Wondering how to get into real estate investing with little or no money? Then you’ve come to the right place to learn how to invest in properties.
Table of Contents
- Is It Hard to Get Into Real Estate Investing in 2022?
- How to Get Into Real Estate Investing in 3 Steps
- Can You Get Into Real Estate Investing Without Buying Property?
Are you considering a career in real estate investing but don’t have the money or the experience? If so, don’t let that hold you back from getting started. Many self-made real estate tycoons started with as little as a few thousand dollars and no previous knowledge of the business.
Investing in real estate is one of the safest and smartest investments you can make. Real estate appreciates, builds equity, provides cash flow, offers a steady return on investment, and comes with major tax benefits. What’s more is that real estate has created more millionaires than any other investment strategy, which is why many choose to put their money into it.
While it seems intimidating, it’s entirely possible to get into the real estate business with little money and no experience. That’s because there are countless real estate investment strategies to choose from depending on your personal preferences, financial standing, and investing goals.
There are just some key fundamentals that beginner investors need to know first. So, let’s take a look at how to get into real estate investing with little money and the best strategies to launch your real estate investment career from scratch. Meanwhile, we’ll discuss how the tools available on the Mashvisor real estate investment platform can help you each step of the way.
Is It Hard to Get Into Real Estate Investing in 2022?
No, getting into real estate in 2022 is easy. The reason is that aspiring investors have numerous strategies, markets, property types, initial investment amounts, and financing options to choose from. Moreover, the recent technological advancements in the real estate industry have made entry more accessible and easier than ever before.
For example, real estate crowdfunding and partial ownership through tokenization offer affordable and hands-off opportunities for beginners with little money and no experience. Alternatively, renting out a spare room on Airbnb and rental arbitrage allow you to start making money from real estate without even buying an income property.
However, if you’re thinking about how to get into real estate investing in 2022, keep in mind that rental properties remain the best strategy, both for beginner and experienced investors. They come with many major benefits that other strategies simply don’t offer. The most important ones are the steady rental income and the long term appreciation.
Is It Worth It to Get Into Real Estate Investing?
Yes, it’s absolutely worth it to get into real estate investing, especially if you go for long term or short term rentals. As mentioned above, they provide many advantages, while the drawbacks and risks are negligible.
But to evaluate exactly how beneficial it is to get started with rental property investing, let’s look at nationwide long term and short term rental data provided by Mashvisor.
Mashvisor is a real estate data analytics company that gives investors the data and analytics they need to make profitable investment decisions.
In real estate markets with 100 or more traditional rental listings, this rental strategy yields an average cash on cash return of 2.34%, with the median at 2.33%. At the same time, the average Airbnb return on investment in cities with at least 100 vacation rental listings reaches 3.47%, and the median value is 3.38%.
They are excellent rates of return compared to the rates offered by other investment strategies, making real estate a totally worthwhile investment.
To help you get started, here are the 100 Best Short Term Rental Markets in 2022.
How to Get Into Real Estate Investing in 3 Steps
Now that you know how profitable real estate investments can be, it’s time to take a look at what’s needed in order to get started. We’ve put together a three-step guide to help you get onto your real estate investing journey even if you don’t have much money and experience.
So if you want to learn the answer to the question, “How do I start investing in real estate now?”, keep reading.
Step 1: Start by Evaluating and Educating Yourself
Sure, investing in real estate properties is appealing, but the truth is – it’s not for everyone. So, the first step to get into real estate is to assess whether this is a reasonable investment for you. Instead of wondering, “How much money do I need to get into real estate?”, ask yourself:
- Do I have the necessary skills to be a real estate investor?
- Am I in a favorable housing market for real estate investing?
- Can I take on the commitment that comes with a real estate investment?
If you answer “Yes” to these questions, start educating yourself about the business. Because you don’t have the experience, it’s absolutely crucial to learn all the basics to understand what type of real estate investor you want to be.
