The title of “real estate investor” sounds so official. And while real estate investors are often some of the most successful, wealthy people in the world, you may be surprised to learn that you don’t need a seven-figure portfolio to start investing. In fact, you don’t even need a six-figure savings account. With just a few thousand dollars, some savvy deal making, and the motivation to succeed, you can start investing and enjoying healthy returns.
The “how much” question is one that gets asked a lot – so rest easy knowing that you aren’t the only one wondering what it takes to get your foot in the door. Unfortunately, there isn’t an exact answer.
While, ideally, you’d have $25,000-plus tucked away in a savings or investment account before getting started, this isn’t necessary. In fact, you can get away with just 10 or 20 percent of that amount – if you’re strategic and patient.
Yep, you heard that right. With $5,000 or less, you can dip your toes into the waters of real estate investing and become one step closer to success. By no means is it easy, though. The less money you have, the more creative you’ll have to get. You’ll also have to partner with others more in order to put quality deals together. But if you aren’t afraid of rolling up your sleeves and getting dirty, there are good things waiting for you!
The beauty of real estate investing is that there are so many different strategies and formats. If one option doesn’t interest you, then you can always find another. With that being said, here are some of the choices you’ll have when dealing with $5,000 or less.
The rise of crowdfunding has been swift and substantial, but did you know that there are options for real estate crowdfunding? Much like traditional crowdfunding, real estate crowdfunding works by spreading out the investment across many people.
“Crowdfunding real estate sites sell investments in small chunks, which are much more accessible to an average investor than an entire building or development would be,” expert Matt Faustman explains. “An investor may contribute $5000, for example, to purchase an empty building. The funds then go into renovating and leasing out the building, at which time the investor will receive an agreed upon percentage of rents and revenue.”
There are tons of crowdfunding websites popping up, so make sure you do your due diligence and understand what you’re getting into. You may also be held to certain requirements, such as income stipulations and credit ratings.
For decades, real estate investment trusts – or REITs – have been a favorite vehicle for low-capital real estate investing. You don’t have to put very much money down, but can up the ante if you’re looking for higher returns.
“These securities are traded on the major exchanges like stocks and invest in real estate directly, either through properties or through mortgage investment,” investor Aaron Levitt explains. “In exchange for offering investors high-dividend distributions, REITs receive special tax considerations and offer a highly liquid method of investing in real estate.”
Want to get really creative and don’t mind putting in a lot of time and effort? Well, with wholesaling, your upfront investment can prove pretty lucrative. And the best part is, you don’t even have to put any money down.
Wholesaling is a fast strategy in which you find sellers who are looking to unload their homes and then enter into a contract with the seller to purchase the property. You then begin marketing the home and assign the contract to another buyer or investor. You charge a fee for reassigning the contract and then move onto the next one. You aren’t going to get rich off one property, but can produce a steady flow of revenue by repeating the process over and over again.
As you can see, there’s a lot of value in pooling resources together with other individuals. Much like crowdfunding and REITs, joint venture investments give you access to opportunities that you wouldn’t have on your own.
A joint venture typically involves two or more individuals and a bank loan. For example, let’s say you’re looking at a $100,000 property. Partner A would provide $2,500 towards the down payment, Partner B would provide another $2,500, and then Partner C would provide $5,000. The remainder would come in the form of a bank loan. In this scenario, Partner A and B each own 25 percent of the deal, while Partner C has a 50 percent stake.
In many markets, it’s actually possible to purchase quality rental properties with just a few thousand dollars down. For example, it’s not uncommon to find condos or apartments with rental potential for right around $50,000 in some areas of the country. While these aren’t going to be swanky properties – or even something you’d want to live in yourself – they are clean, safe, and habitable.
On a $50,000 property, five percent down would be $2,500 and 10 percent down would be $5,000. While you’d obviously have to factor in closing costs and upfront maintenance (as well as a cushion for unforeseen issues and vacancies), you may be able to find a property that meets your standards. When the numbers align, you can generate some pretty steady cash flow almost immediately.
At Green Residential, we believe that everyone deserves the opportunity to enjoy the lucrative returns that can be yielded from real estate investing. If you’re planning on purchasing rental properties in or around the Houston area, then we’d love to speak with you about our comprehensive property management services.
When you work with Green Residential, we take care of the time-consuming and mundane tasks that you shouldn’t have to worry about. This includes things like property marketing, tenant screening, rent collection, maintenance, inspections, and more. For additional information – or to get a free rental analysis – please contact us today!
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