How to Buy Investment Property With No Money Down

If you’re a homeowner, you might be sitting on the key to your first investment property without even realizing it. The equity in your current home is a powerful financial tool, one that can be used to launch your real estate portfolio. Instead of saving for years to come up with a down payment, you can leverage the value you’ve already built. This is one of the most common and effective ways savvy investors expand their holdings. We’ll walk you through the specific methods that show you how to buy investment property with no money down, from using a HELOC to executing a cash-out refinance.

Key Takeaways

• Use creative financing to get in the game: Look beyond your savings account and consider using your home’s equity, government-backed loans for owner-occupied multi-unit properties, or seller financing to fund your first investment.
• Protect your investment with thorough research: Since you’re starting with zero equity, your financial safety net is a solid plan. Always get a professional inspection, verify the property will generate positive cash flow, and build a cash reserve for inevitable surprise expenses.
• Build your professional support system: You don’t have to be an expert in everything. A great team—including an investor-savvy real estate agent, a creative lender, and a property manager—is essential for finding the right deals and managing them effectively.

Can You Buy an Investment Property with No Money Down?

It sounds too good to be true, but yes, it is possible to buy an investment property without a huge cash down payment. Getting into real estate investing doesn’t always require you to have tens of thousands of dollars saved up. The key is to get creative and understand the different financing strategies available to you. This approach can help you get a better return on your investment because you’re using less of your own money upfront. It’s all about leveraging other resources, from the equity in your current home to specialized loan programs. Let’s break down how it works and what you need to do to prepare.

How It Works

Buying a rental property with no money down involves using creative financing methods to cover the purchase price and closing costs. Instead of a traditional down payment from your savings, you might use a loan against another asset, partner with other investors, or find a loan that doesn’t require a down payment. One popular strategy is to rent out the home you already own and then buy a new primary home with a low-down-payment loan. This lets you turn your current residence into an income-producing asset while moving into a new home with minimal cash out of pocket. The goal is to use other people’s money or existing assets to secure your investment.

What Credit Score Do You Need?

When you’re not putting money down, lenders look for other signs that you’re a reliable borrower, and a strong credit score is at the top of their list. While requirements vary, a score of 620 is often the minimum, but a score above 740 will get you the best interest rates. For a traditional investment property you don’t plan to live in, lenders usually require a 20% down payment. However, if you buy a multi-unit property (2-4 units) and live in one of them, you can often secure a loan with a much smaller down payment—sometimes as low as 3.5%. This “owner-occupied” strategy is a fantastic way for new investors to get started.

How to Prepare Your Finances

Your financial preparation goes beyond your credit score. If you already own a home, you have a powerful tool at your disposal: home equity. You can tap into it through a home equity loan, a Home Equity Line of Credit (HELOC), or a cash-out refinance to fund your down payment. Beyond securing financing, it’s critical to have a healthy cash reserve. Investment properties come with surprise expenses, like a furnace repair or a vacant month between tenants. Having a financial cushion to cover these costs without stress is non-negotiable for any savvy real estate investor.

Choose the Right Property for High Returns

Finding a great investment property is always the goal, but it’s absolutely essential when you’re using a no-money-down strategy. Since you won’t have an initial cash cushion in the deal, the property itself needs to be a strong performer from the very beginning. Your success hinges on choosing a home that can generate immediate income and appreciate over time. This means you need to be extra diligent in your search, focusing on properties with solid fundamentals in promising locations. A smart choice minimizes your risk and sets you up for long-term financial gains. Let’s walk through how to spot a winner.

Research the Market

Before you look at a specific listing, you need to understand the market. A property is only as good as its location. Start by exploring different communities to find areas with strong rental demand, low vacancy rates, and a healthy local economy. Look for signs of growth like new businesses and good schools. When you don’t put down a deposit, you initially own very little equity in your investment, which can reduce your flexibility if you need to sell. A strong, appreciating market acts as your safety net, helping you build equity faster.

