Can I Borrow the Down Payment for an Investment Property?

••• Creatas/Creatas/Getty Images

Investment properties can yield high returns for savvy investors who know when and where to buy. If a good investment opportunity comes your way and you do not have the funds available to purchase or even make a down payment, you might think you're out of luck. With a little creativity and careful planning, you may be able to borrow the down payment funds for an investment property and not miss out on a deal.

100 Percent Financing

Although it's less common to find 100 percent financing programs for investment properties these days, some still exist. Since the economic difficulties which began around 2007 and the housing crisis that immediately ensued, lenders are more cautious about lending the full value of a property. If you can find a lender that still offers 100 percent financing, you can get a mortgage for the full purchase price. Beware, however, that you may be on the hook for private mortgage insurance as well as higher interest rates.

Secondary Loan

Even if you are unable to find a lender to approve you without the standard 25 to 30 percent down payment, all is not lost. You may be able to get a loan for the down payment funds from another lender or through an equity loan on your own home, notes Gerri Detweiler of credit and loan website Credit. Just make sure you make enough income to balance the debt ratio of your current monthly bills as well as the mortgage payment for the investment property and the down payment loan. Otherwise, the mortgage lender may deny your application to purchase the investment property due to excessive debt.

Make Your Retirement Work

If you have a self-directed IRA account that is set up to own property you may wish to consider making the investment property part of your retirement holdings. You can use funds from your IRA to fund not only the down payment but the entire purchase. Should you go this route, be sure to contract with an experienced IRA manager like self-directed IRA specialist Equity Trust Co., which can properly advise you on the steps you need to take and the parameters you must follow for this type of transaction.

Get a Partner

When you're really strapped for down payment cash, consider the benefits of taking on a partner. A close friend, family member or business partner might be willing to join in a real estate venture that benefits both parties. If you select a long-time investment holding, you can arrange to pay your partner back over time with added interest. For shorter holdings, you can return your partner's down payment funds plus interest as soon as you resell the property for profit.