Most people have considered some sort of real estate investment, but many feel they don’t have the capital to make a decent profit. While low capital certainly limits options, there are still several ways for hopeful investors to get their foot in the investment door.
Aspiring investors looking to put in some hard labor should consider flipping real estate contracts and wholesaling houses. Those looking for more passive investments should consider publicly traded real estate stocks and real estate investment trusts (REITs).
- Flipping real estate contracts and wholesaling houses is feasible for the hungry hustler with less than $5,000
- Lease options are a good alternative for those that don’t have the credit to get a mortgage loan
- Real estate stocks are the default for busy professionals to invest in real estate passively
Wholesaling houses is commonly promoted as the way to get into real estate with no cash, no credit, and no experience. It’s possible. It can even be incredibly profitable. This can refer to both flipping real estate contracts and wholesaling houses with rapid closings using transactional funding. In reality, there are costs. They may be small, but they are there. There are educational costs, operational costs of just being out there doing business, earnest money deposits, and drumming up a buyers list.
Lease options can be an appealing choice for those who don’t have the credit to go get a mortgage loan from the bank. It offers the ability to control property with little upfront money and the choice to purchase it later at a predetermined price. The downside can be having to carry holding costs each month and putting up “option money” for the privilege of the choice to buy later.
If you don’t buy, that money is lost. It is also essential to conduct deep due diligence on the seller-landlord to ensure they have the ability to live up to their end of the bargain. On a low end property, one of these options is completely possible with $5,000 or less. However, if you don’t have a tenant to occupy the property, you must have access to additional cash to cover your rent, utilities, and maintenance each month.
Real Estate Stocks
Publicly traded real estate stocks and REITs can appear to be an easy default way for individuals to passively invest in real estate. Just tell your stock broker what you want to buy, let your investment sit, and see how you make out over the years. This can be very convenient, especially for busy professionals who just wants to focus on their current careers and hobbies. The downside is mainly the size of these entities, and multiple layers of costs and fees that ultimately net investors very lean yields.
Private REITs & Real Estate Partnerships
There are also hybrid solutions that blend the ease and passive income perks of a stock with the financial advantages of directly investing into income producing rentals, flipping houses, and debt investing. These include various private partnership structures, which are increasingly becoming augmented by technology. These vehicles enable both new and sophisticated investors to put their money to work, while leveraging the time, energy, and expertise of full-time industry pros.
View the original article at BiggerPockets