Investors
How do I start investing in real estate with little money?
By Steve Lockhart
The short answer
Real estate investing does not require a massive pile of cash if you are willing to start with a property you live in. House hacking means buying a home, duplex, triplex, or fourplex, living in one unit, and renting the others.
Full answer
Real estate investing does not require a massive pile of cash if you are willing to start with a property you live in. House hacking means buying a home, duplex, triplex, or fourplex, living in one unit, and renting the others. Lenders and programs treat that differently than a pure investment purchase, and that difference is where the leverage comes from.
An FHA loan, for example, allows a purchase of up to four units with as little as 3.5 percent down when you occupy one unit as your primary residence. Rental income from the other units can count toward qualifying, which means your tenants help pay the mortgage while you build equity. Down payment assistance programs in Nevada can also shrink the savings hurdle for qualifying buyers, and you can start even smaller with a single-family home and rented rooms.
The point is to build a track record: the first deal teaches you maintenance, tenant management, and the rhythm of the numbers. From there, equity, refinancing, and rental income become the capital for the next property. What you cannot skip is the honest underwriting, so the property actually cash flows after vacancy, repairs, and reserves, not just on paper.
A note from Steve: nothing on this page is investment, legal, or tax advice. Markets move, and every property is different. Run your own numbers on the specific deal, and talk to your CPA and attorney before you commit.
Go a little deeper
Frequently asked
Questions investors often follow up on
What is house hacking?
House hacking is buying a property, living in part of it, and renting out the rest, whether that is rooms in a single-family home or separate units in a duplex or fourplex. Because owner-occupied financing requires a smaller down payment and can count rental income toward qualifying, it is one of the most practical ways to start building equity with limited cash.
Can I use an FHA loan for a rental property?
Not for a pure rental, because FHA requires you to live in the property as your primary residence. What FHA does allow is buying a property with up to four units while you occupy one, which effectively turns the other units into income-producing rentals.
How much cash do I really need to start?
You need enough for the down payment, closing costs, and reserves, plus a cushion for repairs and vacancy. The exact number depends on the loan type and price range. The discipline is to keep reserves after closing, because a new landlord with no cash buffer is one bad month away from a hard lesson.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: start owner-occupied and small. We find a property where your housing payment is offset by real rental income, underwrite it with vacancy and reserves built in, and use the first deal as the foundation for the portfolio.
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