How to Buy Rental Investment Property with No Money Down


  • Miki Worth says:

    You didn’t address IRA’s and 401’ks
    Lease for Rental to yourself, re-invest all monies back into Ira’s upon sale of house deposit any & all gains to Ira Then there is NO! Taxes on your Capital Gain’s, then repeat process over and over!

    • Thank you for the comment Miki,
      I think the IRA and 401k route deserve their own article. I’m not a huge fan of retirement plans because you have to wait so long to touch the money. But, I think that is a great strategy for those who already have a lot of money in retirement accounts.

      • I’m planning on using my IRA and withdrawing up to $10,000 to buy my first duplex. I don’t own a home yet so I shouldn’t be penalized for it.

  • 441586 702577Excellent post man, maintain the good function, just shared this with my friendz 229389

  • There are certain ways to purchase an investment property with low start up financials such as seller financing. You can also save money by converting your house into a rental property which is one of the quickest methods.

  • Yoshi White says:

    Hi Mark,
    Recently I found your blog and inspiring because I just bought a duplex and am thinking of investing more properties as well:)
    When you keep purchasing homes as owner occupant as you mention above, do you have to use different lender each time you purchase one? Or you purchase the second and more homes as investment property? I wonder that the same lender could give you finance on multiple homes as owner occupant.

    • investfourmore says:

      Thank you for the comment! You should be able to use the same lender. When I talk about this strategy, you should always stay within the rules, which means you have to occupy the home for at least a year. You can only have one FHA loan as an owner occupant, but you can have multiple owner occupant conventional loans. As long as you lived there for a year, the same lender will most likely give you another owner occupant loan.

  • Always enjoy reading your good article. I m in the process of looking into way to financing for my first true or says 2nd rental investment. I bought my first home with intention to rent it out completely after I live in it for a year and move on to the next one, currently live in it and rented out half of it. Talked to a couple lenders, financing second home is a little stricter, even if you plan on live in it. Do you run into this? what’s your experience and any suggestions. I mean harder as qualifying for 2 mortgages. Was told that you can’t use your current rent (house that you live in) or potential rental income to qualify unless it is on 2years tax return. I know the DTI for investment is 45%, is that number run across the board for 2nd home owner occupy as well? I do have some good equity for the first home but don’t want to use it just yet, as it will also count against my overall DTI. Thanks in Advance.

    • This can be an issue with conventional lenders. MY portfolio lender counts my potential rents, at least 75% of them. I would try to find portfolio lender.

  • Brian Klesmith says:

    Very informative article. Thank you for sharing

  • I am looking at a property that has two quad plexes on it. I am wondering if I can buy the property and qualify as owner occupant if I live in one of the units.

    • I have no idea Jim, You could probably learn more from bigger pockets, but without buying the course who knows how good it is


    • Hi Frank, no one said no cash or no credit. But there are ways to buy with less than 20% down.

  • I’m only 23 and I have nobody to help me that is relatively close. But when I buy a property, however I do that, I will have help fixing it up from my father. No financial help though I will have to do whatever I can by whatever means necessary to myself. I was hoping to buy something that would provide housing for around 5 families but something that needed work so I could purchase it right because I didn’t want to be too deep in my first property. What do you think my best strategy would be since this will be my first ever property purchase and since I will be doing it on my own? Should I search for an investor and maybe flip the first couple properties to gain some capital to then purchase a property outright and take a loan against a that to purchase what would be my second property in my portfolio. Do you suggest tax sales? I have heard a lot about them. Not too sure just fishing for ideas so I don’t make a costly mistake on my first property.

    • Hi Nate, have you thought about buying as an owner occupant and then renting out the other units? you could try finding an investor to flip with, but it will bot be easy. What will you have to offer that investor?

  • Most banks will require investors to put at least 20 percent down when they buy an investment property. However, there are many ways you can buy investment properties with a much smaller down payment.
    Probably the most common type of “no-money-down” purchase is when investors use credit lines (their own or from a group of lenders acking them) to cover the entire purchase price of a property. This is what buyers at foreclosure auctions often do. They use the credit lines to come up with the cash to buy the property.
    There is also something called a purchase money mortgage (PMM), where the seller lends you money. In this case, the bank might lend you 80% and the seller 20%.
    f you’re buying property for your own home, there are government-backed programs that allow up to 100% “loan to value” (LTV). The Department f Housing and Urban Development (HUD), for instance, has the FHA loan program.
    In all the above cases, you can use these special loans to buy residential properties of up to four units.

    • Not sure how you can describe putting a down payment of 100% of the purchase price as “no money down”. It sounds more like putting the “most money down.”

