pay back over time with fixed monthly payments, much like your original mortgage loan. This can be especially helpful as it gives you a defined, budgetable amount to use for the down payment on an investment property.

Home equity line of credit (HELOC)

A HELOC offers flexible access to funds by turning your home's equity into a credit line. It's akin to having a credit card with a limit based on your property's equity, allowing for withdrawals as needed within the draw period. This makes HELOCs ideal for managing the varying costs associated with purchasing an investment property, offering a convenient way to access funds.

Cash-out refinance

A cash-out refinance replaces your existing mortgage with a new loan for more than you owe on your home, allowing you to take the difference in cash. It's an effective way to access a large amount of money from your home equity to put towards buying an investment property. 

Cash-out refinancing is available for both conventional loans and government-backed loans, providing homeowners with various options to access their equity for investment opportunities, regardless of their loan type.

3. Consider house hacking: Be a resident and the landlord

Your primary residence doesn't have to be a single-family home. Multifamily homes can be a great way for novice real estate investors and aspiring property managers to get started. Learning how to buy an investment property with no money can make it even easier to generate income from multiple units.

House hacking involves purchasing a multifamily home, residing in one unit, and renting out the others. For instance, if you buy a duplex, triplex, or quadplex, you would live in one unit, while tenants would rent the remaining one, two, or three units.

Most house hackers look for a good real estate deal on a 2-4 unit property and live in one unit while renting out the others. They then use the rent payments to help offset mortgage payments.

An FHA or VA loan can make the purchase of such multi-unit properties more accessible and favorable. In fact, VA loans have no minimum down payment requirement, and FHA loans only require 3.5% of the purchase price as a down payment for borrowers with good credit. House hacking is particularly accessible with an FHA 203k loan, which is designed for fixer-uppers. 

These options, along with potential gift funds or down payment assistance, minimize upfront costs significantly compared to the traditional 20% down payment, aiding those exploring how to buy a rental property with minimal financial start-up funds.

If you're investigating how to buy a rental property with no money, consider house hacking.

4. Lack credit or funding? Partner up with a co-borrower

If you're keen on investing in rental properties but lack the funds for a down payment or closing costs, consider partnering with a friend who has the capital but not the time to learn about property investment. 

By becoming co-borrowers, you can pool resources and share the responsibilities and benefits of ownership, including monthly payments, rental income, and equity growth. This collaboration is a practical solution when exploring how to buy a rental property with no money and allows you both to embark on the investment journey together.

When considering how to buy a rental property with no money, remember that a co-borrower can be more than just a friend. They can also be a family member or even a stranger willing to act solely as a business partner in your real estate venture.

5. Look into a rent-to-own home

If a traditional mortgage is not suited to your financial situation, another proven way to invest in real estate with no money is through what’s known as a lease option, commonly referred to as a rent-to-own home.

With lease option agreements, the property owner charges the buyer a monthly or yearly premium in the form of higher rent, which is then applied toward the home's purchase price. This method is especially helpful when learning how to buy a rental property with no money.

This setup may require paying a slightly higher rental fee, but it enables an investment path in real estate under less conventional financial circumstances.

6. Assume an existing mortgage

An assumable mortgage is one where the buyer can take over the seller’s mortgage, typically with little to no change in terms or interest rate. Basically, the buyer receives the title to a property in return for making monthly payments on the seller's mortgage.

Using the seller's existing financing can be especially effective if the current loan has a low interest rate. But keep in mind that this scenario requires a bit more research.

In particular, you will want to make sure there is no due-on-sale clause. This type of clause prohibits the new buyer from assuming the mortgage. And more often than not, assuming a mortgage will require lender approval. So you'll still have to prove your creditworthiness and fill out some paperwork.

7. Look for seller financing

Another way to buy an investment property with no money down is with help from the seller. Known as "owner financing" or "seller financing," this type of loan is an agreement where the seller handles the mortgage process instead of a financial institution. The borrower repays the loan as specified in its repayment terms, which are detailed in the formal agreement.

This works especially well with sellers who have no mortgage. For example, this can happen when someone inherits a property and does not want to keep it.

For sellers who are willing to take on the role of financier, owner financing can help sellers move a home faster with sizable returns on their investment.

8. Try a hard-money loan

House flippers often turn to hard money lenders—private individuals, investors, or organizations—for financing fixer-uppers. That’s because hard money loans and private money are often lent with less stringent underwriting compared to traditional mortgages. 

Hard-money loans prioritize the value of the property over the credit score of the borrower and have high interest rates and short terms. If a fixer-upper meets a lender's loan-to-value criteria, you might secure it with minimal or no down payment, making it an attractive option for those seeking to buy an investment property with no money down.

Also, "if you are buying an investment property, you will need collateral, such as a separate property, to go this route," says Meyer.

Pros and cons of buying rental property with no money down

When it comes to real estate investment, the idea of buying a rental property with no money down can be very appealing. However, like any investment strategy, it has its own set of advantages and challenges.

Pros:

• Minimal initial investment: One of the biggest advantages is the low barrier to entry. You can start investing in real estate without needing a significant loan amount upfront, making it accessible for many aspiring investors. This is particularly true for owner-occupied properties, where living in one unit while renting out others can significantly reduce costs.
• Potential for higher returns: With little to no initial investment, the potential return on your investment can be significant. This leverage can amplify your profits as the value of the property appreciates over time, especially in multifamily properties that can generate considerable passive income.
• Learning opportunities: Starting with a no-money-down approach can be a great learning experience. It forces you to be creative with financing, perhaps utilizing private lenders, and to deeply understand the market and property investment strategies.

Cons:

• Higher risk: Purchasing a property with no money down often means taking on more debt, which can increase financial risk. If the property value decreases or if you face difficulties with tenants in multifamily properties, you might end up owing more than the property is worth.
• Dependence on financing: This approach heavily relies on finding lenders willing to finance the entire purchase price, which can be challenging. Loan terms from private lenders might also be less favorable compared to traditional lenders.
• Potential for negative cash flow: If the rental income from your property investment does not cover your mortgage payments and other expenses, you might face negative cash flow. This can put financial strain on your investment and personal finances.

While exploring how to buy a rental property with no money down can be a gateway to real estate investing and generating passive income, it's important to weigh the potential risks against the benefits. Proper research, understanding of the real estate market, and careful planning are essential to succeed in this investment approach.

FAQ: How to buy a rental property with no money down

Discover how to buy a rental property with no money

Launching into real estate investment and wondering how to buy a rental property with no money? It's simpler than you may think, even for beginners.

Don't wait to become a seasoned real estate entrepreneur. Explore ways to buy property affordably and connect with a mortgage lender to learn more about your loan options. 

Click the links below to begin your journey.