New Construction Investment: Can You Buy With 5% Down?

Builders in Las Vegas are offering incentives up to $20,000 to reduce buyers’ upfront costs.
Portfolio loan usage grew by nearly 18% last year, per the Mortgage Bankers Association.
Investors can purchase new builds with as little as 5% down by using builder credits and other types of loans.
Buying three homes with $60,000 is possible under a low down payment real estate plan.
Over 55% of builders offered buyer incentives in Q4 of 2023, creating good chances for investors.

You might think you need a lot of cash to buy real estate, but it’s getting easier to do it with less money down. This is especially true for investors in busy places like Las Vegas. While many assume you need 20% or more to invest, more people are using portfolio loans and builder deals to buy brand-new properties with just 5% down. If you’re trying to buy more homes or get into a market where prices are going up, here’s what you need to know about this strategy that uses less money upfront.

Why More Investors Are Looking at New Homes

More investors are choosing new homes because they cost less initially, help get good renters, and are easier to manage. Unlike older properties that might need a lot of cash upfront for updates or have old repair problems, new builds are ready to go. They have modern layouts, save energy, and offer features people want today. That helps a lot when renting them out because there’s competition.

According to the Joint Center for Housing Studies of Harvard University, new homes consistently bring in more rent money than older ones. Renters will pay extra for updated things like open rooms, smart home tech, and appliances that save energy. In markets like Las Vegas, where job growth, people moving in, and city building are increasing, investors can charge top dollar and won’t have homes sitting empty as often.

Besides that, new homes often come with builder warranties. This means investors pay less for repairs and upkeep during the first few years. This cuts down on unexpected bills and makes it easier to predict how much money you’ll make. That’s important for investors planning ahead.

Normal Home Loans: Where They Limit You

Normal home loans, like the kind backed by Fannie Mae or Freddie Mac, have strict rules. They usually need you to put down 20% to 25% for a rental property. While these loans often have lower interest rates, they cause problems for both new and experienced investors:

Tie up your cash – For investors trying to buy several homes, needing $80,000 to $100,000 or more for a down payment on each home can quickly use up all your cash. That makes it harder to buy different types of properties or buy more homes quickly.
Strict checks – These loans mostly look at your tax forms, job income, and how much debt you have compared to your income. They often don’t count or count very little of the money you expect to make from rent when deciding if you qualify.
No company ownership – Normal loans usually don’t let you put the property name under a company like an LLC. This matters for your tax plan and protecting yourself legally.
Take longer to approve – Working with big banks often means slow processing, a chance they could say no at the last minute, and less flexibility for properties in areas that aren’t typical.

Simply put, normal home loans can stop investors from taking advantage of good opportunities, especially in fast-paced places where you need to move quickly and have options.

The 5% Down Plan for New Homes

To buy new homes with just 5% down, you mix two things: good deals from builders and a certain type of loan called a portfolio loan that investors use.

Here’s how it works:

Builder Deals – Builders wanting to sell houses quickly, especially at the end of a three-month period or if they have too many homes left, offer money back or other benefits that cut down how much cash you need when you close.
Portfolio Loans – These loans are different from normal loans. Lenders who offer them can be more flexible. They can approve you even with a lower down payment and can count the rent money you expect to make when deciding if you qualify.

This way of buying makes it possible to invest in real estate with a low down payment, even if you’re new to it. It’s not about finding a loophole; it’s using the market conditions to your advantage.

If you want to make money back quickly on your cash and be able to buy more homes over time, putting down just 5% and using builder deals works really well together. This is extra true in areas where home prices are going up.

Taking Advantage of Builder Deals

Builders really want to sell homes. Maybe more than regular homeowners do. They make money by selling a lot of homes. If they have houses sitting empty, it hurts their finances, how much they can borrow, and how the company does overall. To get buyers moving when things slow down, especially when loan rates go up or during certain times of the year, builders offer lots of deals.

Some deals builders offer include:

Money to help with closing costs – Builders often give $10,000 to $25,000. This cuts down or gets rid of the fees you pay when you close on the home.
Money to lower your interest rate – Builders can pay to make your loan rate lower, either for the whole time you have the loan or just the first few years. This really helps your monthly payment.
Money for upgrades – Builders often pay for better floors, cabinets, or appliances. This doesn’t cost investors extra and can mean you can charge more for rent.
Bonuses for closing fast – If you can close quickly, builders might give you extra money or deals when you close.

In Las Vegas, you might find places where builders are giving $20,000 or more in total deals. That can pay for almost all the costs of buying the home. Often, you just need to put down your 5%, and the builder pays for the other costs.

Portfolio Loans: A Flexible Loan Option for Investors

Portfolio loans are home loans that banks or lenders keep instead of selling them off to other companies. These loans don’t have to follow the usual rules that Fannie Mae or Freddie Mac set. So, banks and other lenders can use their own rules to decide if you qualify. This gives real estate investors a lot of options.

Here’s how portfolio loans are different:

Need less money down – Some lenders offering these loans will let investors put down as little as 5%. This depends on your credit score, income, and the type of property.
Count expected rent money – Lenders often use the money you think you’ll make from rent to help you qualify for the loan. This means you can buy more properties.
Can own through a company – Investors can usually put the property title under a company name, like an LLC. This helps protect you legally and with taxes.
Work for different types of properties and areas – These loans can work for properties that normal lenders won’t approve. This includes short-term rentals, buildings with homes and businesses, and new homes being built in areas still growing.

