General Finance

How Can I Invest in Real Estate Without a Ton of Money?

Real estate can be a very lucrative business with a variety of opportunities for great cash flow. The trouble is that the cost of real estate can be high with large amounts of cash needed for down payments.

Owning houses, apartments, and investment properties can be expensive! You need a lot of money on hand for both down payments and for upgrades. Not to mention if you plan on being a landlord, which means you will have to deal with getting rent, maintenance, and possible vacancies. All these things can add up to needing thousands of dollars on hand to ensure that you can properly buy the property.

What Should You Do?

You should invest in a real estate investment trust (REIT), which allows people to invest in real-estate without doing the actual maintenance or management. A REIT is basically a company that finances, owns, and operates all types of income-producing real estate. They have been around since 1960. “Established by Congress in 1960 as an amendment to the Cigar Excise Tax Extension of 1960, REITs operate in a manner comparable to mutual funds as they allow for individual investors to acquire ownership in commercial real estate portfolios that receive income from properties such as apartment complexes, hospitals, office buildings, timber land, warehouses, hotels and shopping malls.”1 REITs are a great option for those who would like to get started in real estate but don’t have a lot of money to throw in right away.

There are three types of real estate investment trusts you can invest in. There are equity REITs, which own the properties and allow its investors to invest in the REIT’s portfolio of properties.

There are also mortgage REITs, which own property mortgages that lend money to real estate owner and operators. Finally, there are hybrid REITs that combine the traits of both equity and mortgage REITs.

Where Can I Get These Real Estate Investment Trusts?

There are publicly traded REITs that allow you to buy shares on the stock exchange. You can get these from companies like Fidelity and Baron Capital group. You can also invest in mutual funds that are managed and diversified in a variety of REITs. Like mutual funds, you can invest in REIT ETFs that follow specific markets or are diversified. You can find all types of funds that can be diversified or specifically invested in things that range from shopping malls to funds that are in specific regions or countries. The great part about the ETFs is they have a usually low expense ratio.

There are also private REITs that you can invest in. These generally have lower expense ratios, too, since they are not paying commissions to investment advisors and prices can be bid up to artificial prices. Companies like Fundrise offer great returns for their individual investors. With a minimum investment of $500, Fundrise is on the slightly more expensive side. However, they do help you diversify your investments or allow you to go all in on one investment. This is a great investment for someone who wants to get involved in real estate.

Bottom Line!

Real estate investment can be hard and costly but owning property can make you great cash flow and is a good idea if you have the cash on hand to do it. If not, looking into investing in a real estate investment trust would be a good idea.

REITs are cost effective and allow you to buy shares, such as in a mutual fund, and be a part owner of a real estate group or multiple types of real estate.

There are different types of REITs that allow you to invest in a variety of real estate options. There are a variety of both public and private REITs that you can invest in. I recommend looking into this if you want to get into real estate. Or at least do some further research and check out the book The Intelligent REIT Investor by Stephanie Krewson Kelly & R. Brad Thomas 

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