7 Ways to Invest in Real Estate Without Much Money

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Last Updated: March 1st, 2022

Guest Post by G. Brian Davis

Want to start investing in real estate, but don’t have tens of thousands of dollars for a down payment? 

You have more options than you realize. From directly buying properties to buying shares in real estate funds, try these tactics to diversify your portfolio to include more real estate. 

1. House hack

House hacking involves finding ways to generate income from your home, to offset your housing costs.

In the classic house hacking model, you buy a duplex to live in one side and rent out the other. Traditional mortgage lenders also allow triplexes or fourplexes. 

And if low-end units come to mind when you think of multifamily properties, think again. You can house hack with extremely high-end multifamily properties. 

If you don’t like the idea of sharing a wall with someone else, you can also house hack single-family homes. I’ve house hacked with housemates, and I have a friend who’s house hacked by renting out a suite in her apartment as a vacation rental. My business partner has house hacked by hosting a foreign exchange student whose monthly stipend covered most of her mortgage payment. She’s also rented out storage space in her garage to help cover her mortgage. Other homeowners add an ADU to house hack. 

When you house hack, you take out a conventional owner-occupied mortgage, which means a low down payment. For example, programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible allow a 3 percent down payment, and FHA loans allow 3.5 percent down. Some specialty loan programs such as VA loans and USDA loans allow 0 percent down.

You must live in the home for at least one year, but then you can move out and keep the property as a rental if you so choose. House hacking makes for a cheap and easy way to start your real estate portfolio.

2. Use a credit line for the down payment

While most conventional mortgage programs don’t allow you to borrow the down payment, portfolio lenders and hard money lenders do typically allow it. If you have equity in your home or an investment property, you can open a home equity line of credit (HELOC) against it and pull out money for a down payment.

The tactic works particularly well for buying fixer-uppers to flip or refinance using the BRRRR strategy. You can then pay off your HELOC balance in full just a few months after drawing on it.

Also check out all-in-one first lien HELOCs as an option for pulling out money for a down payment. 

3. Fractional ownership in rental properties

Alternatively, several companies nowadays let you buy fractional ownership in rental properties. 

For example, Real Wealth offers both group investments and rental fund syndications. You can also check out Arrived Homes and Roofstock One, which both offer fractional ownership. 

Arrived Homes is available to non-accredited investors, and lets you invest with as little as $100. 

4. Crowdfunded loans

Some hard money lenders and other sources of alternative financing allow you to invest money toward specific loans on their books. 

My favorite of these is Groundfloor, which lets you put as little as $10 toward any given loan. They allow non-accredited investors to participate. 

Accredited investors can also try PeerStreet, which works similarly. 

I particularly love that these offer one of the few ways to invest in real estate short-term. Assuming the borrower repays on schedule, you get your investment back with interest in just 3 to 18 months. 

5. Private REITs

As another type of real estate crowdfunding investment, you can invest in private funds that own properties or debts secured by real estate. 

Unlike their publicly-traded counterparts, you buy shares in private real estate investment trusts (REITs) directly from the company that owns the assets. That makes share prices far less volatile, but it also makes shares harder to sell. Most crowdfunded REITs impose penalties if you sell shares back to them within the first five years.     

Some private REITs allow non-accredited investors to buy shares. For example, Fundrise lets you invest with as little as $10. 

Before investing, make sure you understand how crowdfunding works, and do your homework on the best crowdfunding companies.

6. Publicly-traded REITs

Want more liquidity, to sell shares at a moment’s notice?

You can buy shares through your regular brokerage account, or through your IRA. Even better, you can sell your shares at any time to other investors on the open market. 

But that liquidity comes at a cost. Public REIT share prices are far more volatile than private REITs, which adds to the risk. 

As for how much you need to invest, you can buy a single share at its going price, often as little as $10 to $20. Some brokerage platforms allow you to buy fractional shares as well, letting you invest in any company for whatever you have available in your account. 

To get started, research the best REITs for beginner investors

7. Real estate stocks

If you like investing in real estate through your brokerage account, you can also look beyond REITs to industries related to real estate. For example, you can buy shares in homebuilder stocks, or in funds that own many different homebuilder companies. 

Likewise, you can buy shares in home improvement retailers such as Home Depot or Lowes. Or you can buy shares in real estate tech platforms like Zillow. For that matter, hotel chains own massive amounts of real estate, tying them to the industry as well. 

Get creative as you research real estate stocks and companies with strong ties to the real estate sector. 

Final thoughts

You don’t need thousands of dollars to invest in real estate. Depending on how you invest, you can get started with as little as $10. 

If you like real estate crowdfunding investments, start with Fundrise and Groundfloor as easy and affordable options. If you prefer publicly traded stocks, check out beginner REITs and funds that own homebuilder stocks. 

And if you want to buy properties directly, consider house hacking to buy your first real estate investment. 

Whatever you do, don’t fall prey to analysis paralysis. Just get started, and keep learning a bit more about real estate investing every day. 

G. Brian Davis is a real estate investor and founder at SparkRental.com, which helps middle-class people replace their day job with rental income. The company offers a wealth of free courses and tools, along with online landlord software that’s (mostly) free for landlords. He spends 10 months out of the year traveling overseas with his family and has an insatiable appetite for reading, hiking, and perfectly paired wine and food.

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