Creative Deal Funding

[Jeremy Fleming]

Hey there, future property mogul! Ready to make your move in the real estate game? Securing a rental property is an exciting venture, but gathering the down payment can feel like a mountain to climb. Fear not, because I've got seven creative ways to help you fund that down payment and get you closer to your dream of owning a rental house in Canada or the USA. Let's dive in!

1. Home Equity Line of Credit (HELOC): If you already own a home with some equity built up, a HELOC can be a fantastic option. This allows you to borrow against the equity in your current home and use those funds for the down payment on your new rental property. It's like unlocking the potential of your existing assets!

2. Partnerships: Team up with someone who has the funds but might lack the time or expertise to invest in real estate. Forming a partnership can be mutually beneficial. They provide the down payment, and you manage the property. Just be sure to outline everything in a clear, legal agreement to avoid future misunderstandings. Be sure to follow through with all your agreements!

3. Seller Financing: In some cases, the seller of the property may be willing to finance the purchase themselves. This means instead of getting a mortgage from the bank, you pay the seller in installments. Sometimes, sellers might require a smaller down payment or even none at all. It’s worth asking about! And in fact, this is my favourite way of funding a downpayment. In fact I bought a house with 100% owner financing one time - only because I asked.

4. Retirement Accounts: Certain retirement accounts, like a 401(k) in the USA or an RRSP in Canada, allow for borrowing or withdrawing funds for home purchases. While this can be risky and might come with penalties or taxes, it can be a viable option if managed wisely. Always consult with a financial advisor to understand the implications. In Canada you can also use a 3rd parties RRSP as a "loan" or a mortgage. Allowing you to finance up to 100% of the purchase price.

5. Side Hustles and Gig Economy: Channel your inner entrepreneur and take on side hustles. Whether it’s driving for a ride-sharing service, freelancing online, or even renting out a room on Airbnb, these extra earnings can add up. Dedicate these funds specifically for your down payment, and you’ll reach your goal faster than you think. Netflix and Xbox will be there when you're done buying your rental!

6. Lease-to-Own Options: Some sellers might offer a lease-to-own option where you rent the property with the intention of buying it after a set period. Part of your rent payments can go towards the down payment, allowing you to build up the necessary funds over time while living in the property. Personally, I've never bought this way, but I have sold using this method. I would purchase this way as well. 

7. Borrow from Life Insurance: If you have a whole life insurance policy, you might be able to borrow against its cash value. This can be a low-interest option for funding your down payment. Just be aware that it could reduce the policy's death benefit if not repaid.

Funding a down payment might seem daunting, but with a bit of creativity and resourcefulness, it’s entirely doable. Whether you’re leveraging existing assets, forming strategic partnerships, or hustling on the side, there are plenty of ways to gather the necessary funds. So, what are you waiting for? Start planning, get creative, and take that first step toward becoming a rental property owner. Happy investing!

Feel free to ask if you need more details on any of these options or have other real estate questions. I'm here to help!