How to buy an investment property with less than 20% down

Investment properties can be a great way to build long-term wealth and generate passive income. However, one major obstacle that many aspiring real estate investors face is the high down payment required to purchase a property. In most cases, lenders require a down payment of 20% or more to secure a mortgage on an investment property. But what if you don't have that kind of cash on hand? Is it still possible to buy an investment property with less than 20% down? The answer is yes, and here's how:

Explore financing options

One of the first things you should do when looking to buy an investment property with less than 20% down is to explore all of your financing options. In addition to traditional mortgages, there are a variety of other financing options available that may be more flexible when it comes to down payment requirements. For example, you may be able to secure a VA loan with no down payment at all if you're a veteran.

Consider private lending

Another option to explore is private lending. Private lenders are individuals or companies who lend money to borrowers, typically with less stringent requirements than traditional banks or mortgage lenders. Private lenders may be willing to finance your investment property with a smaller down payment, but keep in mind that their interest rates may be higher than those of traditional lenders.

Look for seller financing

Seller financing is another option to consider when buying an investment property with less than 20% down. In this scenario, the seller acts as the lender and finances the purchase of the property themselves. This can be a good option if the seller is motivated to sell quickly and is willing to work with you on the terms of the loan.

Partner with other investors

Partnering with other investors can also be a way to buy an investment property with less than 20% down. By pooling your resources with others, you may be able to come up with the necessary down payment and secure a mortgage together. Just make sure that you have a clear agreement in place outlining each partner's responsibilities and expectations.

Save up for a larger down payment

If none of the above options work for you, then your best bet may be to save up for a larger down payment. While it may take longer to accumulate the necessary funds, having a larger down payment can actually work to your advantage in the long run. Not only will it make it easier to secure financing, but it will also help you to build equity in the property more quickly.

Buying an investment property with less than 20% down can be a challenge, but it's not impossible. By exploring all of your financing options, considering private lending, looking for seller financing, partnering with other investors, or saving up for a larger down payment, you can increase your chances of successfully acquiring an investment property and building wealth over time. Just be sure to do your research and work with experienced professionals who can help guide you through the process.