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. Investing in real estate is one of the safest and smartest investments you can make. Real estate appreciates, builds equity, provides cash flow, a steady return on investment, and tax benefits. What’s more is that real estate has created more millionaires than any other investment, 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 preference and financial standing. 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.
Start by Evaluating and Educating Yourself
Sure, investing in real estate properties is an appealing concept but the truth is, it’s not for everyone. So, the first step to get into real estate is by assessing 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 answered “yes” to these questions, start educating yourself about the business. Because you don’t have the experience, it’s absolutely important to learn all the basics to understand what type of real estate investor you want to be. There are plenty of books, podcasts, and free guides online that’ll teach you how to get into real estate. You can also speak with other real estate investors that you know to learn more about the different types of real estate investment 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 one that fits your budget, time, and requirements. Moreover, you also need to do your due diligence and understand how to analyze the housing market you’re investing in and its profitability. This allows you to make better decisions and pursue the right investment opportunities in the market.
To learn all the different aspects of how to get into real estate and market analysis, check out our real estate investment blog where you can find multiple free guides that answer any question you may have!
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 with no money of their own. For beginners with no money or 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:
These 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. However, these lenders come with their own set of criteria and charge an interest rate between 10% and 18%. So, these loans are best for short-term real estate remodeling projects.
2. Private Money Lenders:
These can be self-directed IRAs & 401ks to wealthy individuals looking to invest their money in real estate. 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 have interest rates between 6% and 12%.
3. Seller Financing:
For some transactions, the homeowner/seller is willing to pay the closing costs in order to finalize the deal. So with this financing method, you’re basically buying an investment property from the seller rather than a bank. The two sides will then sign an agreement that states an interest rate and a repayment schedule allowing you to pay the purchase price over time with installments.
4. Real Estate Partnership:
A very common path for how to get into real estate investment is through partnerships. Find a real estate investor who makes up for what you lack. 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. Before creating any type of partnership, however, discuss aspects such as goals, risk, roles, and returns to be on the same page.
And there are even more methods! Check out these 10 Different Ways to Purchase a Property with No Money Down.
Explore the 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 better understand what type of real estate investor you want to be. To do so, you need to learn the different investment strategies, their requirements, and identify which one works best for you. These include:
1. Buy-and-Hold Strategy:
This is the most common way to invest in real estate for long-term capital growth. It involves buying an investment property for low and holding it for a long time period (over 10 years). Thanks to the fact that real estate appreciates in value, this property will have increased in value over the holding period, which allows you to sell it for profits. As you can see, the buy-and-hold strategy is a great way for how to get into real estate with little money and end up with a fortune. But, for the best returns, it should be implemented with this next strategy.
2. Rental Properties:
The best way to get into the real estate business is buying and renting out properties. This is also called the traditional rental strategy which involves renting out to long-term tenants. Once you have the money, you can buy a multifamily home and have multiple streams of rental income. This way, you’ll become a landlord and you’ll be responsible for screening tenants, maintaining and managing the property, and doing repairs when needed. Regardless of the work that you’ll have 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 cheap rental properties for sale? Use our Property Finder to find lucrative properties that match your criteria in a matter of minutes!
3. Vacation Rentals:
This investment strategy involves renting out to tenants 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. This strategy is one of the most common answers to how to get into real estate with no money because you can even rent out your primary residence on Airbnb! Plus, vacation rentals sometimes yield a higher rental income 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 rentals 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 an Airbnb rental.
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 risks and potential for losing money, which is why we don’t recommend starting your real estate career this way.
How to Get into Real Estate Without Buying Property
Want to get involved in the investing business but you’re not interested in buying real estate? Consider these investment strategies:
1. Invest in REITs:
A REIT, or 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 it’s how they make their income. There are even REITs that focus on both residential and commercial property. 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 profits from real estate without actually owning investment properties. Most importantly, this also gives you exposure to real estate without having to be a landlord.
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, but it also allows you to diversify your portfolio both in terms of having a mutual fund and having real estate. Like with other mutual funds, real estate investors can choose ones that are either growth-oriented or income-oriented. However, 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 to find 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. This is similar to REITs in that they pool money from investors and use to it buy real estate. Ultimately, you get the benefit of both dividends and long-term real estate appreciation of the investment properties you “own.”
4. House Hacking:
House hacking is one of the best ways to get into real estate investment. 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! You can use the rent to cover your expenses, and thus live in your house for free! This 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 this the best way to invest in real estate with no money and no experience.
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 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 have 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 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. This is a popular option for those looking to start investing in real estate despite their backgrounds, resources, or level of experience. You don’t have 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 make sure that it’s legitimate and a good fit.
Looking for the best ways to get started in real estate with just $5,000? Check out our video:
The Bottom Line
As you can see, there are numerous answers to how to get into real estate with little money and no experience. If you read this article, this means you’re already on the path to start real estate investing by educating yourself. Now it’s time to grab that knowledge and take action! If you’re searching for an investment property, we can help you analyze and compare properties using innovative tools to find the most profitable one in a matter of minutes. Start out your 14-day free trial with Mashvisor now to try our tools.