Do you want to dive into the real-estate investments industry, but you feel like you don’t have sufficient cash to do so? Well, you don’t need a lot of money to get into it. Today, you can get into this lucrative industry with as little as $100. Here are a few ways to invest in real estate with little money.
How to Invest in Real Estate with Little Money
One of the biggest obstacles in real estate investing is the cost of buying the properties. Traditionally, Banks and lending institution could give loans to an individual with a good credit score and leave out those with poor credit. However, nowadays people have devised ways on how to invest in real estate with little money.
In the past, real estate investments were a preserve for the rich and wealthy because of the high cost of buying properties. At least, most of them could afford to raise the vast amounts of money that were required to invest in real estate properties, or at least they had an excellent credit score.
Though such people still have a wider variety of options, at least now you can become a real estate investor with little cash, poor credit, or no money. That way, you can also become a landlord.
Real estate industry is one of the most lucrative sectors. One of the primary reason being that, with time, properties appreciate. Also, housing is one of the most substantial expenses in the personal budget of every household.
Therefore, if there is a way to cut this expense and save more money, then the better because saving will help boost your wealth and help you retire early.
If you want to get into real estate investing, there are numerous ways to do so with no money or with very little cash. The most popular method involves purchasing REITs.
Besides REITs, you can still get into this industry through other exciting ways, and that is what we will be discussing here.
So, if you’re wondering how to invest in a commercial real estate with little money, then this article will explore some of the unconventional ways to do so.
Ways to Invest in Real Estate with Little or No Money Down
Now, let’s dig into how you can invest in real estate with little money.
Real Estate Crowdfunding
Real estate investors have now adopted crowdfunding as one of the best alternative ways to invest in properties. With crowdfunding, business owners can raise cash from a large pool of investors where each investor contributes a small amount of money.
Several crowdfunding real estate websites offer investors a chance to pool together resources and invest in both residential and commercial real estate properties.
In addition to crowdfunding websites, business owners also use social media platforms, including Facebook and Twitter, to market the idea to a broader network of interested investors.
There are several real estate crowdfunding platforms both for non-accredited and accredited investors. Some of these websites work with individuals while some work with institutional investors and some cater to both individual and institutional investors.
Some of the most popular crowdfunding sites include Fundrise, Groundfloor, Realty Mogul, and Crowdstreet to mention but a few. While Crowdstreet is a platform for accredited investors, Fundrise and RealtyMogul cater to non-accredited investors.
Most of these crowdfunding sites connect borrowers and sponsors. With crowdfunding, you can invest in real estate with little cash. For example, in Crowdstreet, you can invest with only $5,000, and you can start investing with as low as $500 using the Fundrise platform.
Fundrise is one of the best platforms to pick if you want to get into commercial real estate.
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Real Estate Wholesaling
If you have little cash and you want to dive into real-estate investments, then you can try real estate wholesaling. This involves finding an excellent deal on the house and then selling it or assigning it to another investor immediately with no additional costs or renovations.
The concept behind wholesaling is that you identify a distressed house – one that you think is a hot deal and could attract keen interest from other investors. You schedule the closing date with the seller that could be a month or a month and a half away.
Then immediately start pitching the property to other interested buyers and investors. In essence, you’ll be looking for a buyer to buy the same property that you want to buy.
After you find a buyer, you schedule the closing date for the same time as to when you’ll be buying the house. That means that you will sell it the same day you buy it and will probably own the property for a few minutes only.
The buyers’ down payment plus the earnest money will most likely cover the money that you put as down payment and sometimes even more. Sometimes, you will have to sign over the check directly from your buyer to your seller. You only act as a middleman and earn by arranging simultaneous deals.
You should have excellent communication and negotiation skills and have an eye for distressed properties that could be on demand to make it in this venture.
Rules and regulations about wholesaling vary with different States in the US, and thus you should join your local real estate investment groups and have a real estate attorney for advice.
House flipping can also help you get into the real estate industry. Most people use the terms wholesaling and house flipping interchangeably. But there is a slight difference.
Unlike wholesaling, house flipping involves buying a distressed home, making renovations and then selling it at a higher price than the buying price and cost of repairs combined. With wholesaling, you don’t have to do house repairs and renovation and can even close the buying and the selling deals the same day.
House Flipping, on the contrary, involves holding the house while doing rehab. If you want to get a lucrative deal, you need to know when and where to search for them. Most of these distressed houses are sold during foreclosures, auction, and in bank short-sale and are usually at a discount. If you beautifully renovate the home, then you’re typically adding some value to it.
House flipping is expensive because you have to do renovations, but you don’t have to buy the house for cash. You can finance it through various other ways. One of the best ways is through credit. However, you need to have an excellent credit score to invest in this high-risk venture.
You can look for tips on how to build your credit if your credit is poor. Alternatively, you can also apply for a home mortgage loan or take out a (HELOC).
Turnkey Rental Properties
Turnkey real estate investing is a good option for people who are not in a position to do all the hassle of buying the house, doing rehab, and managing the property on their own. In essence, a turnkey rental property is a property such as a house, duplex, apartment building, and more that have been bought at a lower price usually below average value and has been fully renovated.
What that means is that the new owner is ready to “turn the key” and begin renting the property out.