Analyze a Property’s Income Potential

The numbers have to make sense. Your primary goal is to find a property that generates positive cash flow, meaning the rental income is greater than all your expenses. These include the mortgage payment, property taxes, insurance, maintenance, and management fees. While traditional purchases require a large down payment, knowing how to buy a rental property with no money down means the property must pay for itself immediately. Create a detailed spreadsheet for every property you consider and run the numbers conservatively. Prove it will be profitable on paper first.

Assess the Property’s Condition

A surprise repair can instantly turn a profitable investment into a financial drain, especially in a no-money-down scenario where you don’t have a large cash reserve. Always get a professional home inspection to uncover hidden issues, from a leaky roof to an outdated electrical system. A property in excellent condition is a more reliable asset and requires less upfront capital for repairs. A well-maintained home is an asset, while a fixer-upper is a liability that will demand cash you haven’t budgeted for. Prioritize move-in ready properties to ensure your rental income starts flowing.

Use Your Home Equity to Invest

If you already own a home, you have a powerful financial tool at your fingertips: equity. Your home equity is simply the difference between what your home is worth and what you still owe on your mortgage. As you pay down your loan and your property value increases, your equity grows, creating a source of funds you can use. Tapping into this value can be a smart way to fund your first or next investment property. It’s one of the most common strategies for expanding a real estate portfolio without needing a ton of cash in the bank.

Think of it as using your current home’s success to build future wealth. There are a few different ways to do this, each with its own set of pros and cons. You could take out a loan against your equity or refinance your mortgage entirely. The key is to understand your options and choose the one that aligns with your financial situation and investment goals. Before you move forward, it’s always a good idea to chat with a financial advisor and a trusted real estate agent to make sure you’re making a move that’s right for you. They can help you weigh the benefits against the risks and create a solid plan.

Home Equity Loan vs. HELOC: What’s the Difference?

A home equity loan and a Home Equity Line of Credit (HELOC) both let you borrow against your home’s value, but they work differently. Think of a home equity loan as a straightforward loan: you get a single lump-sum payment with a fixed interest rate. This is a great option if you know exactly how much you need for a down payment and prefer predictable monthly payments.

On the other hand, a HELOC functions more like a credit card. You’re approved for a certain credit limit and can draw funds as needed, usually at a variable interest rate. This flexibility is perfect if you’re planning a renovation on a flip or need access to cash for ongoing investment expenses.

Consider a Cash-Out Refinance

Another popular route is a cash-out refinance. With this strategy, you replace your current mortgage with a new, larger one. You then receive the difference between the two loan amounts in cash. For example, if your home is worth $400,000 and you owe $200,000, you could potentially refinance for $300,000, pay off your old mortgage, and walk away with $100,000 in cash for your next down payment.

This can be an excellent way to access your home equity, especially if you can lock in a lower interest rate on your new mortgage. Most lenders will allow you to borrow up to 80% of your home’s value, giving you a substantial amount to work with.

Understand the Risks

Using your home’s equity is a fantastic strategy, but it’s important to go in with your eyes wide open. Your home is the collateral for these loans, which means if you can’t make the payments, you risk losing it. Real estate investing always comes with potential surprises, from unexpected repairs to vacancies between tenants.

Before you pull the trigger, make sure you have a solid financial safety net. You’ll want enough cash saved to cover several months of mortgage payments on both your primary residence and your new investment property. This buffer will protect you from unforeseen expenses and ensure you can handle any bumps in the road without putting your own home on the line.

Explore Government-Backed Loans

When you think of investment properties, you might not immediately think of government programs, but they offer some of the best paths to ownership with little to no money down. These loans are insured by federal agencies, which makes lenders more comfortable offering favorable terms, like lower down payments and more flexible credit requirements. While they come with specific rules—most notably, you usually have to live in the property for a period of time—they are a fantastic tool for first-time investors.

