There is no question that investing in real estate can be beneficial to one’s future. In fact, many of those who have reached financial independence have done so through real estate. However, it does sound like an expensive venture that’ll cost thousands of dollars in initial investment. In addition, not everyone knows how to obtain the funds to actually start. If you’re dealing with this, that’s OK! You don’t need six figures in your bank account to become a real estate investor. Today, we’ll discuss how to invest in real estate even if you’re on a tight budget.
1) Partnering Up
Getting started in real estate might be challenging for beginner investors, which is why it’s beneficial to partner up with an experienced investor. There are a few ways for a real estate partnership to work. You can bring some of the capital for the investment and benefit from someone else’s experience. Or, maybe you have handyman skills or construction experience that you can bring to the partnership while your partner puts up the money for buying an investment property.
Either way, partnering up is a great way to earn while you learn how to invest in real estate (you’ll receive a share of the profits that the investment property generates). If you’re interested in this investment strategy to make money in real estate, just remember to have a partnership agreement in place to avoid potential disagreements.
Related: All You Need to Know About Buying Investment Property With Partners
2) Wholesaling Real Estate
Wholesaling is one of the best ways to start real estate investing with a tight budget (or even zero-dollar budgets). Here’s how to invest in real estate through wholesaling: First, find a distressed seller and negotiate to get him/her to sell the property for a significantly low price. After coming to an agreement, assign the property to a contract. Your job now is to find a buyer and sell the property before the wholesale contract expires. As the wholesaler, you’ll earn a portion of the profit made from closing the transaction.
Many beginner real estate investors are attracted to this investment strategy for numerous reasons. Of course, it’s a great way to make money without the need to spend much. It’s also great for investors who are not interested in property ownership. As a wholesaler, you won’t have to worry about repairing the investment property or mortgage payments.
3) Private Lending
Private lending can be a great way to put the money you have towards investing and make profits from the real estate business. This strategy is for beginners without experience, time, or interest in property ownership as well. Just loan the money you have to other real estate investors that do have the time and experience and reap the rewards.
Many investors will accept amounts as low as $5,000 or $10,000, allowing you to participate in their property investments! As a return on investment, you may have a share in the profits or an attractive interest rate with regular cash flow payouts.
4) Turnkey Real Estate Investing
Another solution for how to invest in real estate with a tight budget is turnkey property investing. As a property investor, if you already have a little cash for a down payment and reasonable credit, you can buy turnkey rental properties. These properties have already been fully renovated and typically even have tenants. Moreover, real estate investors buy these investment properties from companies that also offer property management services!
Needless to say, this investment strategy is great for beginner investors who want to minimize the time and money they put into property investment. Therefore, turnkey rental properties are a form of passive income investments and, hence, one of the best and easiest ways to make money in real estate with a tight budget.
5) Crowdfunding
Another option that you have is crowdfunding. When you participate in real estate crowdfunding, you’ll be part of a group of other investors who pool their money and then lend or invest it with experienced real estate property owners. You’ll get to profit from the experienced investors’ skills with a minimal investment of money and with minimal risk – depending on the investment, of course.
Real estate crowdfunding is a very popular strategy of how to invest in real estate because an investor doesn’t have to search for a rental property for sale, get a mortgage loan, screen tenants, or manage the rental property. Thus, your workload is minimized, yet the potential for profit still exists! Crowdfunding also gives real estate investors access to a variety of investing deals regardless of their background, resources, or level of experience.
6) House Hacking
If you don’t already own your house, consider buying one and hacking it! If you’ve never heard of house hacking before, it’s fairly simple. Essentially, it’s a mix between buying a primary residence and a rental property. Here’s how to invest in real estate through house hacking: you buy a multi-unit property (duplex, triplex, fourplex), live in one unit, and rent out the rest. It’s really that simple!
Related: The Ultimate Guide to House Hacking
As a real estate investor, you’re able to earn rental income from your tenants, use it to cover your mortgage payments and live in your house for free. House hacking a property also allows you to gain real estate investing experience on what it’s like to be a landlord that you need before buying a rental property. Furthermore, house hacking allows for significant savings, as property investors can cover mortgage payments with rent collected from tenants.
Many real estate investors recommend this investment strategy and agree that it’s one of the easiest ways to enter the real estate investing business with a budget. The great thing about house hacking is that you’ll make money from your primary residence without having to put much work in return.
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7) Real Estate Investment Trust
With this investment strategy, investing in real estate starts to look a lot like investing in stocks or mutual funds. A real estate investment trust (REIT for short) takes investor funds and pools them together and invests in several income-producing properties. Those can be large apartment buildings, office buildings, retail space, commercial property, hotels, or warehouses. Thus, this gives you an opportunity to invest in real estate as a shareholder, rather than as an investor with direct responsibility.
Real estate investment trusts typically pay out dividends to their investors. Returns vary – depending on the type of REIT you invest in – but the average ROI is 10% or higher. Thus, if you’re wondering how to invest in real estate in a way that is considered a passive income strategy, offers tax benefits, and is safe with good returns, consider investing in a real estate investment trust.
8) Renting Out on Airbnb
This is probably the easiest way to make money in real estate with a tight budget. If you already own your home, you can make rental income by renting out extra space. I’m saying “space” because, while renting out a room on Airbnb is one way to do it, you can also rent out any part of your house including your basement, garage, attic, or an outbuilding on your property.
Renting out on Airbnb can be a great source of rental income. As a matter of fact, the short-term rental strategy has become very appealing for property investors in the US housing market. Once you learn how to invest in real estate through Airbnb, you can be on your way to making a fortune. One piece of advice to give here is to check your city’s laws and regulations regarding short-term rentals before renting out on Airbnb. We don’t want you to get in trouble with the law!
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
9) Real Estate Limited Partnerships
These are even more like mutual funds than REITs. They’re organized by a general partner who is responsible for handling the direct management of the investment properties held in the partnership. The other real estate investors are all limited partners. Basically, this means that while you participate in the profits, your losses are only limited to your actual investment. This is why these are referred to as a limited partnership.
Much like real estate investment trusts, limited partnerships (LPs) give property investors with a tight budget the opportunity to invest in larger real estate deals with minimal capital. However, limited partnerships are a lot like stocks. Meaning, if the partnership invests in successful deals, it can be very profitable and you’ll earn a steady stream of dividends. On the other hand, a poorly managed LP can cost you your entire investment. Thus, we recommend learning more about how to invest in real estate with LPs if you’re interested in this investment strategy.
There are many ways to start investing in real estate with a tight budget. Which investment strategy do you think is best for you?