How to Get Started Investing in Real Estate

One of the best ways to get started in real estate that I have found, is to maximize your leverage with the bank using an owner occupied loan.

This is a technique that is used often by people who are buying their own houses to live in. The bank usually only requires between 3% and 5% at a minimum of cash down payment in order to buy your own home. They do require that you live in that home for a specified amount of time, often only a year or more. One thing that is often overlooked though, is that those same banks are willing to loan with the same low money down options on a duplex, triplex, or four unit building. Remember though, you will actually have to live in the unit for at least the required amount of time.

Normally, a bank will require 20% to 30% down on a loan for an investment property. That money can be borrowed, and as you expand your portfolio you'll want to use those options, but getting started with only 3-5% down is extremely attractive compared to this. In some ways it can improve the return on investment greatly. If you don't have your own home to live in yet, this is an excellent way to get started.

This is how I got started, and it worked out really well for me. I bought a 4-plex for $150,000, put only $6,000 down. Closing costs were wrapped into the loan, so I didn't have to put anything else down. After paying the mortgage and all expenses, I was getting $150 per unit per month in passive income. If your expenses aren't unusually high, you will recoup your initial investment in the first year with those kinds of numbers.

Many real estate investors that I talk with look back on their first couple of buy and hold deals as sometimes the best investments they've ever made, because they were able to use this creative strategy to get their foot in the door with relatively very little money down. If your family situation allows you to move into an investment unit like this, do it!