The strategy here is often called “house hacking.” You buy a multi-unit property, live in one unit, and rent out the others. The rental income from your tenants can help cover, or even exceed, your monthly mortgage payment. This approach allows you to get into the real estate investment game while also having a place to call home. It’s a practical way to build equity and generate cash flow right from the start. Let’s look at three of the most common government-backed loans that make this possible.

FHA Loans for Multi-Unit Properties

An FHA loan, insured by the Federal Housing Administration, is a popular choice for buyers who don’t have a large down payment saved up. You can secure an FHA loan with as little as 3.5% down. While they’re often used for single-family homes, they’re also perfect for purchasing properties with two to four units. The key requirement is that you must occupy one of the units as your primary residence for at least one year. This makes FHA loans an ideal entry point for new investors looking to house hack their way to financial freedom. By living on-site, you can manage the property easily while your tenants help you pay down the mortgage.

VA Loan Benefits for Investors

If you’re a veteran, active-duty service member, or eligible surviving spouse, a VA loan is one of the best financial benefits you’ve earned. These loans are famous for requiring no down payment and no private mortgage insurance (PMI). Just like with an FHA loan, you can use a VA loan to buy a multi-unit property (up to four units), as long as you live in one of them. This presents an incredible opportunity to start your real estate portfolio without needing significant cash upfront. The ability to acquire an income-producing asset with zero money down allows you to begin building wealth through property ownership much sooner than you might have thought possible.

USDA Rural Development Loans

Don’t overlook the opportunities outside of major cities. The U.S. Department of Agriculture offers loans designed to encourage homeownership in less populated areas. A USDA loan also requires no down payment, making it another excellent option for buying an investment property with no money out of pocket. The main condition is that the property must be located in an eligible rural or suburban area. If you’re open to investing in a small town or a community on the outskirts of a city, a USDA loan could be your ticket to owning a home that also generates rental income. It’s a unique program that supports community growth while helping you achieve your investment goals.

Get Creative with Your Financing

When a traditional mortgage isn’t the right fit, it’s time to think outside the box. Securing an investment property with no money down often means exploring alternative financing routes that many aspiring investors overlook. These strategies can open doors that might otherwise seem closed, allowing you to build your portfolio without a large upfront cash payment. From partnering with the seller to joining forces with other investors, there are several creative paths you can take. The key is to understand your options and find the one that aligns with your financial situation and investment goals. If you’re ready to get creative, these strategies can help you make your first investment a reality.

Ask About Seller Financing

Seller financing, sometimes called owner financing, is an arrangement where the property seller acts as the lender. Instead of you getting a loan from a bank, you make payments directly to the seller over an agreed-upon period. This can be a fantastic option if you have trouble qualifying for a traditional mortgage. It works especially well when the seller owns the home outright and doesn’t have an outstanding mortgage of their own. This arrangement can simplify the process, potentially reduce closing costs, and offer more flexible terms than a bank would. It’s a direct negotiation between you and the seller, so having an experienced real estate agent on your side can help you structure a deal that benefits everyone.

Look into Lease Options

A lease option, also known as a rent-to-own agreement, is another great way to get your foot in the door. With this strategy, you rent a property for a specific period with the option to buy it at a predetermined price before the lease expires. A portion of your monthly rent payment is often credited toward your future down payment, allowing you to build equity while you live in or manage the property. This gives you time to save more money, improve your credit score, and prepare for homeownership without the immediate pressure of securing a large loan. It’s a practical approach that lets you test out a property and neighborhood before making a long-term commitment.

Partner with Other Investors

You don’t have to go it alone. Partnering with other investors can make buying a property much more accessible. A co-borrower can bring a lot to the table, whether it’s cash for the down payment, a stronger credit profile, or valuable real estate experience. By pooling your resources, you can qualify for better loan terms and share the responsibilities of property ownership. This strategy allows you to share both the risks and the rewards, making it a less intimidating entry into real estate investing. Finding the right partner is crucial, so look for someone whose financial goals and work ethic align with yours.

