7 Creative ways to Finance a Rental Property

7 Creative ways to Finance a Rental Property

By this point, I think I have established my point of why I feel Real Estate is the greatest investment you will find. 

One of the reasons why I love real estate is the ability to leverage OTHER PEOPLE’S money to purchase an asset that can become your personal ATM machine for decades to come.

Without further ado, let’s…


Here are 7 ways you can finance an investment property. (So no more excuses) as to why you have not started investing in (real estate)…Between these 7 options, I am sure you can find one that meets your needs.

1. Obtain a Home Equity Line of Credit

If you already own your own home and more importantly have equity, then you may want to consider tapping into the equity and using it to finance your investment. A home equity line of credit, or HELOC, is relatively easy to get and will save you from the hassle of having to finance the investment property itself. In many cases, you’ll be able to borrow up to 70-80 percent of the home’s total equity.
In many ways, the process of qualifying for a line of credit is similar to being approved for a regular mortgage. The bank will check your credit score, and verify that your income is sufficient to pay back the loan.

Keep in mind, though, that by using your home’s equity, your home will become the security for the new loan, which means if you default on your payments, you could stand to lose the property. Be sure to talk to a home mortgage consultant for more details regarding this type of loan.

2. Use the Proceeds From a Cash-Out Refinance

Another option for homeowners is refinancing and using the money to buy an investment property. Of course, the feasibility of this option will depend largely on how low-interest rates are, (not so great in 2023) as well as how much equity you have in the home (probably really great if you purchased over 2-3 years ago). Keep in mind that once you’ve purchased an investment property, you can then refinance that property after a year as well assuming it appreciates enough.

3. Consider Exchanging Property (AKA 1031 Exchange)

If you already own your own home, exchanging it for another property is another option. Consider exchanging it with a buyer for a property that will help you to reach your investment goals -such as one that will perform better as a rental, or, combine the property with cash to purchase the property that you want. For those of you not familiar with the tax code 1031…It has to do with deferring the gains realized from selling an investment property and rolling it into another property…Eventually, you will have to pay on those gains but you can kick that can for decades! 

4. Use Your Self-Directed IRA

If you have a self-directed IRA, you may be able to use the money for an investment property -without facing the stiff penalties that are usually involved when taking funds out. When structured properly, your rental expenses can be paid through your IRA, and the revenue will go back into the account, making your income tax-deferred -at least, until you take the money out. With a ROTH IRA, though, most of the income will have already been taxed, which means that in most cases, the income and appreciation on the property will be tax-free.

If you’re considering using your retirement account, you’ll want to consult a financial adviser to ensure that you don’t lose out with taxes and penalties.

     4a. Use Your Self-Directed 401k

An IRA isn’t the only option; a self-directed 401k can be used to invest in real estate as well. Much like using an IRA, with a 401k, you should be able to use the money to buy income property without having to pay penalties for taking the money out early. Just make sure you check with your financial advisor to ensure that you’ll be clear of potential fees.

5. Hard Money Lending

A hard money loan is a short-term loan that’s obtained from a professional private lender. This form of financing is often used by house flippers, who are usually after fast money, but they can also be used to purchase rental property -as long as the property is a good investment that has positive cash flow and a high chance of appreciation.

While the interest is generally higher on hard money loans, the benefit of this type of financing is that the loans are based more on equity in the property, rather than the strength of a borrower. They’re also generally faster to obtain than conventional mortgage financing -and many hard money lenders will allow a buyer to borrow up to 100 percent of the purchase price -and in some cases, will even allow them to finance repairs as well. Hard money loans are usually structured to include both an interest rate -and a number of points (one point is equal to 1 percent of the loan) that are added to the loan or paid at closing. Interest rates for hard money loans are typically between 9-18 percent, with points that fall somewhere between 1-5.

If you’re interested in hard money loans, be sure to have use help you vet them out. Another word for hard money is SHARK loans so just be aware that they will try to take advantage of someone that is not experienced so it is crucial to have someone else review the terms and make sure you are not being overcharged. In many cases, private funding can be used for a short-term solution, until conventional financing becomes available.

6. Consider Private Funding

Private funding is similar to hard money loans -but the difference is that usually private money lending is considered more relationship based. In most cases, you will obtain the funds from a family member, friend, or acquaintance that’s willing to back your investment property -be it a house flip or a rental property.

Private funding works in a similar way to hard money loans, but there will typically be less formality than going through a professional lender. There will also usually be lower interest rates, somewhere between 7-12 percent is common. In most cases, there will also be fewer -or no points than there would be with hard money loan.

Private lending is one of my personal favorites for financing. It is based on relationships and the private lenders I use for our loans have typically worked with me for decades so there is a lot of earned trust over the years.

7. Consider Going Through a Turnkey Provider

A turnkey provider is a relatively new concept, but it’s an option that’s quickly growing in popularity with many investors today. By going through a turnkey rental property provider, you’ll be able to invest in a rental property that’s already been purchased and rented and is being managed by a property manager. This type of investment makes it easy for you to buy rentals that are out of state -allowing you to take advantage of potentially better housing markets. Some turnkey providers will offer properties for down payments that are as low as 5 percent but keep in mind that lower down payments usually entail higher interest rates.

NEW RELEASE: PROPERTY RUSH IS NOW OFFERING INVESTORS WHO PURCHASE TURN KEY HOMES FROM US FINANCING OPTIONS THAT INCLUDE:30-year fixed/amortized loans3/5/7 year arm loansFixed 30-year interest-only loans.

We have partnered with one of the Nation’s largest providers of private lending to bring our investors the best of both worlds. We are offering incredibly competitive rates compared to traditional conventional financing without the hassles of 2 years of tax returns, W-2 income, 2-year work history, etc. If you get PTSD like I do from having to get conventional loans, then this could be the solution for you.

We are often able to qualify new investors within a couple of days and close within a couple of weeks!
We can offer cash-out refi’s, standard refi’s, along with standard loans for all of the investment properties that we offer in TN & GA!

This is something that has been in the works for the last 6 months and we are excited to announce that we are ready to help anyone get financing if they are interested.

There has never been a better time in the history of real estate to get financing no matter your situation or circumstances.

Reach out to us today if you would like to learn more about any of these options.
The Property Rush Recipe for Success in Turnkey Investing Is the 1% Rule Dead?

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