Real estate is a strong investment, offering a stable source of income. Earning on rent price, or refinancing the accommodation, house owners turn their property to the business.
The problems appear when you try to make a procedure of taking out direct express emergency cash to relocate or purchase a house on credit. And getting a loan is not an evil if you read some reviews on Fit My Money and analyze different lenders. But unlike an unsecured small loan, a mortgage is much more difficult to get. The main requirement is a down payment – a part of the house cost, as a deposit.
Yet, there are several ways to escape undesirable outlay. See what strategies facilitate buying real estate.
Why Earning on Accommodation is a Promising Perspective in 2021
Over 900 thousand apartments are rented in Arizona and it is nearly 36% of the whole household. But usually rent payments are very high and a lot of people with low income can’t deal with rent prices. So, the solution is obvious: buy real estate in Arizona.
There are 2 usual ways to earn on real estate – leasing your accommodation, or resailing it during the price rise. Fortunately, both of them seem to work nowadays.
Prices on the housing market are rising year to year with a special increase at the end of 2020. Even the pandemic hasn’t changed this pattern, as it was expected originally.
Investing in real estate shows no risks, which attracts more and more owners. Selling your accommodation several years later, you’ll profit in any case.
Another variant is leasing accommodation and getting monthly income. This decision requires regular renovation, control over the tenants, and a thorough choice of location. However, more and more Arizona citizens prefer to rent a house rather than buying it, which makes your business a forward-looking decision.
Renting accommodations is also rather expensive. What’s the problem? The rent price for a 2-bedroom apartment in Arizona is over $1000. Through simple calculations, we know that a renter should earn nearly $44 thousand annually or more than 21 dollars per hour.
But official statistics show that the floor wage is $12 per hour and the average is a little bit more than $17.
That is why the demand for real estate is growing. The number of tenants rose extremely during the quarantine, when young people don’t leave their homes and stay with the whole family together.
Can I Purchase Real Estate with no Money Down?
Buying accommodation in credit, you are to pay the deposit. This step shows your credibility and protects the seller from the risks.
You’ll pay nearly 20% of the house’s value – a decent sum, especially for expensive property. And APR will differ from 2,5% to 3,3% in Arizona (depending on how long you are going to repay it).
On rare occasions, the percentage may lower to 3%.
However, such an option is only available for low-income families.
Many buyers look for ways to avoid down payments. It is important to understand that the deposit is a part of real estate’s value, and you’ll pay this sum anyway. Avoiding deposits, you just stretch this process and bypass big expenses at the beginning.
1. Home Equity Loan
If you already have property, use its value instead of a down payment. Here’s how it works:
- You apply for a home equity credit line in your bank or private services.
- Your present real estate serves as a bail in the agreement
- The amount of loan represents 70-80% of your accommodation’s estimated value
- The lender meets no risks since the sum is protected with immovable property. Thus, the borrower gets convenient conditions and large amounts of money.
Check your credit score beforehand – only borrowers with a clear reputation will be able to receive enough money.
2. Owner Financing
So-called purchase money mortgages are a type of mortgage cut between the seller and buyer directly. It is a widespread method in Arizona which means parties of the contract don’t use the bank as a mediator.
Such a decision leads to higher risks for the seller since there’s no compensation in case of non-payment.
How does it help to avoid down payment? Most sellers require the same conditions as banks, but some owners are open to discussion. You can ask for comfortable terms, or the lack of the deposit. Surely, each inconvenience for the seller leads to a higher rate of interest.
3. Personal Loans
Private lenders are less demanding than national banks. To evaluate your reliability, they use a famous “3’s Rule”: collateral, credit score, capacity to pay. Unlike them, banks are only interested in bail.
If you don’t have any property yet, there’s no way for you to take a loan here, since the risks are too high.
Working with private lenders, you can substitute the absence of the first installment with a high regular income and credit score. Provide necessary information and persuade the lender of your trustworthiness. It is a way to get a time buffer and prepare the needed sum after you’ve started to earn on the property.
4. Borrow from Acquaintance
Borrowing from friends is much cheaper than turning to banks. You can discuss the terms of repayment, avoid interest rates, and ask for delays in advance.
For example, you plan to lease the accommodation, but it requires several months to renovate the house and find a good tenant. Other lenders wouldn’t care about this matter and ask for repayment from the very first month, while acquaintances allow concessions.
5. Mortgage Assumption
Some house owners have large mortgage debts and feel unable to repay them in present circumstances. Getting a property with no money down is a beneficial chance for you.
The buyer assumes all debts and undertakes to make regular payments instead of the original owner. You still are to pay the difference between the original value, and the number of debts.
However, it is far less than a down payment. A person gets the same mortgage, but without money down which is a good advantage.
A down payment is a serious obstacle for property buyers. Not many of them know how to escape from this formality in Arizona.
You can assume the seller’s mortgage, or use owner financing and persuade the homeowner to avoid money down. If there’s no way to reduce the deposit, try to lower it, or take a profitable loan to make the payment.