There are plenty of free e-books, podcasts, blogs, YouTube videos, and online guides that’ll teach you how to get into real estate. You can also speak with local real estate investors to learn more about the different types of real estate investments, including:
- Vacant land
- Single family homes
- Small multifamily properties
- Large multifamily properties
- Commercial real estate
Once you learn about the different options available to real estate investors, think about the strategy that fits your budget, time, background, expectations, and requirements.
Moreover, you also need to do your due diligence and understand how to perform real estate market analysis. It allows you to make better decisions and pursue the right investment opportunities in the optimal housing market.
To learn how to get into real estate and how to analyze long term and short term rental markets, check out our real estate investment blog. There you’ll find the answers to all questions you have about getting started in real estate investing.
Step 2: Find Cash for Financing Your Investment
Many beginner property investors may question how hard it is to get into real estate with little money. It’s actually not that hard. You just need to understand how to take advantage of other people’s money!
Successful investors have mastered the art of how to get into real estate investing with no money of their own. For beginners with no money or not a good enough credit score to buy an investment property through traditional financing, some of the most attractive financing methods include:
1. Hard Money Lenders
Hard money lenders are professional individuals or companies that lend money specifically for real estate investing. The best thing about hard money lenders is fast money – meaning once you’re approved for a loan, it’s only a matter of days before you get the money. Another major advantage is that the requirements are much more relaxed than with conventional mortgages.
However, such types of lenders come with their own set of criteria and charge an interest rate between 10% and 18%. Additionally, repayment periods are much shorter, usually within 24 months. So, hard money loans are best for short term real estate projects like remodeling and flipping houses.
2. Private Money Lenders
Private money lenders can be self-directed IRAs and 401ks to wealthy individuals looking to invest their money in real estate. It can also be other savings that you borrow from friends, acquaintances, or other individuals.
The flexibility and the long term relationship you get from these lenders make them very valuable. Private money loans also bring speed and efficiency in how to get into real estate for beginners and typically charge interest rates between 6% and 12%. Once again, loan terms are rather short, usually between 6 and 24 months.
3. Seller Financing
For some transactions, the homeowner – or property seller – is willing to pay the closing costs in order to finalize the deal. So, with seller financing, you’re basically buying an investment property from the seller rather than a bank.
Under the seller financing method, the two parties sign an agreement that states an interest rate and a repayment schedule, allowing you to pay the purchase price over time with installments. An important benefit is the flexibility of the terms. It all depends on the agreement between the seller and the buyer.
4. Real Estate Partnership
A very common path for how to get into real estate investment is through partnerships. The best thing about real estate partnerships is that they can take different forms and legal arrangements.
The key is to find a real estate investor who makes up for what you lack. For instance, many real estate partnerships require one partner to find the best investment property for sale while the other uses their credit score and money to finance it. This way, you can start investing in real estate properties with little or no money.
Before creating any type of partnership, however, discuss and agree on aspects such as goals, risk, roles, and returns to be on the same page. Otherwise, you risk the disintegration of your partnership and the loss of your profitable investment properties.
5. Real Estate Syndication
Yet another way to start making money from real estate without having enough capital to purchase your own property is through syndication. It is a rather fancy name for a type of partnership where the syndicator does the legwork, and the investors provide the financing.
If you succeed in gaining significant knowledge about investing in rental properties and the local real estate market, you can become a real estate syndicator. While this is far from a passive income strategy, it is a great way to get into real estate with no money.
Step 3: Explore Different Investment Strategies
So we’ve covered how to acquire the knowledge and money to get into the real estate business. Now, it’s time to understand better what type of real estate investor you want to be. To do so, you need to learn the different investment strategies, study their requirements, and identify which one works best for you.
The most popular real estate investment strategies include:
1. Buy and Hold Strategy
The buy and hold strategy is the most common way to invest in real estate for long term capital growth. It involves buying an investment property at a low price and holding it for a long period (over 10 years). Thanks to the fact that real estate appreciates in value, the property will have increased in value over the holding period, allowing you to sell it for profit.
