17 Creative Ways to Become a Homeowner | Real Estate Investing
Many believe homeownership is simply out of reach in today’s economic environment. With rising prices, low inventory, raging inflation, and stagnant wages, many have given up on their dream of owning real estate.
Though these circumstances are real, there are still plenty of ways to own property. Creative strategies are becoming increasingly necessary for individuals and families to transition from renters to proud property owners.
This guide explores creative approaches to homeownership so that you can start investing sooner and later—no matter what stage of life you’re in or how much money you have (or don’t have).
Each method offers a unique pathway to owning a home, catering to different financial situations, preferences, and long-term goals. Potential homeowners can find solutions that align with their aspirations and financial realities by thinking outside the box and considering these alternative routes.
1) House hacking
House hacking is a real estate investment strategy in which you, the owner-occupant, live in one unit (or bedroom if you’re doing this with a single-family home) and rent out the others. This financial hack works because your tenants will help pay for the mortgage and other expenses.
In an ideal scenario, you’d get enough rental income to cover your mortgage and expenses and have some additional income for cash flow, too. Even if your mortgage isn’t covered entirely, rental income can, at least, offset some of your living expenses, which is ideal.
An additional benefit of house hacking is that you can get access to owner-occupant financing, which typically provides more favorable terms than commercial financing. You can use conventional, FHA, VA and others to put a minimal amount down while having your monthly expenses covered by rental income.
Most people who do this save the money they would have spent on housing costs and purchase most real estate. This can be an extremely advantageous, economical way to start investing in and scaling a real estate business.
2) FHA Loans
FHA loans are mortgages insured by the Federal Housing Administration, designed to help lower-income and first-time homebuyers access the real estate market. One of the primary benefits of FHA loans is their lower minimum down payment requirement, often as low as 3.5%, which makes homeownership more attainable for those with limited savings.
Additionally, FHA loans are known for their more lenient credit requirements, meaning that you can qualify for financing even with a less-than-perfect credit score. Note this accessibility makes FHA loans an ideal option for house hacking, as it allows you to leverage owner-occupant financing to enter the real estate investment space with minimal initial capital.
3) Conventional Loans
Unlike FHA and VA loans, conventional loans represent a mortgage option not insured by the federal government. These loans are often preferred by owner-occupant investors due to their flexibility in terms and conditions.
The minimum down payment for conventional loans can vary widely based on the borrower’s credit score and the specific lender’s requirements, typically ranging from 3% to 20%. Also, Fannie Mae has recently announced that starting from the weekend after November 18, 2023, it will accept 5% down payments for owner-occupied 2-, 3-, and 4-unit homes, down from the previous multifamily financing requirement of 15-25% down payments for duplexes, triplexes, and four-plexes
A significant advantage of conventional loans is that they do not have upfront mortgage insurance premiums, which are common with government-insured loans. Additionally, when a borrower reaches 20% equity in the property, they can request to have the private mortgage insurance (PMI) removed, potentially lowering monthly expenses.
This feature, combined with potentially lower interest rates for borrowers with excellent credit, makes conventional loans a compelling option for those looking to minimize their initial investment while maximizing the benefits of owner-occupant real estate investing.
4) VA Loans
VA loans are a great mortgage product for veterans, service members, and their surviving spouses. Administered by the Department of Veterans Affairs, these loans are designed to promote homeownership within the military community, allowing eligible individuals to become homeowners sooner than they might otherwise be able to. A standout feature of VA loans is 100% financing. This feature significantly lowers the initial financial barrier to homeownership.
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