  • Fannie Mae Homepath program has been discontinued 🙁

  • I currently own a $140,000 home through a zero down USDA loan in TX. I’d like to rent it out and buy a home under 100k, live in it for a year, repeat that process once, then buy a home around 200k to live in long term. I spoke to a loan officer who told me that my idea wouldn’t work and I’d have to buy a home of equal or greater value to my current home. Is that accurate? Thank you.

    • I have no idea why you would need to buy a home for equal value to your current home.

      • 1031 maybe, and he’s a little confused on how it works?

        • NM, he’s trying to keep the current home, not sell it….my bad.

  • Thanks for the valuable information, I have learned so many things from this post.

  • Renee Ren says:

    Hi Mark,

    Very helpful article. Seller financing is a good idea,however,it doesn’t work in Los Angeles and Orange County area. The market is hot, therefore, most sellers are not willing to do that. 20% down is a lot of money when buying an investment property with average price 400k to 500k. That’s why you got to have some cash to invest in real estate in California. Little money or no money down strategy doesn’t apply in the local market.

    • Mark Ferguson says:

      It doesn’t work in most markets, but you may get lucky. You can still buy as an owner occupant in Cali and live there for a year.

  • halle berry says:

    I want to buy property but I don’t have the best credit. I would be a first time home owner. I really don’t know where to start. Please help!

    • Mark Ferguson says:

      Why is your credit bad and how long will it take to fix it?

  • Hello, I have been reading your articles and would like your opinion on our situation. We bought our first home when the market was low, 3 years ago. We paid $65,000 for it as a HUD home. The home was almost completely renovated in 2007 (not permitted, but done well). It had a new roof, central AC/heat, new sheetrock, nice details like rounded edges on all corners, new crown and base moldings in every room, and new vinyl windows all done in 2007. We laid laminate planks throughout the entire home, repainted all rooms, repainted the kitchen cabinets & put in all stainless steel appliances ($1,200 craigslist etc.), also updated bathroom. Our home is probably worth about $140,000 now, because we bought it so under value & updated it (according to Zillow & my own review of the market). …sorry, maybe TMI. Anyway, would it be better to save a down payment for another home and keep this as a rental, or sell it to have approx. $75,000 to reinvest in 1 or 2 other properties? We owe approx. $55,000 still. It seems like it has way to nice of upgrades that would be wasted on a rental, but one doesn’t come across a $55,000 mortgage often either. One other side note, it is not connected to sewer. Because of the location, if the septic fails we will be forced to connect with a price tag of $20,000. -Thanks

    • Mark Ferguson says:

      I would think about selling depending on what you can buy now and if it will cash flow. The nice thing about your situation is you shouldn’t have to pay taxes on the profit.

      • Okay. To buy a 800-1,500 sq ft reasonable fixer we’re looking at about $70,000-$100,000 each. Would you recommend a home with multi units and income potential that has half the top floor burned (4,500 sq ft home & $40,000 price & good location). Or would you not recommend homes with burn/water damage that extensive even with savings? Thanks

        • Mark Ferguson says:

          I would be very careful with any burned homes unless you have experience with it. There are huge risks involved. Many times the entire house has to be demoed because of smoke damage, the smell never goes away.

  • Hello,
    I would like to purchase the condo I currently reside in and am interested in a “Owner Occupant” purchase as I have little money for a down payment. I have resided in this condo for the past year and a half. My question, can this time be considered as my “time occupied”. Is there flexibility with this? Im guessing no but I thought Id ask.

    Also, the landlord of the condo recently listed it for sell in hopes of selling it by January when my lease ends. Is there an advantage in selling to your tenant? If so, I would like to ask him to wait for me 6 months, in which time I will be fully ready to make the purchase. Meanwhile, of course, I would continue to reside in his property paying him rent. Does this sound reasonable?

    He purchased this property in the 90’s for around 90,000 and it has since increased to around 290,000. It is priced just below market value, it is in great condition, in a great location and I see reasonable potential to make this my first purchase.

    I still have lengthy research to make which is why i want to wait 6 months.
    I am young (early 20’s) and have a lot of research to do, but I am ambitious and want to learn all I can to possibly make this my first investment property.

    Thank you,


    • Mark Ferguson says:

      You would have to live there for a year after buying it.

      If I was a landlord I do not see any benefits to waiting to sell it to you versus someone else. He may be ready to sell right now and may not want to wait. You can always ask and see what he says.

  • Hi Mark,
    I have a home that i owe 178,000 on I am trying to stay another few years until my son is out of school. At that time I want to know what would be the best option . The loan is in my ex husbands name but the home was goven to me by the court. With that said it looks like I do not have a house payment or have ever owned a home . Do I sell this own and put the money down on a duplex and then rent out both sides or do I live in one side of the duplex. I am trying to make the most money to put toward retirement for the future

    • Mark Ferguson says:

      First off If there is a loan against the home you would have to pay it off when you sell the house, it doesn’t matter whose name the loan is in. As far as the other scenario that depends on the numbers and the deal you find.

