Real Estate Investing: How to Start with Little Money
Real estate has long been considered a profitable investment. If done right, it can provide an investor with long-term wealth and passive income. This kind of investment is also deemed good protection against future inflation as one’s cash flow can also increase as home prices do. And if you’re looking for a reliable and consistent income, managing residential rental properties is a great way to make it happen.
While real estate is certainly a promising investment, getting started can be a challenging task for some. But if you’re thinking that not having a fortune will hinder you from investing in real estate, think twice. Curious? Check out our tips below on how you can pursue real estate investment with little money.
- Do house hacking
One popular strategy when it comes to real estate investing is house hacking. This method is basically about renting out certain units of your primary residence to earn income. In other words, you opt to occupy just one or two rooms in your house and rent out the other areas. It’s up to you.
You can rent out your basement or other bedrooms to others. Others even rent out their yard to an RV or motorhome. If this seems like an option to you, be sure to check if the local laws permit it. In buying the property, you can acquire owner-occupant financing. Some low-down-payment loan programs include conventional loans, USDA, VA loans, and FHA loans. Consult a trusted mortgage company to find the best loan for you.
- Try live-in house flips
Another widely used strategy in investing in real estate is house flipping. If you’re not too familiar, this is the concept of purchasing a property with low market value, moving into it, improving the place, and reselling it once the waiting period is done. On average, others live in the houses for up to five years before selling them. Individuals using this strategy can take advantage of tax-free profits.
For live-in house flips, you also have the option to use the loan programs with small down payments. At the same time, you also get to minimize investment risks as you can take the time you need to spruce the house up before selling.
- Participate in crowdfunding
Crowdfunding real estate is slowly making its way into the market. This new strategy involves investing little money into bigger deals then sharing in both rewards and risks. Reputable crowdfunding platforms make it a point to weed out the bad deals for the participants. Some platforms accept accredited and non-accredited investors, while others only accept accredited ones.
On average, most crowdfunding platforms require around $5,000 to $10,000, which is already a catch. But if you’re much luckier, you can find ones that only require $1,000 to get you started with investing. Crowdfunded investments can be loans to other real estate investors or rental properties.
- Perform wholesaling
Another way to invest in real estate with less cash and less work is through wholesaling. This strategy works by finding a property before it hits the market. Unlike with house flipping, wholesaling leaves you with one option – and that is to sell it to another buyer immediately. You’re basically selling the house as-is and not sold to the retail market.
This is a perfect option if you can’t afford the process of house flipping and you need quick cash. You don’t need to rehab the property – no holding costs, repairs, or acquisition funds necessary. Furthermore, you won’t usually need to have a well-establish credit history to be a wholesaler. In other terms, you act as the bridge between the seller and the actual, final buyer.
- Buy a REIT
One passive way to invest is to purchase a real estate investment trust or REIT. This is perfect for individuals who want to own a stock. You have the advantage of collecting a dividend and the liquidity itself. Compared to the typical investing strategies, REITs doesn’t just offer a simple process and property management but also requires less money to start.
Depending on the stock, you can begin with around $20 on average. Plus, there are typically no transaction fees. This is also a great option for people who want diversification across different sectors. But just like investment strategies, it does come with risks, too, so do your own research before buying a REIT fund.
From long-term financial security, covered mortgage payments to tax benefits, there’s no doubt that investing in real estate is an amazing venture. However, keep in mind that this guide is only meant to provide information regarding real estate investment. It’s still highly recommended to consult licensed experts before entering the housing market.