The Mortgage Bankers Association said that the number of these portfolio loans used for real estate went up almost 18% last year. This shows investors want to act fast and have more options in a busy market.

Normal Loans vs. Portfolio Loans Comparison

Feature	Normal Investment Loan	Portfolio Loan
Minimum Down Payment	20%–25%	As low as 5%
How they check you	Your income, strict debt rules	Expected rent, flexible debt rules
How you can own it	Just in your name	Company names like LLCs, trusts
What homes work	Older homes	New homes, short-term rentals, unique homes
How fast it is	Slow	Fast for people who qualify

This chart shows how portfolio loans give investors helpful benefits you don’t get with normal loan rules.

Who Can Get Portfolio Loans?

Portfolio loans are more flexible, but you still need to meet certain requirements. You’ll likely need to show you’re in good financial shape to get these low down payment deals.

Key requirements include:

Credit Score – Aim for 680 to 740. A better score usually means better loan terms. Some lenders might accept scores in the mid-600s if you have other strong points.
Show you have income or cash – This could be from your tax forms, bank statements, or what you expect to make from rent.
Cash Savings – Have enough saved to cover at least 3 to 6 months of the property’s costs or loan payments.
Work with a bank – Local banks often offer these custom loans. Getting to know them can help.

Working with a mortgage broker who knows which lenders work with investors can also help you find options you won’t see just searching online.

Why Las Vegas is a Good Place for This Strategy

Las Vegas is a great spot to use this low down payment idea to buy homes. It’s good for both home values going up and renting them out easily. Here’s why:

More jobs – New companies are coming, people from California are moving there, and new roads and buildings are being built. This means more people need housing for a long time.
Lots of new homes – Many new neighborhoods are being built across the area. Builders often offer deals and help with costs to sell the homes they have left.
More people moving in – Las Vegas got bigger by over 2% each year from 2020 to 2023. This means there’s a steady need for places for people to live, both homes they own and homes they rent.
It’s still affordable compared to other big cities – Homes in Las Vegas still cost less compared to how much you can charge for rent than in places like Los Angeles or Phoenix. This is good for investors.

The market is busy and changing. It’s important to work with people who know what they’re doing. Someone like Steve Hawks has sold over 4,000 homes. He knows builders and how to get good deals, which can lead to much better results for investors.

Buying More Homes With Less Money: An Example

Let’s see how this strategy can help you buy more.

Say an investor has $60,000 ready to use. Here are two ways they could use that money:

Normal Way:

Buy one home for $300,000.
Put down 20%, which is $60,000. This doesn’t include closing costs.
You buy one home. You won’t have cash left over, can’t easily buy more, and everything is tied up in one property.

Using the 5% Down Loan:

Buy three homes for $300,000 each.
Put down $15,000 on each home. That’s $45,000 total.
Builders pay the closing costs with their deals.
Now you’re getting rent money from three homes. This spreads your risk across different properties and renters.

Using this low down payment method lets you buy more homes with the same money. It also spreads out your risk and helps you make much more money from rent.

What to Watch Out For

Every plan has downsides. Investors should look closely at these things:

Interest Rates – These loans usually have higher interest rates than normal home loans. But builder deals or getting a new loan later could help make up for this.
How well the home is built – Some builders are better than others. Look into their past work, check the warranties, and walk through the model homes to see if they build like you want.
Market changes – If a lot is built quickly in areas on the edge of town, there might be too many homes. This could affect how much you can sell for or how much rent you can charge for a while.
Loan rules – Make sure you understand things like large payments due later (balloon payments), fees for paying off the loan early (prepayment penalties), or rates that can change (adjustable rates) that some of these lenders might have.

Things that help: Getting a report on how much nearby homes are selling for (like a CMA), looking closely at what other rentals are charging, and talking to a good local real estate agent can help avoid many problems.

Why Builders Want to Work With Investors Now

Builders feel differently now. Loan rates are still high, and regular buyers are more careful. The National Association of Home Builders says that in the last three months of 2023, over half of builders in the U.S. offered deals to buyers. This means there are good chances for investors.

Builders have homes to sell, but fewer buyers are coming forward. So, builders see investors as a good way to keep selling homes quickly and meet their goals for the year. Investors who can close quickly, agree to easier terms, and might buy several homes often get:

Deal terms just for them
Chances to buy before building starts
Better prices
Groups of upgrades or money back after closing that are good for rentals

This helps investors who are ready stand out when buying in busy places.

Work With a Local Expert to Find the Best Deals

The plan sounds simple, but getting it done right is what matters most. That’s why knowing the local market is very important. An agent like Steve Hawks has worked for a long time and knows the builders well. He knows:

Where to find deals others might miss
Which builders are willing to sell several homes to one buyer
How to handle the loan process smoothly
Which areas offer the most rent money for the price of the home

In busy markets like Las Vegas, when you buy and how you deal with the seller makes a big difference in how well your investments do. You really need someone local to help you.

Buy Homes Smarter, Sooner

You don’t have to wait 5 to 10 years saving up huge down payments to start buying homes or buy more. Using this method to buy new homes with just 5% down, paid for with portfolio loans and deals from builders, gives you a way to buy more homes over time without wasting effort. It uses the market as it is, instead of going against it.

In areas like Las Vegas where lots of people want homes and new ones are being built quickly, using a low down payment plan is a great way to start building wealth, get monthly income without a lot of work, and own more of the home over time. Plus, you keep cash free to buy again.

Talk to a lender who offers portfolio loans and a local agent who knows the area well. There are chances to buy homes now, but they go to people who invest smartly, not just with a lot of money.