Cash will get you the best deal on properties, but here’s a trick favored by experienced investors. Use cash to buy, then within six months, get a Fannie Mae-backed loan on 75% of the home’s value as if it were a purchase, with better terms than a cash-out refinance. Expect to pay at least a quarter point higher on the mortgage rate than if it were your primary residence, says Dean Vlamis, vice president of lender Guaranteed Rate.
Fannie Mae will allow you to finance up to four properties—which includes your primary residence—with 25% down. Note: Fannie counts a duplex, triplex, or fourplex as a single property, so you can finance more units at beneficial terms. Keep in mind that unless you have a two-year track record as an investor, lenders may not count future rental income towards qualifying for the loan, says Mike D’Alonzo, former president of the National Association of Mortgage Brokers.
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Own your own company? The U.S. Small Business Administration offers 10% down low-cost real estate loans as long as the business occupies at least 51% of the space. If you can find a building with, say, an apartment on the second floor, you can rent out that space to a tenant and save on office expenses.