Buying an investment property requires capital; that is, the ability to put down large sums of money. If you put 20% cash down on all the investment properties you purchase, you will quickly run out of cash and might have to wait several years before you can buy another property.

But don’t count yourself out of the market because you don’t have enough money to put 20% cash down. The most successful real estate investors are creative in how they structure and finance their deals, using $1,000 or less of their own cash.

Below are six ways to buy investment property using low- and no-money-down strategies.

Six ways to buy an investment property

1. Take out a private loan

Private loans are loans between a private lender––such as your bank––and you. You can often negotiate the terms of the loan to fit your deal and your finances. It can also be very common to negotiate no payments for a short-term loan of one year or less. Out of all the low-money-down financing strategies to buy investment property, this is my favorite.   

2. Secure a line of credit

If you have substantial equity in your primary residence, you could consider a home equity line of credit (HELOC). These loans have very low-interest rates, and the payments are generally very low, since they are interest-only payments.

It’s even better if you can secure the line of credit with a property that has been paid off. Banks generally like these types of loans because they have a first mortgage.

Usually with lines of credit, banks like to see the balance move up and down. Therefore, if you plan to use the property as a rental, use the line of credit to buy and rehabilitate the property, and then refinance the property with a more permanent type of loan.

3. Get the seller to finance the deal

This method, known as “seller-financing,” is a popular type of 100% financing. The property’s seller provides a loan to the purchaser of the property.

Fair warning: seller financing is a lot of work: you have to find motivated sellers and you also have to find sellers willing to finance the properties. You could even suggest you pay the owners in Cozy, which will ensure they get their payments every month. The more security you can provide upfront, the greater chance you have of getting your offer accepted.

One of the best parts about seller-financing is that you can uniquely structure the loan terms. One of my friends got most of his seller-financed loans structured so that he had no payments for the first three months of owning the property.

Obviously, this is a huge cash flow benefit. It gives you time to renovate the property and get it rented without making any loan payments.

4. Enter into a joint venture

Joint ventures involve partnering with fellow investors to finance a deal. I highly recommend this strategy and use it myself quite a bit. The most common type of joint venture is with two parties contributing cash for the down payment and getting a bank loan for the remainder. However, here is a more creative example:

  • Partner A: $1,000
  • Partner B: $1,000
  • Partner B, shorter-term loan: $8,000
  • Bank loan: $60,000

The second partner’s short-term loan is due within one year. If it’s not repaid by the company, the debt is converted to equity, and Partner B then owns 60% of the deal.

Even in this scenario, you still own 40% of a deal and you got this ownership for only $1,000.

5. Build it

If you can find a vacant plot of land, consider building your own investment property. Land is often cheap, and if you find the right contractor, you can have a property built quickly, then rent it to cover the costs.

There are also more creative ways to do this. One of my friends wanted a nice weekend house in the mountains. He looked at investment property for over a year. He ended up finding a nice plot of land with a small cabin owned by a husband and wife, who used the cabin as a weekend house.

The cabin fell into disrepair, but the couple didn’t want to sell the cabin because they wanted to keep using it. My friend proposed to fix up the cabin, providing the labor and the materials at no cost to the owners. In return, he would get to use the property for half the year and get the first right of refusal to buy the cabin at X price.

Although my friend doesn’t own the property, he gets to use the property for half the year.

6. Purchase the property wholesale

Wholesaling is another popular “no-money down” method. Similar to flipping, wholesaling is a fast real estate investment strategy, but the wholesaler makes no repairs. The wholesaler contracts with a seller and then advertises the home to potential buyers. When the wholesaler assigns the contract to the buyer, the wholesaler makes a profit between the contract set up with the seller and the amount the buyer pays. The wholesaler must find a buyer before the contract with the seller ends.

With this strategy, you just collect a fee, which are typically fairly low, and move on. Usually these fees are pretty low, however, considering how much time you typically invest.

Out of all the strategies I outline in this article, this is my least favorite: it can take a lot of work to find motivated buyers and sellers. But a big benefit to this strategy is that you can do most of the work online and over the phone, which means you can execute this strategy anywhere, not just locally.