Real estate investments are one of the most surefire ways of growing one’s money – whether it’s about earning a little more right now or building a fortune for the future. Investing in real estate generally requires a lot of money, with most properties requiring at least a 25% down payment. But this can be rather expensive for beginners, leading to barriers in people’s investment journeys. Fortunately, there are several ways to side-step this issue.
Ways to invest in real estate with no money
This may sound bizarre to traditional investors, but there are ways to invest in real estate without investing one’s own money. To clarify, it isn’t possible to invest with no money at all, but there are plenty of opportunities to invest with minimal or no capital of one’s own.
House-hacking
This is a strategy wherein one lives in one part of the house and rents out the other–either as a monthly/annual lease or for short stays. Not only does this help finance the mortgage payments for the investor, but also helps them get a realistic idea about the property as an investment.
This experience will also expose beginners to being a landlord, managing property and tenant issues, and taking on DIY projects. Since the property will remain owner-occupied, it is also likely to require a lower down payment. With an FHA loan, first-time buyers can get a home with just a 3.5% down payment, while the VA office may be able to help veterans buy homes with a zero down.
Fractions of real estate
It’s no secret that real estate investments tend to be massive. But they don’t always need to be. Instead of investing in the entire property, consider investing in a part, or a fraction of it. There are plenty of online apps and platforms that allow beginners to invest in fractional real estate, and generate a passive income of 5-8% per month, with an appreciation rate of 6-8%. Over time, this leads to a compounded return of 60-80% over 5 years, all without having to worry about a property loan.
Please note that some of these platforms may have a minimum investment requirement that could be offset with certain discounts, offers, or referral programs. So, it’s essential to check the details before putting in one’s money.
Duplex with FHA Loan
If house-hacking feels like an invasion of privacy, one can try to go down this route. By bringing an FHA loan into the picture, buyers are likely to qualify for a larger loan as they account for the added rental income in the future. While a larger down payment may be required to purchase the duplex initially, homeowners will end up paying less in monthly mortgage, helping them save their money.
To qualify for an FHA loan, some lenders may require buyers to have previous landlord experience, but this isn’t the case everywhere.
Home equity line of credit (HELOC)
If one already has a home to their name, it may be a better idea to open a HELOC, wherein one can get access to a line of credit in exchange for equity in their property. This money can then be channeled into home improvement or to expand the living space, allowing owners to lease out the space to generate more income. The biggest advantage of opting for this option is that it has a lower interest rate in comparison to other property loans.
Real estate investment trusts (REITs)
This is one of the cheapest and quickest ways to invest in real estate, even for beginners who don’t want to spend too much of their money. REITs invest in real estate via property purchases or mortgage investments. Those looking to put their money in real estate buy stocks earmarked by their REIT of choice, which are then traded on the stock market.
REITs can be highly localized or focused on a certain type of real estate, which can give some investors an edge over others. That being said, this is a wonderful way of dipping one’s toes in the real estate game, building exposure to different types of real estate, and generating passive income.
Crowdfunded real estate
If the goal is to put money into a physical property, then crowdfunding may be a good idea. Here, several investors come together to invest small amounts of money and create a fund that goes towards the development of the property. This benefits both the investors and the developers.
While this may be a lucrative investment option, it is important to note that each crowdfunding platform has its own deals and regulations. That is why, one must carefully read the fine print before investing their hard-earned money in such programs.
Those with a little more money could invest in a real estate syndication instead, as these are only open to accredited investors. Here, many platforms give investors the chance to directly view investment opportunities, review, and compare them, to find one that best suits their investment style.
As a beginner, it is highly recommended to learn more about the market before deciding on an investment strategy. This can be done by reading books or listening to podcasts by other investors, and understanding the benefits and challenges that may arise in the future. This will help individuals make better investment decisions that are in line with their financial goals.