Smart ways to come up with a down payment for a rental

Cashfloat is a technology & data oriented lending company, developing and integrating technologies to enable affordable loans online under the new FCA regulations.

Here it looks at ways to come up with a down payment for a rental.

We had some rough years. With the current conditions on mortgage loans, not everyone can summon the courage to embark on such adventure. Have you found a deal on the market that is too good to ignore?

Let’s discuss today some smart ways to come up with a down payment for a rental!

First, be smart about the desired property.

We would all like to start with a rental in the shape of a five-bedroom house in a residential urban area. The price of such house and its down payment are most likely astronomic. Prices in real estate are high by default. But you can find sweet deals to build upon and turn into profitable investments.

As advice, if you have a poor credit history/score and you struggle with credit card debt, you should first cover those debts. It is wise to do so you spiral down in more loans, more interest rates, and more payments that are overdue.

Now, let’s see a some smart (albeit not risk-free) methods to present a down payment for a rental.

1. A Personal Loan

You can try a personal loan from a reputable lender and cover it from the rent you receive. Personal loans offer you significant amounts over long periods (think years) with bearable interest rates. Just make sure you receive approval for a sum large enough to cover the down payment or at least the majority of it.

If your rental deal is as good as it seems, it can cover your loan debts and even make a profit. Personal loans differ from payday loans. The latter will not offer you enough money to come up with a full down payment for a rental. What a payday loan can do is cover a small chunk you are missing to reach the down payment amount.

Keep in mind that payday loans are short-term credits with higher interest rates. They can work together if you strategise your credit portfolio correctly. You should read more about how these credit instruments work and make an informed decision.

2. An Auto Equity Loan

When it comes to conventional financing for a property down payments revolve around 15%-20% and up. You may have to save a small fortune to be able to put the down payment on the table. Especially if you are young and don’t have an investment portfolio yet.

In case you have a decent car make and model, you can take an auto equity loan. It can help you cover some down payment. Auto equity loans can bring as much as 50% (and sometimes more) as the value of your car.

In this scenario, the interest rates are high. The lender can repossess your car if you fail to reimburse the loan. On the other hand, you can add this easy money to your down payment piggy bank. Of course, you have to be aware that you need to make your loan reimbursements on time to take your car back. You should also present a clean credit history.

3. Seller Financing

It is a long shot, but you can try. Few people think about this because who has heard about a seller covering the buyer’s down payment? Well, it is rare but not impossible.

Here are some situations you should take advantage of:

The seller inherited the property, does not need it much, and does not know what to do with it either; the seller has no mortgage on the property; the property is in relatively poor shape and the seller does not have the cash to fix things; the seller may not want to go through all the motions.

They might accept a quick settlement with you and monthly payments from your part.

Some sellers won’t even want to hear about it. If you find one that does, it is worth discussing such matters and finding a mutually beneficial solution.