Despite the fact that $50,000 may not seem like much, there are numerous methods to invest it in real estate. Online stock purchases in the real estate sector are fairly common, as are joint investment funds or the more traditional method of buying one house at a time.
What exactly are REITs?
Companies called real estate investment trusts (REITs) are owned and operated by the general public. The majority of the time, REITs invest in a single type of property, such as commercial, residential, healthcare, or industrial.
Benefits: It gives you a ton of experience working with various real estate types in various markets. Being able to purchase and sell shares of a REIT online whenever the market is open is another excellent strategy to maintain liquidity.
Cons: The return is one of the greatest disadvantages of holding shares of a REIT. AvalonBay and Equity Residential, the two biggest residential REITs, offer a dividend yield of little over 4%. (as of May 2020). (up till May 2020).
What: When many investors pay into a deal made with sponsors, crowdfunding and real estate syndications are born. A crowdfund’s sponsor is in charge of directing the purchase, financing, and maintenance of real estate, as well as its leasing and eventual disposition.
Benefits: Profits on real estate investments made through crowdfunding vary from deal to deal. Its yields are typically significantly higher than REITs’, and as an investor, you are fully aware of the type of property into which your money is being invested.
Cons: One drawback of crowdfund investment is that, frequently, only certified investors—those with a high net worth or six-figure yearly income—can access the greatest offers.
A partnership in real estate
What it is: It’s similar to a crowdfund, except you know who else is contributing money to the project. As passive investors, some partners may just give money, but others may actively manage and build the investment.
Positives: You are aware of the other investors. You only have a small number of partners to split any potential earnings and tax advantages with, despite the fact that the property you invest in is smaller.
Cons: Since there are less investors, there can be increased investment risk. Problems might arise from alternative working ethics and investing philosophies, and poor judgments made by a general partner can reduce the possible return.
Rehabilitation or bankruptcy
What it is: The tried-and-true buy-low, sell-high real estate investment method. Distressed sellers, bank REO divisions, and auctions are among the places to find foreclosed and rehabbed properties at below-market prices.
Pros: Experienced investors who know how to fix and flip properties can possibly make a sizable profit in exchange for the risk of purchasing a property in its current condition (as-is).
Time management is crucial in real estate investing
It might be tough to sell a rehab at a profit if an investor purchases one as the market is in a bear market. It requires much practical work and thorough market understanding.
Rental-ready real estate
What it is: A house that has undergone all necessary maintenance and updates and frequently already has a tenant. Rentals can be found in many sorts of real estate, but turnkey rental homes are becoming more and more popular with buy-and-hold investors.
Benefits: If you want passive income, this may be the safest real estate investment strategy. Rentals are managed by professionals, and cash flow begins the day the deal is completed.
Cons: While the property is vacant, there could be a brief reduction of cash flow. Investors still need to review the property manager’s reports and financial records to evaluate how the asset is doing.
How to Save Money and Earn More
Consider how you can reduce risk while getting the most out of it if you want to buy more with less money. Even though it may sound cliché, long-term, profitable real estate investors actually do that.
How to Achieve Your Goals
If you employ leverage, you can spread your $50,000 investment across multiple endeavors. You might invest in two $100,000 turnkey income homes with the same LTV of 25% rather than purchasing a single $200,000 rental property with a reasonable down payment of $50,000:
One $200,000 rental property requires a $50,000 down investment, one income stream, and one long-term profit.
A $50,000 down payment, two sources of income, and two long-term gains come from two $100,000 rentals. Your whole debt remains $150,000, the same as before. Yet, as a result of your smart use of leverage, you now have two properties with potential appreciation and twice as many revenue streams.