How to Start Investing in Real Estate With Little Money

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7 Mar How to Start Investing in Real Estate With Little Money

Are you interested in learning how to start investing in real estate but don't have much money to start? You're not alone! Considering the many benefits of real estate investing⁠—including building equity, generating income, and creating a hedge against inflation⁠—it's no wonder so many people are interested in becoming full-time real estate investors

Yet, prices for properties can be high, and traditional methods of financing an investment property (like getting a mortgage) may not be an option if you don't have a lot of money saved up. So, are you ready to learn how to start investing in real estate with little money? Keep reading to find out how!

Rent Out Part of Your Primary Residence

One option for starting real estate investing on a budget is to purchase a property as your primary residence and then rent out part of it. By living in the property and renting out part of it, you can cover some or even all of your monthly mortgage expenses by earning rental income from tenants. Not only will this help you build equity in the property, but it can also provide a steady stream of income that can be used to cover other investments or expenses.

However, before you decide to go this route, keep a few things in mind. First, being a landlord comes with responsibilities, like maintaining the property and dealing with repairs and maintenance issues as they come up. 

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You'll also need to screen tenants carefully and establish a solid lease agreement to protect yourself and your investment. Be careful when drafting your lease, as many clauses can be easily overlooked

Purchase a Duplex and Rent Out Half

Another option to become a real estate investor with little money is to purchase a duplex (or other multifamily property) and live in one unit while renting out the other. It’s an excellent way to get started in rental real estate because you'll be able to offset your monthly mortgage costs by earning rental income from the other unit.

Like renting out part of your home, you'll need to be prepared to deal with the challenges of being a landlord.

Obtain a Loan From a Business Partner Willing to Cover Closing Costs

If you don't have the cash on hand to cover a downpayment and closing costs, there are still options available to help you buy rental properties. 

Several low (and even no) down payment loan programs are available from lenders. Before applying for one of these loans, make sure you understand the terms and conditions for the investment property loan. These loans often come with higher interest rates and fees, so it's essential to compare offers from multiple lenders to find the best option for you.

Create a HELOC to Finance an Investment Property

If you own your home and have equity built up in it, you may be able to use a Home Equity Line of Credit (HELOC) to finance a second investment property. A HELOC allows you to borrow against the equity in your home and can provide a good financial start without having to come up with all the cash yourself.

Before taking out a HELOC, read the terms and conditions carefully. Make sure you understand how the loan works and how much it will ultimately cost you.

Find a Hard Money Lender for Your REI Team

If you have trouble qualifying for a loan from a bank or credit union, you may consider working with a hard money lender. Hard money lenders are private individuals or companies that lend money based on the value of the investment property, not your creditworthiness.

The downside of hard money loans is that they often come with higher interest rates and fees than traditional loans. As a rule of thumb, contemplate a hard money lender carefully and make sure you vet them properly. The best way to start real estate investing is to build a strong support team! 

Consider Purchasing REITs

Real Estate Investment Trusts (REITs) are companies that own or finance income-producing real estate. You can buy shares of a REIT through an investment broker.

One advantage of investing in a REIT is that it provides diversification since the company owns many different properties. This can help mitigate some of the risks associated with investing in just one property. On top of that, real estate investors don't have to worry about property management since the REIT handles that. Finally, REITs often have favorable tax treatment.

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The downside of investing in a REIT is that you're not the actual owner of the property, and you are subject to the ups and downs of the stock market since REITs are traded on major exchanges. However, it can be a good way to start investing without much start-up capital. 

Use Privy to Find the Best Properties Within Budget

After choosing how you will finance real estate investments, it is time to start looking for the right property. The best way to start investing in real estate is to use Privy! With Privy, you can search the MLS like a pro to find the best deals in your preferred markets. 

Privy also allows you to create custom searches and receive real-time alerts when new properties that fit your criteria become available, so you never miss a deal. Get started with Privy today and find your next property!

Learn more about building a successful support team with our free resource, the "Assemble Your Real Estate Investing Team: A Worksheet."

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