Most turnkey companies manage the property on your behalf. Thus, they offer you the joy of earning passive income while doing nothing. These companies buy and sell fully renovated rental properties on your behalf.
Roofstock, HomeUnion, and American real estate investments are some of the best turnkey real estate investing companies available today. Roofstock is also one of the best platforms to use if you want to get into residential real estate investments.
These companies may charge an acquisition fee, which is an additional price paid during purchase. With turnkey projects, you only need to put down 35% as a down payment to get started.
However, with Roofstock, you can put down as much as you’d like to start earning passive income through real estate. If you use my link for Roofstock, you can sign up for completely free and start browsing real estate property investments.
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This is one of the best ways of investing in real estate with little cash. When house hacking, you make a small multi-unit rental property your primary residence. In essence, it means that you buy a small multi-unit rental property, live in one unit, and then rent out the other units.
All you need is to own the house by paying the down payment. These rental properties can range from a duplex, a triplex, or even a fourplex. The income that you receive from the tenants can cover some or all of the house expenses.
Later, you can move out, and the property will remain an excellent long-term passive income investment. This kind of investment has numerous benefits and a few downsides too. Also, you can take out an owner occupant loan, which is easier to acquire than an investment loan to do house hacking.
You can do house hacking by renting out rooms in your home already through Airbnb.
Lease Option Real Estate Investing
Another way to reduce the amount of money that is needed to buy a rental is by using the seller financing option. This option involves getting financing from the seller to buy a rental property that you can rent out on a lease option to tenants.
The renters must sign a lease contract, which says that the renters have agreed to buy the home. That means that they will pay the rent plus an additional amount of money that goes to paying off the house in their name.
After signing the contract, the tenants also agree to give you their down payment. That can help you cancel out the money you had incurred to pay for the same.
With this option, you’re acting as the bank for the tenants to purchase the house and so the interest rates and the purchasing price may be a little more too.
Seller financing strategy is a bit more like a lease option strategy that we have explained above. The only difference is that with seller financing, you’re the one that gets the lease option from the owner of the property and not your renters. After getting the lease option, you are at liberty to either sell the house to someone else on a lease option or you can hold it and follow the buy-and-rent strategy.
With this particular type of financing, you can get a better rate and terms on a down payment. If you opt for the lease option sale, then you must have excellent negotiation skills. That will help you get more out of the property in a lease option sale or at least get enough from renters to cover all your payments and make a profit.
Some of the most excellent seller financing deals are usually from motivated sellers such as Bank Real Estate Owned Properties or For Sale by Owner (FSBO).
Most banks typically let go of these foreclosures for less than what they are worth because they don’t want to hold the real estate property for long.
If you partner with another investor, then you’ll put down less money than if you were alone. However, you will have to share not just the capital but also decisions and profits as well.
Therefore, you should have everything in writing to avoid issues later. Why? You need to know how you can structure your real estate partnership for the partnership to run smoothly.
In the partnership, you can either offer equity or debt investment in the deal. A debt investment involves putting up a loan, and so you’re committing to pay either quarter or semi-annual interest and then pay the loan in full typically with a lump sum after three or five years.
An equity investment, on the other hand, involves putting up some cash and then getting paid out from free cash flow or the eventual sale. The equity investment poses less risk compared to the debt option. Alternatively, you can opt to go with a formal partnership or create a limited liability corporation (LLC) for each deal.
An ideal place to find partners is in the National Real Estate Investing Association and the local real estate groups on Facebook. With National Real estate Investing Association, you may incur training and membership fee, but they are better than Facebook groups.
With Facebook groups, you need to watch out for fraudsters and spammy groups. Alternatively, you can ask from the local real estate agents to refer you to legit local real estate investor groups.
Using FHA and Hard-Money Refi Loans
Another way to invest in real estate with little cash is to take out property loans. You can use the FHA Loan to get started in property investing. The FHA loan is a unique loan program that helps people purchase their first home and can use it as an investor to get into real estate investing. You can get a property for as little as 3.5% down and even when with bad credit.
Another way to invest in real estates is to take out a hard money loan. With hard money refi, you can buy a rental property with a hard money loan. Then you can refinance the property into a conventional mortgage.
This is a very high-risk strategy, and hard money loans must be refinanced within a year or less. You need to have a lot of experience and skills to succeed in this strategy.
Invest in Real Estate Investment Trusts (REITs)
With M1 Finance you can build a portfolio of REITs for completely free of charge and they will automate your investing. They will even reinvest dividend income or your contributions as fractional shares.
Generally speaking, you can invest in both public or private REITs. However, with a brokerage, you will likely only be able to invest in public REITs.
There are a lot of great public REITs out there to choose from in the following industries, including:
- Office buildings
- Senior living facilities
- Single family or residential real estate
- Commercial real estate
REITs can give you a lot of flexibility. Especially if income is a high priority for you.
Conclusion on Invest in Real Estate with Little Money
Real estate investments have potentially higher returns over other types of investments. That is why most people want to get into this lucrative industry. This industry was hard to penetrate before due to the high amount of money needed to get started.
Unlike before, now you can invest in real estate with little or no money down.
Have you invested in real estate through any of these methods? Please let me know in the comments below.
- 4 Key Secrets your Real Estate Agent Won’t Tell You
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- 13 Best Books on Real Estate Investing
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