How to Buy a Rental Property with 5% Down (Sneaky Tactic)

Want to know how to buy a rental property with just five percent down? That’s right, not twenty-five, not twenty, but FIVE percent down. With a lower down payment, you can buy in the best neighborhood, have plenty of money left over to upgrade your rental, AND keep more money in your pocket for your next income property. But, if low-money down real estate was that easy, why isn’t everyone doing it? Christian Bachelder and David Greene are here to explain.

Most real estate investors think they can ONLY buy investment properties with twenty or twenty-five percent down. While this is right, it’s also wrong. Using this “sneaky” rental property tactic, you can buy homes without much cash, live for free, and walk away with thousands, tens of thousands, or hundreds of thousands in extra equity. You can sell the property a few years later and take home some tax-free profits, or keep it as a rental and make cash flow forever. So, what’s the tactic, and how can you get in on it? Stick around to find out!

Have any mortgage questions about this investing tactic? Have you bought low-money-down rentals before? Let us know in the comments below!

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00:00 The "Sneaky" Rental Tactic
01:42 Down Payment Too High?
05:49 The 5% Down Rental Property
07:30 Get Paid to Live!
10:39 Connect with Christian!

[kylestricklin]

I am on my 3rd sneaky rental. When I discovered this I could not believe it. I couldn't believe the bank would give me another mortgage and let me turn my old home into a rental. All I needed was a lease agreement to cover my DTI. I grew up doing carpentry work (home remodels) with my uncle. I started a few businesses instead of ever getting a real job. When my wife and I purchased homes we always have looked for something we could improve upon and have projects to work on. Something we could force equity into. I have grown my businesses to where I own them and they don't own me, allowing me more time with family and to renovate our current sneaky rental/home. It took about 8 years into our "real estate investment" journey to start realizing some decent cash flows. We're in year 9 now, and the snowball is starting to really roll. Exciting stuff. Glad you guys shared this.

[JustPolitical]

Things I don't like about this video:

1. Sneaky rentals is just house hacking, there was never a time where bigger pockets didn't share this before lmao
2. There is no mention of the actual mechanism for this to work which is an FHA loan
3. 12 months IS a REQUIREMENT for you to stay at an FHA loan property and David makes it sound like its optional, giving illegal advice is no bueno
4. No mention of PMI
5. No mention of how your monthly will skyrocket in comparison to a 20 percent down

this is just a rehashed concept of house hacking but this is repackaged as new information. If you are running out of topics I'd rather you post fewer videos than post time wasting videos that are the same 4-5 strategies over and over and over and over and over again. Infact at 10:35 David even refers to this as house hacking totally validating that this is rehashed information but its packaged as some kind of "sneaky, secret, super strategy" and its just the same fucking video they put out 2 weeks ago except here they are even more loose with the rules and regulations around this stuff.

Very disappointed, Brandon would never do stuff like this.

The vagueness of this video makes this just an advert for the brokerage. I'm legitimately considering unsubscribing as bigger pockets went from solid advice to just david and Co plugging their personal companies instead of helping people learn how any of this works

[therealtimray]

I’ve been doing this since 2017. Bought a 4 unit with 4% down, two years later, sold it, bought a 12 unit, duplex, and invested in 5 cabins. Since then I’ve bought a single family home with an adu that’s on Airbnb. I wasn’t able to buy in good areas until the latest house. Ready to quit my day job in less than a year.

[randomsonmymind]

These discussions with David and Christian are my favorite.

[superhostreacts]

David, you’re the best honestly… your humble and practical, and we provide advice that benefits investors at all levels. Thank you!

[andrescardenas]

Love it! This is how I bought my first two sfh in Phoenix. I got in to the first one for 210k at 3.5% down fha. Did a cash out refi 2 years later, used that for a 5% down payment on a 400k house. Now the first one is a long term rental, and I’m currently saving up for another one to redo this same process. Very powerful strategy imo for new investors.

[iceguy]

My favorite podcast I've listened all recent ones so now I'm going backwards and glad to be able to listen to all the great people on the podcast they all seem to want to progress and grow it's awsome thank you David and all the hosts.

[MrDomemi]

I think these are great talks and very educational, thanks for providing this info to the community. If I can make a suggestion, since we're talking numbers and how they evolve in the process, I think a written visual support (like a slide, or a whiteboard) will be tremendously helpful.

[MarvinOrieh]

There is some nuance to what they’re indicating that does not make this 100% accurate..in the sense that if you vacate your property and still want to hold on to the previous home as a rental have to still qualify for the new loan that you are getting based on personal and/or rental income from old property. So the gentleman mentioning 25 homes in 25 years is assuming you could carry the note from a creditworthiness standpoint for that many homes, which is unlikely for most people. At some point you will need to sell off some assets Which is a smart strategy for liquidity but as far as the low barrier of entry to get into rental investing for 1-3 homes this advice is solid. I’m a Realtor that loves biggerpockets fyi

[rubengonzalezjr.]

I appreciate you! Thank you for sharing your knowledge on the subject.

[lailaatallah]

Excellent, you two! So helpful. However, I think Christian may have made a math error. When you do your third house/houshack, that single property wouldn’t likely be expected to DOUBLE the gains of the first two properties.

Using your example, you might go to bringing in $72K with two properties and then by adding another $36K with the third property, you’d be closer to $108K, and not closer to $150K.

Now, if you did TWO more properties at $36K each then, yes, you would be closer to the theoretical $144K/$150K.

[johncano]

Love your info..
Thanks for the advices..

[kjhudson]

Great episode!!! Thank you all again!!!

[alexkimball]

If your income doesn’t go up significantly in this time your buying power is still limited. They add 75% of the rental income to your income but require 2-3x the mortgage payment on your income so each time you get a new property you have less buying power. Also, there are conventional loans that allow you to put 5% down on a property so you don’t necessarily need to do it this way unless you are using an FHA loan

[vahramtovmasyan]

Just don't understand how is the mortgage on 475k loan is 2000 a month when the rates are 6.5-7 percent? According do Zillow calculator the monthly mortgage including the property tax and PMI will be around 3900

[sergiolauramaldonado]

This is exactly how we started investing!! We did this strategy 3 times already and it’s great!

[richie]

Amen. On my 3rd looking to buy my 4th in December

[smilexa]

Hi i have heard so many podcast on pandora your podcast to be exact i love all the info thank you

[jessicadubiel]

I love this! I purchased my first home (w/ a granny flat) with 20% down. I then purchased all my other properties with 5% down with granny flats. I STILL regret putting 20% down on the first house, which is a lot bc I’m in San Diego! 😅

[seanbrownsociety]

What kind of legal obstacles are involved with converting a single unit into 2 or 3 units? Like permits, zoning, etc.