February 3, 2020
Maybe you’ve seen the late-night infomercials or have heard the radio ads that promise to teach you how to invest in real estate with no money down. If you’ve been skeptical of such promises, you probably have a right to be.
Since the foreclosure crisis of 2008, no-money-down real estate acquisitions have been reduced to a couple of select government programs. It used to be that you could get a real estate loan if you had a pulse and a job, but those days are gone.
But there ARE ways to start investing in real estate – both income and equity opportunities – that don’t require a ton of money. Here are four ways to start investing in real estate with little money out of your pocket.
Even though there are no longer no-money-down loans for most people, there still are low-money-down loans. You could use one to buy a primary residence that’s a duplex and live in one half and rent the other half out. More than one real estate investor has started out this way.
If you already own a home, you could possibly rent a room out or convert a basement or attic into a separate living space to generate rental income. If you have ample land or a garage, you could rent out space for storage or parking.
You could also possibly draw on your home’s equity in the form of a line of credit, which you could use to invest in other income properties.
You don’t always need to own property in order to earn income from it. If you were to lease property from someone, and there’s nothing that prohibits it, you could sublease the property to others. You might be able to use some of the methods mentioned above, but you could also use online hospitality sites to sublease on short-term rates, which are typically higher than long-term rates.
If you rented a place for $1,000 per month, then advertised it for, say $75 per night on one of the short-term rental websites out there, you’d only have to have the place occupied for about 13 nights per month to break even. Any nights after that would be pure profit.
Crowdfunding is not new. It’s a concept that involves micro-financing of projects: collecting small investments from many people. You can do it with real estate projects.
It used to be that real estate-related crowdfunding sites required you to be an “accredited investor,” that is, someone who has a million-dollar net worth or $200,000 a year in verifiable income. Recent regulatory changes, however, have made available to the general public some investment opportunities in real estate that don’t require accreditation.
Also, there are real estate investment trusts (REITs) that you can purchase shares of just like any other stock or mutual fund. Individuals have the option of a publicly-traded REIT or a public, non-traded REIT. It’s not difficult to get in on the real estate investment train with a few hundred bucks if you go the REIT route. You can learn more about different REITs here, including DiversyFund’s Growth REIT–where investors can own a portfolio of real estate for only $500.
You’ve probably heard the term “silent partner.” It refers to someone who might provide capital for a venture but who doesn’t take part in actually managing the endeavor. When it comes to real estate, it can sometimes pay to be the “loud” partner.
That is, you could offer your services in the acquisition process, management or maintenance of a property in exchange for an equity stake and/or income the property generates. For example, if you’re a contractor, you might be able to provide the labor on a real estate “flip,” whereby a partner would put up the money to acquire it. You’d do the rehab work and split the profits with your partner.
This is not so uncommon a scenario. There are investors who want to flip properties but who have no desire to do the work on the properties themselves. Also, simply identifying good deals for this type of investor has value; you could earn income or equity by being what’s known as a “bird dog,” the deal-finder for other investors.
Again, there are those out there who will promise that real estate riches are there for the taking with no money down. That’s usually not the exact truth, but what IS true is that there are several ways to start investing in real estate without having a ton of cash at the outset.