The famous billionaire Andrew Carnegie once said that 90% of millionaires acquired their wealth by investing in real estate. Therefore, it is no surprise that real estate is one of the most popular asset classes investors turn to when building wealth.
Real estate is an asset class that typically requires a lot of cash to make good money. Therefore, you might be wondering whether you can get started as a real estate investor without spending hundreds of thousands of dollars. Here are some of the best ways to invest in real estate with limited capital.
Lease option
The lease option is also one of the most effective ways to invest in real estate with little capital. Under this option, you will charge your property’s buyer a monthly or annual premium through higher rental payments. Then, you will channel the surplus rental fee towards the property’s purchase prices. This agreement allows investors to buy investment real estate with higher rental fees.
Form strategic partnerships
Real estate partnerships are popular among individuals who want to invest in this asset class but have limited capital. It isn’t uncommon for a property to be out of your price range as an individual investor. Nevertheless, you can find equity partners and pool your resources together to afford the property of your dreams.
For instance, a $1 million apartment complex will be too expensive if you have only $100,000 to invest. However, you can own this property if you find nine other investors willing to fund the remaining $900,000 of the sale price. It is always prudent to iron out the fine legal details of such partnerships, and that is where professionals like Syndication Attorneys (syndicationattorneys.com) come in.
House hacking
There are hacks for seemingly every process, and real estate investment is no exception. You can’t use a Federal Housing Administration (FHA) loan to acquire an investment property. Still, you can buy a multi-family residential property and live in one of its units to make it your primary residence.
This way, you can purchase the property with as little as a 3.5% down. Then, find tenants for the other units and pay off your mortgage and other property expenses using rental income. You can then use the money you haven’t spent on rent as a down payment for your next property and slowly increase the number of buildings you own.
Real Estate Investment Trusts
Real Estate Investment Trusts (REITs) are a great alternative to direct real estate purchasing, and you don’t require a lot of cash to buy into a REIT. You can think of REITs as a real estate asset pool managed by a professional and traded on the stock market exchange.
As such, they offer some of the attractive benefits of stock market investing, as long as you invest in a publicly-traded REIT. For instance, you can buy one share and sell it whenever you want. On the other hand, you can invest in a private REIT to enjoy the major benefits of predictable future shares value. However, private REITs usually demand a higher minimum investment and are not so easy to liquidate.
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