If you think real estate is only for people who have loads of money to invest in then you're wrong. There are ways you can invest in real estate with a tight budget.
Before you start investing you should know what you're investing into. You need to be knowledgeable about real estate. You don't want to head into the battle without a weapon.
Why educate yourself?
- You won't be confused on terms and definitions - there are words often used in real estate that you as an investor would not know of. Knowing things by definition means that you will get a clear view of what direction your investment is heading into.
- You make better and logical decisions - the more you know about real estate, the clearer your decision will be. You will surely have a low chance of investment failure when you know things upfront.
- You know what options are there for you - You might be allured by others offering you a deal that's too good. But it might turn out to be not good in the long run. If you learn more about real estate, you will get to see what investment options you can make. Having the freedom and knowledge will give you options that are suitable to your investment preferences.
- You will know what is more profitable - you will have knowledge of the value of a property. There are properties out there that look unprofitable in plain view but is a hidden wealth that just needs a bit of developing. You can also know what companies are performing better compared to the competition if you want to invest in them.
Educating yourself can be free. There are lots of websites that give information about real estate. There are also some offering free knowledge courses to some extent. If you can you should invest in real estate education.
Crowdfunding is a good way to invest if you have something but lack another. For example, you have the skills in developing real estate properties but don't have the funds to do so. You look for someone who has the funds. You partner up in real estate investment.
Crowdfunding also works by pooling in the money to raise capital. There are companies out there like RealtyMogul or FundRise looking to crowdfunding to raise capital. Make sure that you know who you're crowdfunding into. They need to be transparent in their operations. You as an investor should have the freedom to choose your investment deal, track investment performance, and evaluate the costs of operations.
Real estate crowdfunding is a fast growing investment market. Because of its appeal to people with small funds and online accessibility.
3) Real Estate Investment Trust (REIT)
This works the same with crowdfunding. You pool in your money to a trust company. The company then uses the money for real estate operations. Operations can include buying, selling, managing and developing real estate properties.
REIT does not give you a share of the profit but gives out part of the managed real estate property. This means you are given a physical property. You can use this for rent, leasing or even sell it for profit.
REIT is also required to distribute 90% of their annual taxable income. The income comes from producing properties to shareholders. The better the REIT company is performing the more amount of income you get from them.
If you don't have the time to learn and know about real estate, then REIT is suitable for you. REIT companies do all the hard work to grow the pooled capital.
4) Property Locating (Bird Dogging)
You look for deals that you can give out to buyers. This requires that you do your work of driving around the neighborhood and look for properties that are for sale or undeveloped. You obtain information about the property and give leads to buyers or wholesalers. As a lead provider, you earn around $250 to $1000 or more for every transaction completed.
If you know how to fix properties and interior design then it's a good start to real estate. You can also learn the skill if you want to try it out. You can offer to fix up houses in exchange for money. Or you can make a deal with people who don't know how to make use of their undeveloped property and help them fix it up in exchange for a part of the income from the property.
6) Real Estate Wholesale
You put a property under contract. You then award the contract. It works by finding a property that when developed can give huge profit. You put it under contract. You will then look to assign the contract to a rehabber for a higher price.
This requires that you have the education or training to provide eligibility. You also need to be accessible. So with this approach, you would have a phone line, business card, and a website for contact purposes. You may also need a lawyer to review the contracts for you. It's also a good idea to do this under a LLC although there are some people who do real estate wholesaling without the LLC protection.
7) Traditional Real Estate
If you have a property suitable for rental or have the funds to buy one (or more) then this could work for you. You develop or buy a rental property and rent them out to tenants.
If you don't have a property. This will require you to search and visit properties to find the one that you think would grant you profit and suit your preference.
It also requires you to look for tenants to occupy your property. This will involve entertaining them and present the home that they are looking for. No tenants mean no income for you. This will also require you to maintain and manage the property to keep its value and attract tenants.
8) Private Lending
If you have the money but don't have the time to learn about real estate, or if you are not confident because you don't have experience in real estate, you can offer to lend your money to real estate investors who have the time, experience and manpower to do so. You can negotiate a deal where you can have a share of the profit or an attractive interest rate with a monthly cash payout.
Investing in real estate can be done with a tight budget. It does not mean that it will lead to great profit. As an investor, you should know the risks and legal implications that you will partake. A common risk that most investors face is buying a property and be forced to sell it because of poor market conditions. There is also the maintenance and management of your properties. Be also wary of scams.
You also have to know what taxes you're gonna be paying. You should know what how your property is classified and what it's being used for. You might end up getting a huge part of your investment return as taxes. You should consult a tax professional before you invest in a property.
Assess your options based on your financial situation and convenience. This article serves as your guide on what options you could choose. Remember to learn and research more and you will be a step closer to a successful real estate investment.