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I'm 19 I don't plan on owning a home until I begin my new career as I'm almost certain they won't have me stay at my home field location. So as of right now I'm trying build up my emergency savings.

I was just wondering if I wanted to take a mortgage out on a house is it possible to not make a down payment. Do banks allow this? What happens if there's no down payment? Is there any data I could read regarding this?

If possible I'm thinking about cheap houses $50 - $60k, taking out a mortgage. Rebuilding the house back up and rent out the house and maybe start a little side business to increase cash flow.

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    10% of $50k is $5k. $5k can be made by anyone in the US within a year. A year is what, 2-5% of your adult life? Just wait, save and take the easier road. You don't lose anything by doing this. – insidesin Dec 29 '17 at 2:54
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    I don't understand the relation between your first paragraph and the rest. If you are trying to build up your emergency savings, and believe you will soon move somewhere else, why are you considering taking out a mortgage, zero-down or otherwise? – BrenBarn Dec 29 '17 at 5:48
  • The second paragraph I was just trying to captivate something I thought I could do. If anyone wanted to share their thoughts then I could read their advice. – Porixify Dec 29 '17 at 5:55
  • Where in the US can you find houses for $50-70K? Detroit, maybe? And renovating a house takes time and skill: either to do it yourself, or the time, skill, and money it takes to manage the people who're doing the actual work. – jamesqf Dec 29 '17 at 19:18
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($0 down-payment loans to unqualified borrowers are a big part of what caused the early 2000s housing bubble, and subsequent crash.)

Here are the three ways I know of for getting a zero-down mortgage:

  • Veterans Administration
  • USDA Rural Development mortgage guarantee program
  • Borrow from family

Some "regular" lenders will go as low as 3.5% down, but you'll pay serious PMI (private mortgage insurance). So will the FHA, if you meet their qualifications and are a fist-time home buyer.

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RonJohn does a fine enough job answering the "nuts and bolts" of the question, but given your comment of:

The second paragraph I was just trying to captivate something I thought I could do. If anyone wanted to share their thoughts then I could read their advice.

Down payment aside there seems to be a misunderstanding of being a landlord. It is work and it is risky. The work comes in three forms. The first is fixing and maintaining the property. This can be contracted out but the more this is contracted, the less profit. An example is the water heater. A person in NJ was just quoted 1800 from a plummer to change a water heater. I can do this job myself for less than 600. However, in my own case I have paid someone else to do it as I did not have the time to drive down to my rental property to deal with the problem. It is only 2.5 hours a way.

The second is in the form of finding and managing tenants. Here is a hint: it is very easy to find bad tenants, difficult in finding good ones. Services can be used to help find them, but again paying for such cuts into profitability.

The third is managing the "company". Managing payments, the tenants, keeping track of expenses, etc... this can take a significant amount of time, especially at year end.

All this is to indicate owning rental real estate is not easy, and is not the "cash cow" that many feel it is.

I would advise not to purchase long distance real estate, to put down 50% or more on a property and have an emergency fund. Why? Because a good rule of thumb is that 50% of rent receipts will be eaten by costs. An emergency fund will cover times of non-payment or catastrophic repairs (roof, HVAC, etc...)

Personally I would not own rental real estate that was not owned free and clear.

  • I'm just looking for ways to increase my cash flow / providing a second source of income with the possibility of long term business and stuff I can do on the side. All that stuff I can hire other people to do. Second, I never thought of real estate that way. I've always been interested, but if I were to purchase property and rent it out then I'd make sure I would keep the interest increasing such as purchasing more properties and etc. – Porixify Dec 29 '17 at 15:23
  • What you are proposing will likely drain your cash flow, not increase it. I thought I made that clear, but I guess not. Also it will likely lead to bankruptcy. Admittingly, that one takes a bit of an intellectual leap from my answer. However, if bankruptcy is your goal, then sure stock up on many rental house as you can. – Pete B. Dec 29 '17 at 16:39
  • Okay you made it clear now. Surely you're not saying companies such as Elevate Living in California who purchased their first apartment complex and now own several different locations and several different complexes. I'm not trying to annoy you, I just don't understand how this would be a complete failure. How are other people successful? What are other methods of increasing cash flow on the side? – Porixify Dec 29 '17 at 20:26
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If possible I'm thinking about cheap houses $50 - $60k, taking out a mortgage. Rebuilding the house back up and rent out the house and maybe start a little side business to increase cash flow

The main question is about getting am mortgage without a down payment. While there are some programs with low down payment, some of which will require PMI (private mortgage Insurance). Most of these programs, maybe even all of them, are not applicable if the purpose of the mortgage is to buy a rental property.

The lenders I have dealt with require 20% down payment for a rental property. When applying for an owner occupied mortgage they usually include in the application forms and the ones you sign at closing, a document where you state that you intend to live in the house.

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