Key Takeaways
- You can buy a rental property with no money down by using home equity, house hacking, seller financing, or a co-borrower.
- Using little cash boosts potential returns but also increases financial risk if rents or values drop.
- The best approach depends on your credit, equity, and comfort with creative financing, so comparing options is key.
Yes, you can buy a rental property with no money down. House flippers, home buyers, and investors can purchase real estate without putting up a significant amount of their own cash.
Traditional property purchases often require a large down payment, but knowing how to buy a rental property with no money down can simplify your investment strategy.
By using minimal personal funds, real estate investors can achieve a better ROI. Options like leveraging home equity, securing investment property loans with no down payment, or partnering with co-borrowers can open doors to the real estate market, even with limited personal savings.
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8 ways to buy a rental property with no money down
1. 'Backing into' your first rental property
If you already own a home, you’re in a great position. One of the most common ways to become a real estate investor is by turning your primary residence into a rental property. 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, rental income can help cover part or all of the mortgage.
Check your investment property loan options. Start hereThere are significant advantages to “backing into your first rental property” this way.
- Traditional investment property loans often require a 20% down payment and higher interest rates.
- The interest rate on an investment property is typically higher than on a primary residence by at least half a percent or more.
“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 can help you buy an investment property with no money down. Home equity is the difference between your home’s current market value and the amount you owe. By leveraging this equity, you may have enough money to cover a significant down payment or even buy the property outright. Several options are available for tapping into your home equity.
Check your home equity options. Start hereHome equity loan
A home equity loan provides a lump sum of money upfront, which you pay back with fixed monthly payments, similar to your original mortgage. This option is ideal for a predictable, budgetable amount for your investment property down payment.
Home equity line of credit (HELOC)
A HELOC turns your home’s equity into a flexible credit line, much like a credit card. It allows you to withdraw funds as needed during the draw period, typically spanning 5-10 years. HELOCs are ideal for managing various costs associated with buying an investment property, such as the down payment, renovations, and furnishing the rental.
Cash-out refinance
A cash-out refinance replaces your existing mortgage with a new loan for more than you owe, giving you the difference in cash. Available for FHA, VA, and conventional loans, cash-out refinancing allows homeowners to borrow a large amount of home equity, often up to 80% of a home’s market value.
3. Try house hacking with a multifamily property
House hacking means buying a multifamily property, living in one unit, and renting out the others. Purchase a duplex, triplex, or fourplex, and your tenants’ rent can cover your mortgage payments. You’re both the property owner and the landlord, and your primary residence becomes a source of cash flow.
FHA or VA loans make this strategy even easier. FHA loans require as little as 3.5% down with good credit, and VA loans often require no down payment at all. You can even use an FHA 203k loan if the place needs rehab. Use gift funds, down payment assistance, or a HELOC to handle upfront costs, and you’re buying both a home and your first rental property.
Check your eligibility for a multi-unit FHA loan. Start hereIf you’re investigating how to buy a rental property with no money down, consider house hacking.
4. Bring in a co-borrower
When you’re short on savings or have a low credit score, teaming up with a co-borrower gives you a shot at buying a rental property without covering the full down payment requirements or closing costs yourself. One person might bring the cash; the other handles the property management or finds the real estate deal. You split the risk, share the work, and both benefit from rental income, monthly payments, and long-term equity growth.
A co-borrower doesn’t have to be a friend. It could be a family member or even a business partner who sees value in real estate investing. This setup works well when exploring how to buy an investment property with no money down, especially if you’re willing to offer sweat equity in place of capital. Just make sure to align on responsibilities, loan terms, and how you’ll handle things like refinancing or a future cash-out refinance.
House Hacking Tip
Live in one unit of a duplex, triplex, or fourplex while renting out the others to cover your mortgage and reduce upfront costs.
5. Try rent to own
If you don’t have savings for a down payment, a rent-to-own agreement—also called a lease option—can be a way to buy a future rental property with no money down. You rent the home now with the option to buy it later, and some of your monthly payments may go toward the purchase price.
