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How To Buy Your First Investment Property With Little to No Money Down

How To Buy Your First Investment Property With Little to No Money Down
Nicole Rueth headshot
Home.com Contributor

Buying real estate is one of the best ways to build your financial future, thanks to home equity and the potential for earning rental income.  

But the idea of buying an investment property might seem daunting. Don’t you need a lot of money? Don’t you need cash reserves? Isn’t it harder to get approved?

Not if you make your home your first investment property.

I’ll explain how to buy your first investment property with little or no down payment – and how you can use it to build your real estate portfolio.

What's in this Article?

Three ways to buy your first investment property without a big down payment
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How to spot a great opportunity
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Take the first step
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Three ways to buy your first investment property without a big down payment

If you think buying an investment property requires a massive down payment or jumping through hoops, I’ve got good news for you. It doesn’t have to be that way.

Yes, if you buy a property solely as an investment, you will need to take out an investment loan. And those do require higher down payments than a a loan to purchase a home you’ll live in. Plus you’ll need cash reserves.

But you can get started with real estate investing with little to no money down – if you’re willing to get creative.

Renovate and rent out part of your home

Whether you already own a home or you’re in the market for your first property, think about the possibilities beyond your day-to-day life there.

Sure, you’re going to live in the home. But what else can it do for you?

One of our mortgage team members is 21 years old, and he just bought a house with 3% down. It’s a single-family, 860-square foot house with more potential than meets the eye.

Not only will he live in the home, but he could turn the unfinished basement into a brand new Airbnb rental. Or he can convert his garage into a cool studio apartment for rent.

Either option could bring in income that will help pay his mortgage – and potentially fund his next property. By fixing up the space, he’ll increase the value in his home, and he can borrow against his equity over time. But he can also use the rental income toward his next property and repeat the same process there.

Seeing these possibilities can put your home search into perspective. You have to look beyond your current situation, especially if you’re in a competitive housing market like Denver, where I’m based.

Everyone wants to get into their dream home right out of the gate, but it doesn’t always happen that way. The real estate market is tough right now, and a lot of people are having to rethink the types of homes they’re willing to buy.

And that’s OK! You can buy a property now, live in it for a couple of years, then rent it out and leverage it to buy your next home. Maybe that second home is your dream home, or the one after that.

But buying now will give you the most options for building wealth, investing, and ultimately being in a position to purchase the house you really want.

Renovate a fixer-upper and rent it out after a year 

With competition for new, or newly renovated, homes so high, buying a fixer-upper can be your ticket to homeownership and real estate investing.

You can use a renovation loan to purchase a home and pay for renovations with a single mortgage. That means one application, one closing, and one monthly payment for the home and the repairs.

The home must be your primary residence for at least a year, but after that, you can rent it out and move up into another home. You may even be able to charge a higher rental rate if you’ve added popular amenities and overhauled the key living spaces.

Buy a multifamily home

You can buy a multifamily home with up to four units with a low down payment loan, as long as you live in one of the units for at least a year.

FHA and VA have a no or low down payment options for this:

Conventional loans require a minimum 15% down payment on a duplex and 20% down for 3-4 unit properties. USDA loans do not allow you to buy multifamily properties.

As long as you live in one of the units, you can rent out the others and use that income to cover your mortgage or save for a down payment on your next property.

And when the time comes to buy your next property, you can repeat the same process. Buy the home, live in it for at least a year, and then rent it out for additional income.

You can start earning income even while you’re living there by renting out a finished basement, extra bedroom, or a converted living space.

Learn more: Buying a Fourplex: What You Should Know About Buying a Multifamily Property

How to spot a great opportunity

Creativity is critical in our current market, which is why you need to work with professionals who can help you see the possibilities.

Your real estate agent, for instance, should be able to point out homes that are a little outdated but have a lot of potential. You also want an inspector who will give you a very clear definition of what needs to be fixed and what’s achievable with the property.

The inspector will give you a list of the house’s problems, and that list might be enough to scare another buyer away. But if you’re willing to put in the time and energy to remedy those issues, you could have a great home that will earn money for you over time.

Look at the local market

Another factor to consider is the market in which you’re buying. A lot of people are afraid to buy right now because they’re afraid of a housing crash. But real estate is local, so look at the economy where you live.

In a city like Denver, which has multiple industries – including tech, oil and gas, and financial services – to attract workers and students, there’s a strong likelihood of continued growth. There are jobs, amenities, access to mountains and hiking, and other features that are drawing people here. That makes it a good place to buy property, from my perspective.

So, consider the growth prospects and the demand for rentals. Popular college towns or up-and-coming areas with lots of new companies, jobs, and attractions are typically good bets for buying properties that will appreciate and attract tenants.

Take the first step

Contrary to what you may see in the headlines, now is a great time to buy a house. You can still lock in a low interest rate on a home, and the earlier you buy, the more time the property has to appreciate.

It doesn’t take a million dollars or a six-figure salary to buy your first investment property. You just have to be able to see the possibilities and be willing to put in the work to get started.


*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.

Further Reading

FHA Loan Requirements 2022 | Rates & Eligibility

FHA Loan Rates Today: Are They Going Up?

FHA Multifamily Loan: Start Earning Rental Income