Find a Private Money Lender

Private money lenders offer an alternative to traditional financial institutions. These lenders can be friends, family members, or private individuals and companies that specialize in funding real estate deals. They often have more flexible lending criteria than banks and can move much faster. Another option is a hard money loan, which is a short-term loan secured by the property itself. These are often used for fix-and-flip projects and can sometimes be obtained with little to no money down. While interest rates may be higher, the speed and flexibility of private financing can be exactly what you need to seize a great investment opportunity. If you’d like to discuss your options with an expert, our team is here to help.

Manage Your Investment Risks

Buying an investment property with no money down sounds like a dream, but it’s a strategy that requires a clear-eyed approach to risk. When you finance 100% of a purchase, you start with zero equity. This means you have less of a financial cushion if things don’t go exactly as planned. A sudden repair, a vacant month, or a dip in the market can put you in a tough spot.

That’s why managing risk isn’t just a good idea—it’s the most important part of your job as an investor. A smart strategy involves more than just finding a property; it’s about creating a plan that protects you from the unexpected. By anticipating potential challenges with interest rates, property management, market fluctuations, and your personal finances, you can build a more resilient investment. Think of it as financial self-defense. It ensures your new asset remains a source of income and not a source of stress.

Plan for Interest Rate Changes

Many no-money-down financing options, like a HELOC, come with variable interest rates. While a low introductory rate is appealing, it won’t last forever. When rates rise, your monthly mortgage payment will, too, which can quickly erase your profit margin. Before you sign any loan documents, you need to stress-test your investment. Calculate your monthly costs with an interest rate that’s 2% or 3% higher than the current one. Does the property still generate positive cash flow? If the numbers get too tight, you might need to reconsider the deal or build a larger cash reserve to handle potential payment shocks. This foresight is key to ensuring your investment remains profitable over the long term.

Know the Basics of Property Management

Once you own the property, the real work begins. Being a landlord is an active role that requires time and skill. You’ll be responsible for finding and screening tenants, collecting rent, handling maintenance requests, and understanding local landlord-tenant laws. If you plan to manage the property yourself, be realistic about the time commitment. If you’d rather be hands-off, you’ll need to hire a professional property manager. Their fees typically range from 8% to 12% of the monthly rent, so be sure to factor that cost into your cash flow analysis from day one. Poor management can lead to high turnover and costly vacancies, which are risks you can’t afford in a highly leveraged investment.

Protect Yourself from Market Shifts

Real estate markets move in cycles. While it’s great to buy when values are climbing, you have to be prepared for periods of stagnation or decline. When you have no initial equity, a market downturn can be particularly dangerous. If property values drop even slightly, you could owe more on your loan than the property is worth, making it impossible to sell or refinance. The best defense is to invest for long-term cash flow rather than hoping for short-term appreciation. Focus on finding properties in stable neighborhoods with strong rental demand. A steady stream of rental income will help you ride out any market fluctuations without being forced to sell at a loss.

Keep an Eye on Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes toward paying your monthly debt payments. Lenders look at this number closely to assess your ability to repay a loan. Adding a new mortgage without a down payment will increase your DTI. If it gets too high (most lenders prefer it to be under 43%), you may find it difficult to qualify for other loans in the future, whether for another investment or a personal need. Before you buy, calculate your DTI and see how the new mortgage payment will affect it. Keeping your overall debt manageable is crucial for sustainable growth as a real estate investor.

Plan for Legal and Tax Matters

Buying an investment property is a major business decision, and it comes with important legal and financial responsibilities. Getting these details right from the start protects you and your asset for the long haul. It’s easy to focus on finding the perfect property and securing financing, but a solid plan for taxes, insurance, and legal compliance is what will sustain your investment. Think of this as the framework that supports your entire real estate venture. Taking the time to understand these matters will help you operate confidently and handle any challenges that come your way.