These deals usually require you to live in the home first, so you won’t earn rental income right away. But one upside is that the property owner often covers property taxes and homeowners insurance during the lease, which helps lower your upfront costs while you work toward becoming the property owner and turning the home into a rental property down the line.
6. Assume the seller’s mortgage
Assuming a mortgage lets you take over the seller’s home loan, often with the same interest rate and loan terms. It can be a smart way to buy a rental property with no money down, especially if the seller is locked in at a low rate. You make the monthly payments, just like they did, and take over the title.
Not all loans are assumable. You’ll need to check for a due-on-sale clause and get lender approval, which usually means showing a decent credit score and completing some paperwork. Still, it’s a solid financing option when the numbers work and the seller’s loan has better terms than what traditional lenders offer today.
Check your investment property loan options. Start here7. Find seller financing
Seller financing—also called owner financing—is when the seller acts as the lender and lets you pay for the home over time, often with no bank involved. It’s an option for buying an investment property with no money down, especially if the seller owns the home outright. They might agree to seller financing if they inherited the property or want a steady income instead of a lump sum. You’ll agree on the repayment terms, like the loan amount, monthly payments, and interest rate, all spelled out in a formal contract. It’s a flexible path that skips traditional lenders and can work well if you find the right real estate deal and a seller ready to move quickly.
Pro Financing Tip
Seller financing can skip banks. If the seller owns the property outright, they can finance the purchase directly, potentially with zero down.
8. Use a hard-money loan
A hard-money loan is a short-term, high-interest loan offered by a private investor or hard-money lender. It’s often used to buy and flip properties fast. Unlike a traditional mortgage, this type of loan focuses more on the property value than your credit score. If the numbers work and the home fits the lender’s loan-to-value guidelines, you might get financing with little or no down payment.
“Just know that to qualify, you’ll usually need collateral—like another property—and a clear repayment plan since the loan terms are short and the interest rates are high,” says Meyer.
Pros and cons of buying rental property with no money down
Buying a rental property with no money down can be an attractive way to enter real estate investing, but it comes with both opportunities and risks. Understanding the potential benefits and challenges can help you make a more informed decision.
Check your investment property loan options. Start here| Pros | Cons |
|---|---|
| Low upfront cost: Enter the market without a large down payment; owner-occupied units can reduce personal expenses. | Higher financial risk: More debt increases exposure to market drops or tenant issues. |
| Potential for high returns: Leverage can amplify profits as property appreciates, especially in multifamily rentals. | Dependence on financing: Harder to find lenders; terms may be less favorable. |
| Learning opportunity: Encourages creative financing and deepens market knowledge. | Risk of negative cash flow: Rental income may not cover expenses. |
| Faster portfolio growth: Minimal capital allows acquiring multiple properties more quickly. | Limited lender options: Fewer banks offer full financing for no-money-down deals. |
| Access to leverage: Control valuable assets and benefit from appreciation and rent. | Higher interest rates: Lenders may charge more to offset risk. |
FAQ: How to buy a rental property with no money down
Compare quotes from multiple lenders. Start hereYou can buy a rental property with no money by using creative financing, such as seller financing, lease options, or partnering with a co-borrower who brings the capital. Government-backed loan programs like VA or FHA may also require little or no down payment if you qualify.
To invest in property with no money, try house hacking—buying a multifamily home, living in one unit, and renting out the rest. You can also use down payment assistance, home equity, or bring on a co-borrower to share the costs.
The BRRRR method stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a fixer-upper, renovate it, rent it out, and then do a cash-out refinance to access equity. That equity funds your next property, allowing you to scale without using new money.
Yes. Rental property loans often come with higher interest rates, stricter credit requirements, and larger down payments. Lenders see them as higher risk compared to loans for primary residences.
A good rental property typically returns 6% to 8% annually after expenses like mortgage, maintenance, taxes, and insurance. Profit margins vary based on location, financing, and how well the property is managed.
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.
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