Buying that first rental property or even your 10th or 20th almost always comes with the need to come up bank loan and to get that bank loan, you need a down payment. We are going to be talking about the getting the bank loan part at the October 14th MAREI Meeting. Today we tackle the other part: “Where do I find the 20% down payment on my first rental?”
We recently asked this on our MAREI Facebook group and received a flood of practical ideas.
Here’s an organized guide—straight from experienced investors—to help you think through your own plan.
1️⃣ Old-Fashioned Saving and Smart Budgeting
Several group members reminded us that the simplest path still works:
Live below your means and pay yourself first. Build a dedicated “freedom account” and funnel every extra dollar into it (Sam Mayberger).
Cut unnecessary expenses. Drop subscriptions, extra cars, or pricey vacations (Damon Remy’s “Cut & Stack” strategy).
Stay disciplined. Bill Smith and Jon Stallman both stressed that if you can’t save for a down payment, managing a rental might be tough.
2️⃣ Tap Equity You Already Own
If you own a home or another property:
HELOC (Home Equity Line of Credit): Borrow against built-up equity. You only pay interest on what you draw.
Cash-out refinance: Replace your current mortgage with a larger one and use the difference for the down payment.
House Hack: Buy a small multi-unit property with an FHA, VA, or USDA loan (as low as 0–3.5% down). Live in one unit and rent the others (Jeff Dutzel).
3️⃣ Use (or Borrow From) Retirement Accounts
Borrow from a 401(k) or IRA. You can often take a short-term loan against your plan instead of a taxable distribution (Kim’s note).
Self-Directed IRA or Solo 401(k): These accounts can buy property directly—just follow IRS rules to avoid penalties.
4️⃣ Creative & Low-Money Financing
Seasoned investors offered a variety of “outside the box” strategies:
Hard Money + Refi (BRRR Method). Buy with a hard money loan that covers purchase and rehab (often up to 75% of After-Repair Value), then refinance into a long-term DSCR loan (Ashley Peters, Amanda Cantu).
BRRR = Buy, Rehab, Rent, Refinance.Seller Financing or “Subject-To.” Negotiate directly with the seller to carry a second mortgage or let you take over existing financing (Erek Kirsten).
Partners or Private Lenders (OPM—Other People’s Money). Bring the hustle while someone else brings the cash. Split equity or pay them a fixed return.
TIP: MAREI Members, if you need help or direction on these strategies, we have talked about all of them in recorded past meetings that you can access in the Member Library.
5️⃣ Build the Down Payment Through Active Income
Wholesale Deals. Flip a purchase contract and collect an assignment fee to build your cash reserve (Jeremy Finn, Ray Durbin).
High-ROI Side Hustles. From driving for dollars to selling items online, short bursts of extra income can add up fast (Damon Remy).
Value-Add Flips. Buy a cheaper property, renovate, and refinance to pull out cash (Jon Doss).
6️⃣ Credit Cards: Only as a Last Resort
A few investors mentioned using credit cards or cash advances to bridge the gap (Erick Amaya-Salazar).
⚠️ Use extreme caution. High interest can sink a deal fast. Only consider this if you have a rock-solid payoff plan.
7️⃣ Don’t Forget the Safety Net
Lisa Layne reminds us that many lenders require cash reserves—often enough to cover a few months of mortgage payments—before approving your loan.
Key Takeaways
There’s no single “right” way to fund the down payment on your first rental.
Match the method to your risk tolerance, credit profile, and timeline.
Always run the numbers and have a clear repayment or refinance strategy.
What’s your favorite funding strategy?
Join the conversation and share your ideas in our Facebook thread.
Funding Deals
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