How much money do you need to start investing in real estate?
We found real estate investments that work for any budget. Whether you have less than $1,000 or more than $100,000, there’s something for you on this list!
How to Start Investing in Real Estate for Under $1,000
You don’t have to wait until you’re wealthy to invest in real estate. In fact, investing early (often when you’re young and broke) is one of the most effective ways to build wealth!
Here are three ways to capitalize on the real estate market with less than $1,000.
1. Real Estate Investment Trusts (REITs)
REITs are companies that invest in income-producing real estate, like large apartment communities and commercial buildings. You can buy a share of a REIT, which entitles you to a portion of the portfolio’s profits, paid out as dividends. Then, you can reinvest your dividends to grow your portfolio faster.
Many publicly traded REITs have shares available for just a few hundred dollars. You can invest in REITs through an online investment brokerage.
2. Low-Minimum Real Estate Crowdfunding
Real estate crowdfunding is when lots of investors pool funds to finance a real estate investment together. The investment property is handled by a real estate sponsor, who makes the decisions and manages the project.
While many crowdfunded real estate projects require a minimum of thousands of dollars, some platforms offer investment minimums of less than $500.
Choosing a crowdfunding platform is an important decision because you want to be able to trust the team managing your investment. Make sure you read about the key factors to consider when choosing a crowdfunding service.
3. Real Estate Mutual Funds
A real estate mutual fund invests in real estate-related assets like stock in real estate companies and REITs. This offers exposure to a wider range of industry assets, which can mean greater diversification compared to investing in a single REIT or crowdfunded project.
You can buy shares of a real estate mutual fund through an online investment brokerage to get in on the action with under $1,000.
How to Start Investing in Real Estate for Under $10,000
If you have more than $1,000, your options open up a bit. It may even be possible to take direct ownership of a property for under $10K in some markets!
Here are three options for investing $1,000-$10,000 in real estate.
4. Diversified REITs and Crowdfunding
With a larger budget, you can diversify across multiple REITs or crowdfunding platforms. The benefit of diversification is that it mitigates risk. Let’s say you have $1,000 spread across eight different geographically-specialized REITs. If one of those local geo markets tanks, you have the other seven to bolster your portfolio.
5. Tax Lien and Tax Deed Investing
If a property owner fails to pay their property taxes, investors can step in to pay the taxes on the property.
In some states, the investor who pays the taxes is granted a tax lien against the property. The owner must repay the investor (with interest), or the investor could seek legal ownership of the property. This is known as tax lien investing.
In other states, the investor who pays the property taxes is granted a tax deed, making them the rightful owner of the property. This is known as tax deed investing.
Tax lien and tax deed investing can be risky. The owners can pose a threat, and the property will likely have deferred maintenance issues. But it’s one of the very few ways in which an investor can get a property for under $10K.
6. Multi-Family House Hacking
House hacking is when you use your own home to generate income. This can come in many forms. You can rent out your home while you’re on vacation, for example. Or lease storage or parking space to others. (If you rent your home, you must get the landlord’s permission first.)
But multi-family house hacking is next level. It’s not for everyone, but it’s an interesting option for the right investor. Here’s how it works.
You purchase a duplex, triplex, or four-plex and live in one unit while renting out the other(s). You may be wondering how you can buy a multi-family property for under $10K. This is the clever part. Since you’ll live in one of the units, you can qualify for low down payment primary residence loans. USDA loans (reserved for rural properties) and VA loans (reserved for military service members and veterans) both offer 0% down payment loans to qualified buyers. So you just have to cover closing costs. Or, better yet, negotiate with the seller to have some of your closing costs paid out of the seller’s proceeds from the sale.
Even if you don’t qualify for a USDA or VA loan, FHA loans offer down payments as low as 3.5% to qualified buyers. In some markets, $10K is enough to cover a 3.5% down payment on a small multi-unit building. And again, you can ask the seller to help cover closing costs.
How to Start Investing in Real Estate for Under $50,000
We’re taking a giant leap up the budgetary chain from $10K to $50K. If you’re looking for something in between, check out How to Invest $25K in real estate.
Here are three ways to start investing in real estate with $10,000-$50,000.
7. Real Estate Syndication
Real estate syndication is very similar to crowdfunding. Both models allow investors to pool funds to finance a specific real estate project. But there are a few key differences between syndication and crowdfunding, notably that syndication offers equity ownership. As a syndication investor, you would become a member of the LLC that owns the property, giving you an ownership stake in the underlying real estate.