As you can see, the buy and hold strategy is an excellent way of how to get into real estate investing with little money and end up with a fortune.
Namely, you can purchase a property with a down payment as low as 20% if using a conventional mortgage or even lower if you use one of the financing methods listed above. Then, you pay the rest of the price over the loan term.
But for the best returns, this real estate strategy should be implemented in combination with the next method.
2. Rental Properties
The best way to get into the real estate business is by buying and renting out properties. It is also called the traditional rental strategy, which involves becoming a landlord and renting out to long term tenants.
Once you have the money, you can buy a small multifamily home and have multiple streams of rental income. In this way, you’ll become a landlord and be responsible for screening tenants, maintaining and managing the property, and doing repairs when needed.
Regardless of the work that you’ll need to put in as a real estate investor, investing in traditional real estate rental properties is a popular way to grow your wealth.
Looking for affordable yet profitable rental properties for sale? Use the Mashvisor Property Finder to find lucrative properties that match your criteria in a matter of minutes!
3. Vacation Rentals
The vacation rental investment strategy involves renting out to guests for short term periods. Basically, you can buy an investment property and rent it out on Airbnb as a vacation rental to tourists and travelers.
The strategy is one of the most common answers to how to get into real estate with no money. It is because you can even rent out your primary residence on Airbnb. Plus, vacation rentals, as demonstrated by Mashvisor data, usually yield a higher rental income and return on investment than traditional rentals.
However, we should note that the success of this rental strategy depends on the location of your rental property. First of all, short term rental properties are a good choice in desirable vacation destinations because they’ll have a higher Airbnb occupancy rate. Second, some cities have strict regulations regarding vacation rentals, and others even ban Airbnb.
So, make sure to carefully check these regulations before buying a vacation rental property.
To learn how to choose the top locations for this rental strategy, check out The 4 Steps of Airbnb Market Research.
4. Rental Arbitrage
A real estate investing strategy suitable for beginners with little money that’s been gaining a lot of popularity in recent years is rental arbitrage. It refers to renting a property with the intention of subletting it to another person. You can rent out the home either on a long term or a short term basis, depending on the market, local demand, and your preferences.
Generally speaking, Airbnb arbitrage – meaning that you rent out the property short term – is the more profitable approach. To succeed with this strategy, you must find a location where traditional rental income is significantly lower than Airbnb income. You can use the Mashvisor investment property calculator to find such properties across the US market.
Note: You may have heard about the fix and flip investment strategy in real estate. If you’re wondering why we didn’t include it, it’s because this is not a strategy for beginners with little money or no experience. It requires a large capital and comes with high risk and potential for losing money, which is why we don’t recommend starting your real estate career this way.
Can You Get Into Real Estate Investing Without Buying Property?
Yes, you can start investing in real estate without buying and owning a property. Here are the top investment strategies to do this:
1. Invest in REITs
A REIT, or a real estate investment trust, is a company that either owns or finances income-producing real estate properties. REITs invest the majority of their money into real estate, and that’s how they make their income. There are even REITs that focus on both residential and commercial properties.
As an investor, you receive part of the profits the REIT makes in the form of dividends. Therefore, you’ll have the ability to make money from real estate without actually owning investment properties. Furthermore, this income is as passive as it gets. Most importantly, it also gives you exposure to real estate without having to be a landlord.
However, before deciding in favor of this strategy, keep in mind that most REITs are reserved for accredited investors. It means that you usually need to hold a significant amount of money to be able to invest in a REIT.
2. Invest in Real Estate Mutual Funds
While REITs are actual companies, mutual funds are simply investments pooled together and overseen by an investment manager. Investing in a mutual fund is not only a way of how to get into real estate investing, but also a way to diversify your portfolio both in terms of participating in a mutual fund and owning real estate.
