Six easy ways to save for your first rental property down payment

Estimated read time 4 min read

Rental costs are increasing across the country, even though interest rates are low and lenders are friendly to homebuyers. It’s the perfect time for first-time investors to buy their first rental properties.

Some people want to invest in rental properties, but feel they do not have the money. They want to be able to buy a property, but are unsure of how to raise the money.

This article may help you if you are in a similar situation.

Six money-saving tips can help you to save up for a deposit on your first rental home while the market is booming. These money-saving tips will have you holding the keys to your very first rental property in no time.

Six easy ways to save for your first rental property down payment

Budget your expenses.

If you don’t have a plan, it will be impossible to save. Setting up a budget will help you save the money needed to buy a home.

You may want to save $20,000 if you plan on buying your first rental home in a year for $200,000, with a 10% down payment. Your goal is to reach $20,000 by the end of February 2017. To stay on track, you will need to save $1667 a month if you plan to divide your savings into equal monthly payments. Use a spreadsheet or paper trail to keep track of your progress. You will be more likely to achieve your savings goals if you have a visual reminder.

Open a separate account for savings.

Now is the perfect time to open a separate account for your downpayment. Experts recommend having a separate account for the down payment of your new home. You won’t need to worry about accidentally spending the money on other expenses or bills if you have a separate account. This makes it easy to track your progress.

Save all extras.

You’re getting a refund of taxes this year. It can be deposited directly into a dedicated savings account. You may receive a Christmas or yearly bonus from your employer. Add these funds, as well as any extras to your savings account. Any “extra” money you have in the coming year should be put into your savings account for a down payment. Even though it may not seem much, all that extra money can add up fast.

Ask for gifts

Ask family members to make a gift to your downpayment instead of giving you material gifts on your birthday, during the holidays, for special occasions, or even personal events like your anniversary. Nearly a quarter (25%) of first-time buyers use gift funds to supplement or pay for the down payment on a house.

You can withdraw money from your paycheque.

You can rely on your paychecks to provide you with a steady income. Determine what percentage of your paycheck you can put in your downpayment savings account. Ask the HR representative or accountant to set up split direct deposits so that you don’t see the money being taken out. The money would go straight into your savings account. Most banks allow automatic online transfers between a checking and savings account, even if split direct deposits are not an option.

FHA loans are available.

Some investors who want to buy their first rental properties will purchase a house as their primary residence using a no-money-down FHA mortgage. They then live there for a year and turn the property into a rental after that.

This strategy could be a good one for you to buy your first rental property. You may be able to get an FHA mortgage with just a 3.5 percent deposit if you are willing to live in the home for at least a year.

Choose your money wisely

You will need to make some sacrifices in order to save for the first down payment on a rental property. Spending money on items that aren’t important to your goal is a waste.

Spend and save money with diligence and you will have your first rental property and down payment before you know.

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