Get the Right Insurance

When you buy a property with no money down, your initial equity is very low, which makes the right insurance coverage non-negotiable. Standard homeowner’s insurance won’t cut it for a rental property. You’ll need landlord insurance. This type of policy not only covers damage to the property itself but also provides liability protection in case a tenant is injured on your property. It can also cover loss of rental income if the property becomes uninhabitable due to a covered event, like a fire. Protecting your investment is about more than just the physical building; it’s about safeguarding your financial future from unexpected events.

Understand the Tax Benefits

One of the most appealing parts of real estate investing is the tax advantages. As a property owner, you can deduct many expenses associated with your rental. These often include mortgage interest, property taxes, insurance premiums, maintenance costs, and property management fees. You can also claim depreciation, which is a deduction for the wear and tear on the property over time. These tax deductions for rental properties can significantly lower your taxable income. It’s a good idea to connect with a tax professional who specializes in real estate to make sure you’re taking full advantage of every benefit available to you.

Follow Property Management Rules

Being a landlord means you have to follow a specific set of rules. Landlord-tenant laws vary by state and even by city, so it’s crucial to understand your local regulations. These rules cover everything from lease agreements and security deposits to eviction procedures and property maintenance standards. You also need to comply with the Fair Housing Act, which prohibits discrimination against tenants. Following these rules isn’t just about avoiding legal trouble; it’s about running a professional and ethical business that treats tenants fairly and respectfully.

Develop Your Exit Strategy

Before you even buy a property, you should know how you plan to eventually exit the investment. An exit strategy is your plan for how you’ll cash out or move on to the next venture. Will you hold the property for long-term cash flow? Do you plan to sell it after a few years once it has appreciated in value? Maybe your goal is to use the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method to pull your capital out and reinvest it. Having a clear real estate exit strategy helps guide your decisions from the very beginning and ensures you’re always working toward a specific goal.

Build Your Investment Team

Real estate investing might seem like a solo mission, but it’s truly a team sport. This is especially true when you’re getting started with little to no money down. You’re not just buying a property; you’re executing a complex financial strategy that requires specialized knowledge. Having the right experts in your corner can be the difference between a successful investment and a stressful mistake. Your team will help you find the right opportunities, secure funding, and manage the property, so you can focus on building your portfolio. Think of them as your personal board of directors, guiding you toward smart, profitable decisions.

Who You Need on Your Team

When you buy a property with no down payment, you start with very little equity. This lack of a financial cushion makes every decision more critical and reduces your flexibility if you need to sell quickly. Your investment team acts as your safety net and your strategic council. The core players you’ll want to recruit are a savvy real estate agent, a creative lender or mortgage broker, a reliable property manager, and a knowledgeable real estate attorney or accountant. Each person brings a specialized skill set to the table, helping you vet deals, understand legal obligations, and keep your investment profitable.

Partner with a Real Estate Agent

A great real estate agent does more than just send you listings. For an investor, they are your eyes and ears on the ground. You need an agent who understands the investor mindset and knows how to spot properties with potential for creative financing. They can find motivated sellers who might be open to seller financing or identify multi-unit properties that qualify for specific government loans. A well-connected agent is also a fantastic networker who can introduce you to the other members of your team. Think of them as your strategic partner in finding the right investment.

Find a Private Lender

Traditional banks often have strict lending criteria that can make no-money-down deals nearly impossible. This is where private money lenders come in. These are individuals or small companies that lend their own money for real estate investments. They tend to be more flexible and are often more interested in the potential of the property than your personal credit score. Options like securing investment property loans with no down payment become much more accessible when you work with private lenders who understand creative deal structures. Your real estate agent can often recommend trusted lenders in their network.

Hire a Property Manager

Once you own the property, the real work begins. Being a landlord involves marketing the unit, screening tenants, collecting rent, and handling late-night maintenance calls. If that sounds like a second job you don’t want, a property manager is a must-have. They handle all the day-to-day operations, ensuring your property runs smoothly and remains a profitable asset. This frees you up to live your life and, more importantly, focus on finding your next investment property. A good property manager helps streamline operations and keeps your investment on track without you getting bogged down in the details.

