First published: 21 January 2022 @ 3:23 pm
Client: Shiirs
Written By: The Big Writer
Published At: Read More
Have you always wanted to become a real estate investor, but you don’t know if you have enough money or resources to make it work?
The good news is that there are several ways to start. In fact, it is more accessible than a lot of people may think.
Even if you only have a few thousand dollars to invest, it’s possible.
Read on to find out how you could get started as a real estate investor.
Do You Need Money to Invest in Real Estate?
Yes, you need to have some amount of money to invest in real estate.
The amount of money you need to invest in real estate depends on the type of investing.
Also, the real estate market is always changing. There are many different real estate investing strategies, so it is possible to find one that is right for you.
However, while you will need some money to invest in real estate, you do not have to have hundreds of thousands of dollars lying around.
How Much Do You Need to Invest in Real Estate?
The exact amount of money you need to invest in real estate depends on the type of investing that you decide to do.
Most people know about traditional investment strategies such as buying an investment property. You can either invest in a single-family home or in a multi-family housing unit. Often, people look at buying single-family houses or multi-family units and renting them out. Some people even choose to use one of their units as their primary residence while renting out the rest. You can make a lot in rental income by buying a rental property. But this will cost at least $100,000, if not more.
With this method, the investor buys a property and then rents it out to a tenant. This strategy puts you in the position of a landlord, which comes with a lot of responsibility.
Costs to Consider
When you buy a house to use as a rental property, you are also going to be responsible for many costs. You must handle closing costs, maintenance costs, mortgage payments, and other assorted fees that come with owning and maintaining a property.
Since the housing market crash in 2008, it is impossible to get a mortgage without proof of income. When applying for a loan, you must be able to share credit reports, net income, and possibly a cash flow statement. Lenders pay close attention to your finances, and the loan estimate could be much different than you’d hope. The credit crisis was caused by a huge decrease in cash flow. Ultimately, it led to a full mortgage meltdown as the housing bubble burst. This crash had a lasting impact on the real estate market.
Now, you will need to place as much as 20% of the loan amount down, if not more, to get the mortgage for your rental property. The exact amount depends on the lender and price.
Emergency repairs and other unexpected costs can also add up over time, along with the initial purchase price of your property. You must pay for many different housing expenses as the property owner, including property tax, insurance premiums, homeowners insurance, and more. Remember, the property owner covers the cost of repairs and maintenance.
In the long term, though, you could make a considerable amount of profit. Still, that’s only if you can find a tenant who can pay enough in rent to cover more than just the necessary costs.
Ways to Invest in Real Estate with Under $100,000
While renting out properties can be a lucrative way to earn money, it’s not the only option in this industry.
If you don’t have at least $100,000 lying around to invest in a rental property, there are other options available to help you get your start as a real estate investor.
Two of the main ways to invest in real estate with less than $100,000 are by participating in a real estate investment trust (REIT) or a real estate investment group (REIG).
Real Estate Investment Trust
This is one of the cheapest and easiest ways to start investing in real estate.
REITs were originally created in the 1960s as a way to give individual investors a chance to be a part of the commercial real estate market.
REITs are securities that are traded on major exchanges such as stocks. They may specialize in a specific region or type of real estate.
You can find REITs for just about any type of commercial real estate, including malls, apartment complexes, and office buildings, so there’s an REIT out there to fit any investor’s interests.
These are passive investments that you can diversify the same way you can diversify your stock portfolio. This means your profit will not depend on just one property.
With this, you are directly investing in real estate, through either mortgage investments or property purchases.
Exchange-traded REITs are relatively easy to get out of, unlike most types of real estate investments. You can get started without needing a lot of cash. As little as $1,000 can buy a REIT.
Real Estate Investment Group
With an REIG, you own actual physical real estate instead of owning shares of a company.
An REIG lets an individual investor buy one or more units of an apartment building or a condo through the operating company. This company manages and markets all of the units, and in exchange, they take a percentage of the monthly rent.
This is a good way to take the work of managing a rental property off your hands and also invest a relatively small amount of money.
An investment of $5,000 to $50,000 could be enough to invest in an REIG. While that is not enough money to buy a whole unit yourself, the REIG pools money from multiple investors, funding a co-owned, shared property.
Get Started with Real Estate Investing
With so many different options and strategies to use when investing in real estate, it can be overwhelming and confusing, especially for a first-time investor.
At Shiirs, we know how complex investing can be. But we also know how great the rewards from it can be for each individual investor.
Getting started as a real estate investor doesn’t have to be overwhelming. Sign up for Shiirs today! We can help you with all of your investing and personal finance needs.
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