How to invest in real estate without a lot of money

Traditional wisdom suggests that it’s generally a good decision to invest in real estate—but hhow do you do that if you don’t have a lot of money? After all, not everyone has huge piles of money hang out, waiting to be spent on an investment goods. Fortunately, there are several ways to realize some of the benefits of heat. housing market even if you don’t a few hundred dollars to work with. Here is an overview of your options.

Invest in ruse of real estate crowdfunding

With crowdfunding, you can invest directly in the property of a property or business through platforms that have minimums as low as $ 500. Since the number of wealthy investors is limited compared to those with less money, the idea is that large sums of money can be raised quickly from a larger number of individual investors, a bit like a Kickstarter. There are a bunch of platforms that do this, including Fundraising, PeerStreet, and RealtyMogul (Investopedia has a good overview of the options here).

In an ideal scenario, you could make a lot of money investing in a business that later goes public. But as Nerdwallet points out, there are also a lot of downsides to this method, such as annual fees that can exceed 2.5%, taxes on dividends, and the difficulty of selling real estate assets quickly. In addition, you must be good at spotting the right investment opportunities on a case-by-case basis..

Invest in a REIT (confidence in real estate investment)

REITs allow you to invest in companies that own commercial real estate such as office buildings, apartments, and hotels. Many REITs are publicly traded on major stock exchanges, allowing investors to buy and sell them like stocks.

The nice thing about REITS is that they are required to pay out 90% of their profits to investors as dividends, without you having to deal with it. the hassle of managing a goods. The downside is that REITs are vulnerable to market downturns, and this impact can be aggravated by those 90% of payments limiting their ability to grow by invest in more properties. In addition, the dividends are taxed as income.

On the other hand, they are easy to invest: just create an account with a brokerage house. Depends on type of REIT you invest in, the minimum investment can be as low as $ 2,500 or less.

FPI Exchange Traded Funds or Real Estate Mutual Funds

Both REIT REIT and real estate mutual funds allow you to invest in a basket of real estate securities traded on an exchange, although ETFs are easier to manage if you are more active investor. the the costs are relatively low – $ 1,000 can get you started.

This type of investment can be a good option if you prefer to passively follow indices for the broader real estate market, rather than more closely monitoring the performance of a specific property.. Of course, as with REITS, this approach also leaves you vulnerable to decline in the Marlet.

Buying a property with an FHA loan

It’s obviously more expensive than the previous options, but you can buy a property with an FHA mortgage for as little as 3.5% decrease (which amounts to $ 10,500 on a $ 300,000 house). And since these federally guaranteed loans are designed to help low to moderate income people buy a home, they come with less stringent credit score requirements than other private mortgage lenders.

While you can’t use an FHA loan just to buy investment property, use one to buy. your main residence, you will put your money in an asset rather than blowing it up on the rent, or even just free up money you would have put in a larger down payment to explore any of the above options. Also there are no restrictions on rental rooms in your new home, which would allow you to generate passive income on top of your initial investment.