A home is an expensive purchase that an individual or family makes. Purchasing a home through auctions, government programs, or with rental income can provide a free or almost free way to buy a home.
Key Takeaways
- Reliable, long-term tenants can help pay off a mortgage loan.
- The U.S. Department of Housing and Urban Development sponsors homeownership and assistance programs for qualified individuals.
- Foreclosed homes may sell through an absolute auction where the highest bidder wins regardless of the bid amount.
Use Rental Income
Investors commonly obtain a mortgage on a property and then rent it by charging a competitive rent that provides enough money to meet the monthly payments. It is possible that reliable, long-term tenants can pay off the entirety of a mortgage.
Buying properties for use as an Airbnb is also popular. Over the long run, this purchase can provide a steady passive income. These rentals are typically short-term. According to AirDNA, the average daily rate for an Airbnb in Los Angeles in 2022 was approximately $190, with units typically occupied 67% of the year.
Buyers should be aware that making a profit from renting out property is not simple, and there are factors to consider before choosing this route.
Home Ownership Programs
The U.S. Department of Housing and Urban Development sponsors programs for qualified individuals that include:
- Law enforcement officers, teachers, firefighters, and emergency medical technicians may qualify for the Good Neighbor Next Door Sales Program. HUD offers a discount of 50% off the list price if the eligible buyer commits to living in the property for 36 months as their principal residence.
- A local Public Housing Authority (PHA) may offer public housing units to residents and other eligible low-income families in their communities. A PHA can also use Capital Funds for homeownership activities, including financial assistance for closing costs, downpayment, and mortgage loans to public housing residents.
- The Federal Housing Administration (FHA), part of HUD, insures loans so lenders can offer buyers incentives like low down payments and closing costs.
Auctions and Tax Sales
Homes may end up in auction due to a mortgage default or foreclosure, or a homeowner's failure to pay taxes. Foreclosed propertiesare seized by a mortgage lender after a borrower fails to make mortgage payments over some time.When an owner doesn’t pay property taxes, the local tax authority may seize the property. Auctions can be conducted in person or online and are deployed in one of three ways:
- Absolute Auction: The highest bidder wins regardless of the amount of the bid.
- Minimum Bid: A minimum dollar value is required to bid for the property
- Reserve Auction: Bids are treated as offers that can be rejected by the seller.
How Do I Contact HUD for Assistance?
HUD.gov offers federal homeownership and home-buying assistance programs. Additionally, there may be programs sponsored by state or local governments.
How Can I Get a House I Can't Afford?
There are several sources of help available to buy houses. You can apply for homebuyers’ assistance programs, try a rent-to-own option, or look into alternative loans.
Where Can I Find Houses Selling at Auction?
Local realtors and banks may carry listings of foreclosed homes and offer information regarding the date and time of auctions. Auction.com provides subscribers access to daily updates on available homes.
The Bottom Line
Three affordable or low-cost housing options include local auctions, government-sponsored programs, or receiving rental income. Potential homebuyers can visit the U.S. Housing and Urban Development website for assistance or online auction sites for listings.