Do Your Due Diligence

This is your homework phase, and it’s arguably the most important step in the entire process. When you’re buying a property with no money down, your due diligence is the main thing protecting you from a bad deal. It’s easy to get swept up in the excitement of finding a potential investment, but this is where you need to slow down and verify every single detail. Think of it as your chance to look under the hood and kick the tires before you’re financially and legally on the hook.

A thorough due diligence process covers everything from the physical condition of the property to the fine print in the legal documents. It’s how you uncover hidden issues, confirm the property’s income potential, and gain the confidence you need to either move forward with the purchase or walk away without regret. Skipping or rushing this step is a recipe for disaster, so give it the time and attention it deserves.

Always Get a Property Inspection

This is a hard-and-fast rule: always get a professional property inspection. It’s the best way to understand the true condition of a house beyond the fresh coat of paint. Owning property comes with big, surprise expenses; for example, one investor had to pay $9,000 for a new roof without warning. An inspector will give you a detailed report on the home’s core components—the foundation, roof, plumbing, and electrical systems—so you know what needs immediate attention and what could become a problem down the road. This report is a powerful tool for negotiating with the seller for repairs or a lower price.

Run the Numbers

An investment property is all about the numbers. If they don’t work, the deal doesn’t work. Your primary goal is to achieve positive cash flow, and you can only determine that with a careful financial analysis. A good rental property should typically return 6% to 8% profit each year after all expenses (mortgage, maintenance, taxes, insurance) are paid. Be sure to account for everything, including potential vacancy periods, ongoing repairs, and property management fees. Using a rental property calculator can help you accurately project your income and expenses to ensure the property will actually be profitable.

Review All Legal Documents

When you’re using creative financing methods, the paperwork can be more complex than with a traditional loan. It is absolutely critical that you read and understand every document before signing. For instance, with seller financing, you might pay a slightly higher price for the property because the seller is taking a risk. These deals often have a “balloon payment,” meaning you’ll need to pay off the rest of the loan in a lump sum after a few years. Having a real estate attorney review all contracts is a wise investment to protect yourself from unfavorable terms and ensure the deal is structured in your best interest.

Verify Your Market Research

You did your initial research to find the property, and now it’s time to confirm everything. Remember, real estate investing is usually for making money over a long time, not for quick profits. Double-check your assumptions about local rental rates by looking at current listings and talking to property managers in the area. Verify the neighborhood’s potential by checking for any new developments or economic shifts. This final check ensures your investment is based on a sound, long-term strategy and that the opportunity is as good in reality as it appears on paper.

Ready to Buy Your First Property?

You’ve learned the strategies and explored the financing options. Now it’s time to put that knowledge into action. Buying your first investment property, especially with no money down, is a significant step, but it’s completely achievable with the right preparation. Think of this as your final launch sequence before you start your property search. By focusing on a clear plan, understanding potential pitfalls, and knowing how you’ll measure success, you can move forward with confidence. Let’s walk through the essential steps to get you from aspiring investor to property owner.

Your First Steps Checklist

Getting started is often the hardest part. This simple checklist will help you get organized and build momentum. The goal here isn’t to do everything at once, but to take small, consistent steps forward. You can absolutely buy a rental property without a huge upfront investment, which can free up your cash and potentially lead to a better return.

Here’s where to begin:

• Define Your Goals: What do you want to achieve? Are you looking for long-term rental income, or are you planning to fix and flip?
• Check Your Financial Health: Review your credit score and calculate your debt-to-income ratio.
• Get Pre-Approved: Talk to a lender to understand exactly how much you can borrow.
• Start Your Research: Begin exploring potential communities and learning about local market trends.
• Connect with an Agent: Find a real estate professional who understands investment properties.