  • Hi Mark,
    We are considering buying a second home, rent out the current one and move to the one we are buying. However, the one we are liking so far is closer to our work but far from our children’s school. They are in high school and the older one just started driving. So we won’t want them to drive far. We also don’t want to wait longer to buy since the house prices and interest rates are going up. We can’t afford a huge downpayment either so we want to live there (required if rental property). So can we buy as rental but not really live there yet, but rather rent it out, since we cannot afford 2 mortgages? And then after a couple of years when our kids are done with high school, move in to that house?

    • Mark Ferguson says:

      You have to live in most owner occupied homes for one year and usually you have to move in within 90 days of purchasing depending on the loan.

  • Hi Mark,
    I am considering buying a duplex that is already rented out and doesn’t need repairs. What is a good offer to make? 5x what it brings in annually?

    • Mark Ferguson says:

      That depends on many, many factors. Rents, expenses, market value etc

  • Mark,
    I am considering a vacation/rental in Florida. Prices of those I’m looking at are 500-775,000. Good GRI on all of them (50,000 – 80,000). It will be a challenge to put 20% down, although I have it, a little hesitant to put it all in one basket. I own 3 homes, one of which I live in and one I rent. The other my son lives in (basically no rent). Your suggestions are good, but I’m wondering if 20% on a turn key property is typically required – its fully furnished, booked through 2016 season,(not offered by turn key company, just through regular realtor).

  • Sha Parker says:

    I own 2 rental properties out right that both have tenants. My credit isn’t that great, but I only have around $5,000 in debt total. I would like to borrow money to do repairs to each property as well as buy another investment property. Would it be better to use a hard money lender or could I get an equity loan?

    • Mark Ferguson says:

      I would get an equity loan if you could. The hard money will only be good for a year

  • I am a Loan Officer with 16 years’ experience at a mortgage company in Maine. If you own a home, and wish to purchase another home as your primary residence (and rent your current home), you will experience difficulty getting conventional or government financing if the property you are trying to purchase has more units or is inferior to your current home. This is up to the underwriter’s discretion. If they feel you are simply trying to “work” the system and purchase an investment property utilizing the better terms of an owner occupied loan program, they will either deny the loan or insist that it be underwritten as an investment property. I’ve been down this road several times with clients. Be prepared to provide a detailed letter of explanation to the underwriter and it had better make sense.

    • Mark Ferguson says:

      Hi Richard, I have heard this a couple times. I am always baffled since the HUD guidelines say the owners have to live there one year. It seems weird that HUD would give guidelines for what they require an owner occupant to do, but then turn around and say people are working the system when people follow those guidelines.

  • Great article mark. Would prefer to get more detailed in each strategy especially for foreign national investors.

  • Melissa Williams says:

    What if you live from paycheck to paycheck & have nothing saved. Plus working on clearing up bad debit. Can someone like me still profit from this? If so, what should I do?

    • Mark Ferguson says:

      I would concentrate on bad debt first

  • Zach Rogers says:

    Mark, I have a question that nobody has really answered for me. If I bought a home for sale are there any difficult laws or taxes that you have to go through to turn it into a rental property? Or can I buy a home then immediately post it up as a rental home on real estate websites, without it being illegal as I don’t have some kind of ‘okay’ to rent that specific property out to tenants? Thanks.

    • Mark Ferguson says:

      Depends on where you live, some cities require you to register rentals and others require nothing.

  • nayan jee says:

    Dear Mark,
    It has been an year since I am working as an architect. I have a small saving and a basic salary. You know architects initially earn very less. But, I am keen on starting investing in real estate. Can you suggest something. Should I invest in real Estate Bonds?
    Since I am an architect, do you think I can take some advantages from my profession?

    Thank you for this article.

    • Mark Ferguson says:

      I don’t know anything about real estate bonds

  • Jim Strong says:

    this is really awsome thanks for sharing such a informative artical

    • Mark Ferguson says:

      You are welcome!

  • We are in California. Someone mentioned that a realtor would need to put more money down when purchasing a property. True or false?

    • Mark Ferguson says:

      I have never heard of that

  • Wes Adams says:

    I’ve read that USDA loans are only for primary residences. Can you get one for investment properties? What is a good lender to use for them? I live in California but I’m looking at property in Kansas. Thanks

    • Mark Ferguson says:

      Correct, you cannot use a USDA loan on an investment property.

  • Hi mark, quick question. Besides from actually residing in the home , what actual “proof” would you have to show to validate that the home your purchasing is an owner occupant?

    • Mark Ferguson says:

      Well, if you are getting an owner occupant loan, you should be living in the home