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Real Estate Development
December 31, 2021

Yes, You Can Invest in Real Estate with No Money

Real estate is usually a great investment – it can generate passive income, appreciates, and usually offers better returns than other investments. But don’t you need a big pile of cash to get started in real estate investing?

Not necessarily. You don’t even really need to take on the hassle of being a landlord if you don’t want to. There are plenty of ways to invest in real estate with very little cash. You can invest in real estate investment trusts (REITs), rent out a room in your house, live in a house while you flip it, or get a Federal Housing Administration (FHA) loan for a house that you’ll live in for a while and then rent out. Let’s take a closer look at some options.

Buy Shares in REITs

If you want to invest in real estate but aren’t keen on the idea of being someone’s landlord, REITs might be for you. REITs are kind of like mutual funds, but they invest in owning, financing, and managing real estate. They might invest in things like apartment buildings, medical offices, data centers, cell towers, shopping malls, and warehouses. While you can’t benefit directly from appreciation in the same way you would from actual real estate, REITs can generate a steady income. You can buy shares in REITs with very little money, and you can get higher dividends than you can with some other forms of real estate investment.

It’s usually a good idea to stick to buying publicly-traded REITs because they’re easier to sell if you need to liquidate some of your investment. If you don’t need the investment income right now, you can reinvest it and grow your wealth over time. If you do need the income, consider investing in a Delaware statutory trust to shelter your investment income from capital gains taxes.

Hack Your House

House hacking is a term applied to various strategies that allow you to gain passive rental income from a property you’re currently living in yourself. For example, you could rent out a room to a long-term lodger or for short-term rentals via platforms like Airbnb. You could buy a multi-family property, like a duplex, and live in one unit while renting out the other. If you have enough spare rooms or rental units, you could pay your entire mortgage from the rental income and save up your regular income for a down payment on your next property.

Live-in and Flip

Flipping a house involves buying a cheap house that needs some work, doing the work yourself, and then selling it at a profit. Of course, you need some handyman skills to be able to pull this one off – if you end up paying someone else to do most of the work, you won’t make any profit. If you live in a house while you’re renovating it, you can save on rent.

But you’ll need to be somewhat savvy when it comes to buying houses to flip – they need to have good bones and be in a market where you can make a profit from the sale. You’ll need to accurately estimate how much repairs are going to cost for a given house before you buy it. If you end up with something that needs many more repairs than originally thought, there go your profits. 

Live-in and Rent

Traditionally, landlords take conventional mortgages on homes they’re never going to live in themselves. But if you make a rental home your residence, at least for a few years when you first buy it, you could qualify for a special government loan program that could significantly lower your down payment. For example, you can get an FHA loan for just 3.5 percent down, as long as you live in the house as your primary residence. Save up enough to make another down payment, line up a tenant to cover the mortgage on your existing property, and then get another FHA loan to cover your next primary residence. You can keep the same first loan if you want, or you can refinance to get rid of private mortgage insurance (PMI).

You don’t need a lot of money to invest in real estate – it’s pretty easy to get your foot in the door by renting out a room, investing in REITs, or even living in a house while you fix it up. As long as you’re always saving and looking for your next property, you can continue to build wealth in real estate.

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