Common Mistakes to Avoid

Knowing what not to do is just as important as knowing what to do. A no-money-down strategy comes with its own unique challenges, and being aware of them ahead of time can save you a lot of stress. For instance, when you finance 100% of the purchase, you start with very little home equity. This can limit your flexibility if you need to sell the property unexpectedly in the first few years.

Another major pitfall is underestimating expenses. Your mortgage is just one piece of the puzzle. Remember to budget for property taxes, insurance, maintenance, and potential vacancies. Having a cash reserve is crucial for handling surprise repairs, because big expenses will pop up. A solid financial cushion keeps a minor issue from turning into a major crisis.

Plan Your Timeline

Patience is your best friend in real estate investing. While it’s exciting to get started, remember that this is a long-term game, not a get-rich-quick scheme. Building wealth through property takes time, so it’s important to set realistic expectations from the beginning. A typical timeline might involve one to three months for initial research and securing financing. From there, finding the right property, making an offer, and closing the deal can take another two to four months.

Once you own the property, your focus shifts to managing it effectively and letting your investment grow. True success is often measured in years, not months, as you build equity and your property appreciates in value. A strategic, long-term approach will almost always outperform a rushed, short-sighted one.

How to Measure Success

How will you know if your investment is performing well? The most important metric is cash flow—the money left over after you’ve collected rent and paid all the bills. A good rental property should generate positive cash flow every month. As a benchmark, many investors aim for an annual return of 6% to 8% after all expenses are covered.

To calculate this, add up your total annual rental income and subtract all your costs, including the mortgage, taxes, insurance, and maintenance. This final number is your net profit. While cash flow is key, don’t forget to track your property’s appreciation and the equity you’re building with each mortgage payment. These factors are crucial parts of your overall return on investment and are essential when you eventually decide to sell your property.

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Frequently Asked Questions

If I don’t need a down payment, do I still need to have cash saved? Yes, absolutely. While you might finance 100% of the purchase price, you still need a healthy cash reserve. This money isn’t for the down payment but for everything else that comes with owning property. You’ll need funds for closing costs, an emergency fund for unexpected repairs like a broken water heater, and enough to cover the mortgage during any vacant months between tenants. Think of it as your business’s operating capital—it’s essential for keeping your investment secure and stress-free.

What’s the single biggest risk of buying with no money down? The biggest risk is starting with zero equity in the property. Equity is your financial cushion. Without it, if the real estate market takes a slight dip, you could owe more on your loan than the property is worth. This makes it very difficult to sell or refinance if you need to. That’s why it’s so important to focus on properties that generate strong, positive cash flow from day one. The rental income provides the stability you need to ride out market fluctuations.

Are any of these strategies good for someone who doesn’t already own a home? Definitely. While using home equity is a popular strategy for current homeowners, several other paths are perfect for first-time buyers. Government-backed loans, like FHA or VA loans, are designed for this. You can buy a multi-unit property with a very low down payment, live in one unit, and have your tenants’ rent help pay the mortgage. Partnering with other investors or finding a seller willing to finance the deal are also excellent options that don’t require you to be a current homeowner.

Which no-money-down strategy is best for a beginner? For most beginners, the “house hacking” strategy using an FHA loan is one of the most accessible and effective methods. It allows you to buy a property with up to four units with only 3.5% down, which is very close to zero. By living in one of the units, you learn the ropes of being a landlord with low personal risk, and your tenants’ rent can significantly reduce or even cover your housing costs. It’s a practical way to get started in real estate investing while also securing a place to live.

I’m interested, but this feels overwhelming. What’s the very first step I should take? The best first step is to simply get a clear picture of your own finances. Check your credit score and figure out your debt-to-income ratio so you know where you stand. The next step is to talk to a professional. A conversation with a lender who understands investment properties or a real estate agent who works with investors can make the entire process feel much more manageable. They can help you understand your options and create a realistic plan based on your specific situation.