As you start investing money, you probably are mostly involved with stocks. Yet, another great diversification and wealth-building option is to invest in real estate.
But for many, investing in real estate can be quite intimidating.
And even more scary when you have little money to purchase property in-general.
Although there are ways to buy real estate with other people’s money, that’s not always an option that people like to go with.
However, there are other ways to invest in real estate with little money.
Did I grab your interest? Awesome! Dive into the content below to learn how to invest in real estate with $500 or less.
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Benefit of Investing Real Estate
If you know my writing on this website, you know I like to ensure that you understand all the goods first.
So before I show you how to invest in real estate with little money, I wanted to ensure you understood the benefit first.
So why is investing in real estate a good idea?
For one, real estate has created many millionaires and helped many extend their net worth by 5-10x or more. Of course, that is with smart investing, patience, and having a strategy in place.
Besides the potential to build wealth and passive income, real estate also provides the investor with various tax benefits, future financial security, diversification of investments, and long-term appreciation on real estate.
But it’s important to remember that there are always risks with investing your money.
So do not think you’ll get rich overnight without putting in the work and making some mistakes along the way.
Challenges with Traditional Real Estate Investing
Nothing worth doing is typically easy. If you want to succeed and build wealth you have to put in the work. Period.
But regardless, even though you are willing to put in the work, investing and buying physical properties might still provide some challenges.
The average home price in America is over $220,000. Not too bad, but it varies on state and city. Here is a huge list from Business Insider to get an idea.
If you are a first time buyer, you can get an FHA loan but that still requires a 3.5% minimum down payment. For a $220,000 home, that’s still $7,700. Not exactly pocket change for most people.
Then, you still may have to work to fix the house which will cost money.
You have to then try to flip for a profit or hold on to it a rent it out (even AirBnB). Which then requires you to be a property manager or you could hire one, which costs a fee as well.
Real estate is also not a liquid asset.
This means if you have an emergency or need cash, selling quickly is not always an option nor is getting your money back or making money (pending the how the housing market is doing).
This is not to scare you away from investing in actual property, but to know that there is a lot of time involved and potential money needed as well.
However, with regulations from the SEC changing and crowdfunding industry booming, you have more real estate investing options.
How to Invest in Real Estate With Little Money
A big reason you might be not investing in traditional real estate is because of the upfront costs.
As I mentioned in the intro, there are ways to invest in real estate with no money by leveraging other people’s money. But if you are not ready for that and have $500 or less to invest, you do have a few other options.
You don’t have to worry about signing a mortgage, fixing tenants problems, or have thousands and thousands of dollars upfront.
But you still get the benefits of appreciation and dividend income from real estate investments.
Remember, there are some fees involved with any of the below choices. But it’s part of the convenience factor for you.
Just ensure anything you invest in, that you understand any fees involved.
1. Invest in REITs
A real estate investment trust (REIT) is a company that will own and probably manage any income-producing real estate.
The real estate will typically be in the commercial space like apartments, office buildings, shopping centers, etc.
There are two variations of REITs as well: publicly traded and private.
Publicly traded REITs are those in the stock market, you’ll find fund options in your investment account. So this means you can opt to invest in a REIT in your brokerage account or retirement accounts.
For example, Vanguard has VNQ (ETF fund) or VGSLX (Index Fund). These tend to follow the trends of the stock market.
Private REITs aren’t traded on the stock market and generally are for accredited investors only. Meaning the minimum investments are quite high and you need a big net worth.
Although, stREITwise is a company looking to change that, their minimum investment in a private REIT is $1,000.
If you already to diversify your investments, then investing in real estate with Fundrise is a great option.
The minimum investment here is $500 and you’ll be invested in an assortment of awesome commercial properties in different locations.
There are three portfolio options you can choose from based on your investing style. These include supplemental income, balanced investing, and long-term growth.
Fundrise is one of the original real estate crowdfunding companies that has really performed well since they were founded. Their historical returns so far as varied from 8%-12%+.
Not a bad way to invest without having to physically manage anything. Start Investing in Real Estate with Fundrise.
Looking for another option to invest in real estate with little money? Well, DiversyFund is a potential platform for you.
This platform is similar to Fundrise in that it allows you to invest in commercial real estate with a minimum investment of $500.
But they offer one major difference — DiversyFund is a no-fee platform. The reason being is they actually own the properties they invested in.
This way, they do not have to go through a third-party for management of properties. Instead, they are paid through acquisition/developer fees and aren’t paid until investors are.
The only downside to DiversyFund currently is their real estate investments are limited and the company is relatively new, starting in 2017.
But so far, their historical returns have been over 17%! Start Investing in Real Estate with DiversyFund.
So the above two options require a $500 minimum to get started. While not an insane amount of cash, it still is a lot to consider investing as a beginner.
But if you want to invest in real estate with little money, another option is Groundfloor.
Groundfloor allows the investor (you) to get started with just $10. This is the lowest minimum investment of any real estate platform I have come across.
Now, you won’t become a wealthy investor on just that small amount.
But, this low minimum allows you to start with less, test and learn more about real estate, and you then you can consistently set aside some amount and grow overtime.
Groundfloor primarily offers single-family homes to invest in. Slightly different real estate options from Fundrise or DiversyFund, but nonetheless this one gives you a chance to invest in actual properties.
The company and their investments have returned averages of 7-14% for investors. These results will vary pending how and what properties you invest in.
Get $10 towards your first investment when you fund your Groundfloor account.
If you have been wondering how to invest in real estate with little money, then the above should get you on the right track.
And as you can see, there are many ways to get started without actually buying physical properties.
Eventually, you might want to move on to owning property and having rentals. But with the changing regulations and new technologies, anyone can invest and build a strong real estate portfolio without a major down payment.
The question is, are you ready to build wealth through the power of diversifying into real estate?