The idea of not using personal funds to buy real estate in any city in the U.S. can motivate a lot of people. The reason that no money is needed is because certain types of investments can be leveraged. By leveraging someone else's cash, a home could legally be purchased although this method can be risky for someone without experience in the marketplace.
4 Ways to Buy Real Estate Without Cash
4. Lease Option
A motivated seller, who is usually a homeowner, often seeks the easiest way out of a mortgage. The reasons why a person sell can be different, but the opportunity to buy is available to investors. A lease option can be arranged with a seller who is ready to sign a contract of sale. An investor can obtain the contract and rent the home to a third party for a specific price. This relieves the homeowner of the mortgage payments. The person leasing the home puts up the money for the down payment paid to the property owner.
3. Borrowed Funds
Real estate venture partners seek ways to turn their unused cash into profits. A beginner in real estate who finds an excellent price on a home could use the services of a partner to help fund the purchase. Most partners will put up the money for the down payment in exchange for a larger percentage of the profits when the home is sold or rented. A beginner who has no contacts in the housing industry could find it different to find a venture partner.
2. 1031 Exchange
When one home is swapped for another, the tax burden can be eliminated in most cases. It is now common for a person who owns a property that is underperforming or distressed to trade this property in for a brand new house. There are a lot of qualifications that a person much go through to complete this trade off although many investors do prefer this option. A 1031 is one of the many options to buy real estate.
1. IRA Investing
Raw land or real estate are two of the purchases that can be made using IRA or 401K funds. An adult who has enough funds in a retirement account to provide a down payment or the full purchase price for a house could prefer the IRA investing route. The IRA or 401K actually owns the property after it is purchased and income will likely grow free of taxation. A non-recourse loan lender is used to secure the loan when only a down payment is used to acquire the property.