Like with other mutual funds, real estate investors can choose those that are either growth-oriented or income-oriented. Nevertheless, even though they are designed with the intention of mitigating risk, mutual funds are still vulnerable to the risks inherent in real estate. So, be sure to do your homework before finding the best one to invest your money in.
3. Invest in Real Estate Online
New online platforms have made investing with little money and without buying real estate much easier. Popular real estate investment websites like Fundrise let you invest in commercial or residential properties and receive cash flow distributions in return.
They are similar to REITs in that they pool money from investors and use it to buy real estate. Ultimately, you get the benefit of both dividends and long term real estate appreciation of the investment properties you “own.”
4. Try House Hacking
House hacking is one of the best ways to get into real estate investment with very little money down. This strategy works if you buy a multi-unit property (like a duplex, for example). Simply live in one unit, rent out the other, and start generating passive rental income without buying a separate investment property.
You can use the rent to cover your expenses, and thus live in your house for free. It also gives you a hands-on experience on what it’s like to be a landlord without buying real estate rental property. Many experts consider it the best way to invest in real estate with no money and no experience.
The trick is that with house hacking, you qualify for low down payments on conventional mortgages (as you actually buy a home). You may also qualify for alternative financing methods like FHA loans and VA loans. It means you can get into house hacking with less money than when buying just a rental property.
To learn exactly how to get into real estate this way, check out The Ultimate Guide to House Hacking.
5. Wholesale Real Estate
Another answer to how to get into real estate investing with no money is wholesaling. With this strategy, you find a distressed seller, assign their property to a contract, and quickly sell it to a prospective buyer for a profit – which you get to keep.
Wholesaling real estate means you won’t own the property or need to repair it before selling it. There’s also much less risk as you’re not putting any money into the deal. The difficult part, however, is actually finding a seller willing to sell their house below market value so you can manage to sell it for a profit.
6. Real Estate Crowdfunding
When you participate in crowdfunding, you’re a part of a group of other real estate investors who pool their money and then invest or lend it to experienced property owners. Real estate crowdfunding is a popular option for those looking to start investing in real estate despite their background, resources, or level of experience.
You don’t need to search for an investment property for sale, get a loan, or manage the property. So, your workload and responsibilities are minimized, but the potential for profit still exists. Just be sure to research the crowdfunding channel to ensure that it’s legitimate and offers a good fit.
7. Airbnb Arbitrage
We’re coming back to a strategy that we discussed briefly above. It is because Airbnb rental arbitrage is one of the best and easiest ways to get into real estate with little money and no experience.
How do I invest in real estate with $1,000?
Simply, try Airbnb arbitrage.
All you need to do is find a property that is available for rent for a relatively affordable monthly rate and that can generate a high Airbnb daily rate when rented out per night. You get to keep the difference between the Airbnb income you collect and the monthly rent you pay to the original owner.
But before you go into Airbnb arbitrage, make sure that your rental agreement does not prohibit subletting. Even if the contract doesn’t mention anything in this regard, it’s best to talk to the landlord to avoid problems.
To learn everything you need to know about Airbnb rental arbitrage in no time, check out our video below:
The Bottom Line
As you can see, there are numerous answers to how to get into real estate investing with little money and no experience. The strategy that’s right for you depends on your background, strengths and weaknesses, personal preferences, and investment goals.
If you’ve read this article, it means you’re already on the path to starting real estate investing by educating yourself. The next step is to continue expanding your knowledge while also looking for financing options and profitable investment properties.
Mashvisor’s real estate investment tools can help you locate the top-performing neighborhoods and income properties for sale in the US market. Our tools work for both long term and short term rental strategies. You can start your property search now by entering your criteria, such as city, budget, expected rental income, cash on cash return, and cap rate.
The Mashvisor investment property search engine will provide you with a list of MLS listings, as well as off market properties, that match your exact expectations. Our rental property calculator will supply each listing with detailed analysis of its investment potential.