Are you interested in purchasing investment property in Boston? Is the lack of cash for the down payment holding you back? If so, we have some good news for you. Having a large amount of money readily available will certainly help advance your real estate investing career, but there’s more than one way to do things. There are some creative ways of purchasing investment property in Boston for people that don’t have a lot of cash on hand. Here are the top 10 ideas to cover your next down payment on an investment property in Boston.
Leverage Other Real Estate That You Own
Many real estate investors already own property. It could be other investment property, or a single-family home that you currently live in. Either way you can leverage the equity. There are a few ways you can accomplish this without selling the property. You can take out a cash out refinance loan. This works especially well if you can lower your interest rate. You can also take out a home equity line of credit or HELOC for short. This is the way to go if you can’t qualify for a cash out refinance loan. It’s also a smart choice if the interest rate on the refi is higher than your current interest rate. Simply use the cash from the refi loan or HELOC to pay for the down payment on the new investment property in Boston.
Utilize Seller Financing
Seller or owner financing is a form of financing in which the owner of the real estate holds the financing for the buyer. In essence, the seller acts as the buyer’s lender instead of a bank. The buyer repays the loan over time according to the repayment terms. Seller financing can be for the long term or short term. If it’s for the short term you will need to refinance the property within the specified amount of time. If you take part in a seller financing deal you may need to pay a higher interest rate. However, you may be able to negotiate a no down payment situation. Seller financing is also perfect for investors who can’t otherwise qualify for a mortgage.
Assume The Seller’s Mortgage
Another great way to buy an investment property with little to no money down is by assuming the seller’s mortgage. This is also referred to as a “subject to” purchase. You’re buying the investment property in Boston by taking over the seller’s mortgage. Although these deals may be hard to come by, they are out there. Depending on the seller’s needs it may even be possible to take over or assume the loan with zero money down. However, you should be prepared to pay a small down payment and some lender fees.
Find Partners To Fund The Purchase
There are many people who would like to invest in real estate, but don’t want to get their hands dirty. In short, they want to be passive investors who only invest their money and let others do the work. That means you can use other people’s money to purchase real estate. This could be for the down payment, or even the entire purchase price. Of course, your funding partners will require a significant return on their investment. They may want to stay in the deal for the long term and split the rental income with you. However, they may be in it for the short term. That means you will need to refinance the property within the specific time frame.
Draw On Your Credit Cards Or Business Credit Line
Do you have low balances and or high limits on your credit cards? If so, you may want to draw money from them in order to cover the down payment on your investment. Although it may not be the ideal way to do it, this method works for many real estate investors. You will most likely more than make up for the credit card interest rates by making the investment. In addition, if you have a business line of credit you can draw on that for the down payment money.
Borrow From Family And Friends
Many real estate investors turn to family and friends if they need to borrow the down payment money. You may be able to do the same. Although you may feel funny about asking them, it can be a great way to come up with the cash you need. As an added bonus, your family and friends will probably be more than reasonable when it comes to the loan terms. As an added advantage, the loan won’t appear on your credit report. That can help your debt-to-income ratio when applying for the purchase loan.
Borrow The Money From Your 401(k)
Are you thinking about taking the down payment money out of your 401(k) account? If so, there are a few things that you need to be aware of. If you are younger than 59.5 years old there will be penalties. However, if you can put the money back within 60 days it doesn’t count as a distribution. That means you won’t need to pay those penalties. If you can’t put the money back into the account within 60 days, there may be another option. You can borrow the money from your 401(k)-account administrator. The good news is that 401(k) loans are inexpensive. You’re technically borrowing the money from yourself.
Borrow The Money From Your Roth IRA
You can also withdraw money out of your Roth IRA for up to 60 days without penalty. However, there is another option. You can set up a self-directed IRA to purchase investment property in Boston. Please seek the advice of an investment advisor or attorney first. You can also withdraw contributions from your Roth IRA penalty free at any time. However, you cannot withdraw any earnings without penalty. To avoid penalty, all gains must stay in the account until you’re 59.5 years old.
Sell Your Other Investments
Have you currently invested in other things besides real estate? Perhaps you have invested in the stock or bond market. Maybe you have invested in Bitcoin or other crypto currencies. Many people invest in precious metals such as gold and silver. Investors are now investing in sports cards. If you currently own any of these investments or other valuable items, it may be time to cash them out. That way you can use the money for the down payment of the investment property in Boston.
Get A Part Time Job Or Side Hustle
If you work full time, you may not have a lot of extra time on your hands. This holds especially true if you’re also spending time investing in real estate. However, a part time job or a side hustle just may be the solution. The good news is that you don’t need to keep the job or side hustle long term. You can quit after you earn enough money for the down payment on your investment property in Boston.
Contact a Boston Investment Property Expert Today
If you’re searching for an investment property in Boston and surrounding areas, we can help. Please contact Boston Pads today. We are your Boston real estate specialists. We look forward to working with you.
Anthony Tse
Published May 20, 2021