Investment minimums in syndication typically depend on the project type. For example, a single-family house flip might have an investment minimum of just $10K-$15K, while a multi-family development may have an investment minimum of $25K or more.
There are many benefits of investing in syndication. For example, you get to invest in projects that would otherwise be beyond your means (you’ll see some of those projects later in this list), your returns are completely passive, and you get the tax advantages of real estate ownership.
8. Single-Family Rental Property
In some markets, $50K may be enough for a 20% down payment on a single-family rental property. If you can find a turnkey property, you won’t have to worry about covering (or financing) renovation costs.
Rentals can be excellent real estate investments because they generate cash flow while appreciating over time and providing tax benefits.
9. Vacation Rentals
Vacation rentals in desirable tourist locations can command much higher nightly rates than long-term rentals. Plus, owners have the advantage of being able to use the property as their own vacation home. While $50K won’t go very far toward a deposit and closing costs in a high-value market like Los Angeles or Miami, it could be enough in affordable destinations, like many of those along the Gulf Coast.
How to Start Investing in Real Estate for Under $100,000
With up to $100K to invest, your options break wide open. We even have a designated article on How to Invest $100K in Real Estate.
Here are three of the opportunities that might not have been available at a lower dollar amount.
10. Small Multi-Family Properties
Multi-family properties are great for investors because they allow you to generate multiple streams of rental income from one property. This provides instant diversification. If one unit sits vacant, the other occupied units can offset those vacancy losses.
Of course, the more units you have, the more time and energy you’ll spend on property management. If you prefer the hands-off approach for more passive returns, consider hiring a property manager to handle the day-to-day operations of your property.
11. Fix-and-Flip
Purchase a distressed property, renovate it, and sell it for a profit. You can make a lot of money flipping houses. But you need to have the money to put into it first. With $100,000, you can cover the down payment and closing costs on a fix-and-flip. You may even have some money left over to help with the renovation costs (the rest can be covered with a construction loan or similar short-term funding).
This strategy requires a keen understanding of changing market conditions and the renovation process. If you don’t have any experience, partner with someone who does for your first few deals.
12. Private Equity
Private equity is similar to real estate syndication in that they both pool funds from multiple investors to finance projects. But, while syndication opportunities are made available to the public, private equity deals are often made behind closed doors among a network of high-net-worth individuals (HNWIs).
If you have the connections, and you trust the sponsor of the deal implicitly, private equity can be a lucrative way to start investing in real estate.
How to Start Investing in Real Estate With $100,000+
While many investors become millionaires through real estate, it’s also possible for people to come into large amounts of money and not know what to do with it. And you don’t have to be a tech professional, entertainer, pro-athlete, or lotto winner to find yourself in the position of having lots of money to invest and still being new to real estate investing. Even people who simply sell a high-value home or business can suddenly have $100K+ to build their real estate portfolios.
Here are three ways to start investing in real estate with more than $100K.
13. Commercial Properties
Commercial real estate, like office buildings, retail spaces, and industrial properties, may offer higher returns than residential real estate. But they’re also more volatile and more complex.
If you’re going to jump straight into commercial investing as a new real estate investor, make sure you have a team of industry professionals in place to help you analyze, manage, and protect your new asset.
14. Larger Multi-Family Buildings
Apartment communities offer the potential for significant rental income, taking advantage of economies of scale by spreading a single investment across many units.
As with commercial property investing, larger-scale multi-family projects are best handled by experienced professionals. Get your team in place before scouting potential acquisitions.
15. Real Estate Development
New real estate developments built from the ground up are considered opportunistic investments. The risk level is moderate, but the reward potential is very high.
Of course, some developments are a better bet than others. Take residential multi-family developments for example. In areas where housing is in short supply, this type of development is in extremely high demand. You could build-to-rent or you could build with the intention of selling the completed building to another investor.
Real estate development requires specialized knowledge and experience, so (as with the other $100K+ opportunities on this list) it’s best to hire experts you trust. But if you don’t want to go through the time and hassle of putting a team together, you can also invest in real estate development through real estate syndication.
Start Investing in Real Estate with Gatsby Investment
Gatsby Investment is a premier real estate syndication company, based in Beverly Hills and specializing in projects with high return potential. Our unique real estate syndication opportunities provide access to carefully vetted properties, managed by a team of seasoned professionals with a proven history of success. We take care of every aspect of your investment, so you can focus your attention on your passion projects, knowing that your investments are in capable hands.
With many of our projects valued in the multi-millions, we offer equity shares to accredited investors for as little as $25K.
Whether you have $25K or $100K+ to invest, you can start investing in real estate with Gatsby today!