Real Estate Investing 101: How to Invest 50k in Real Estate When That’s All You Have
This situation is a bit tricky because, with that amount of cash, you want to make sure to invest money wisely. Therefore, you want to look for the types of investment which will ensure a good return on investment. The good news is that real estate does, in fact, offer a myriad of ways to invest money for good returns.
So, here’s how to invest 50k in real estate for the highest profits:
Fix and Flip Real Estate
Flipping properties is one answer to how to invest 50k in real estate. Since flipping real estate means that you buy a distressed property in an as-is condition, you can benefit from the fact that they are cheap real estate opportunities. In this way, not only will the 50k cover the down payment for investment property (which should be around 20% of the property’s price), but it will also cover the closing costs and maybe some of the repair cost if not all of it. Here’s an example of how you can invest 50k wisely with this strategy:
You buy a foreclosed investment property. The actual market value for that property is $200,000. But, you get it for $150,000 since it is in a distressed condition. So, instead of paying $40,000 in down payment, you pay $30,000 because it’s below market value (some money lenders might require less than that though, depending on the lender’s down payment policies). Now, you are left with $20,000. When calculating the repair costs, you find out that you will be paying between $15,000 to $20,000 in repairs. What does that mean?
It simply means that you have benefited on so many different levels. First, you buy real estate property for cheap. Second, you were able to save on the down payment and put the saved amount towards renovations. And finally, although you only paid $150,000 for the entire investment property, you still own a property that is worth $200,000 or maybe more once it’s renovated (forced appreciation).
Beware: fix-and-flip is one of the short-term investments that is financially promising. However, the risks are higher than other types of real estate investment strategies. So, make sure you do due diligence before stepping into it.
Listen, no matter who you ask or where you go, you’ll always hear that rental properties are the BEST way to invest 50k for income. If you are investing on your own, 50k is plenty of money to invest, not just in one rental property but maybe even two! You can use the $50k as a down payment for two investment properties that are within the 100-120k price range. It could be a studio apartment, a duplex, a multi-family property, a single-family home or two regular apartments in a building. The best part of real estate investing is that it provides a variety of property types for you to invest in. So, you won’t feel limited to any sort in particular.
Want to start looking for a rental property right now?
Here’s a way to invest 50k in a rental property without being involved:
Turnkey Rental Properties
A turnkey investment property is one of the ways to invest money for beginner real estate investors who have no background in real estate. This investment strategy allows you to make money with the least amount of work. Contact a turnkey company which has a few rental properties under its portfolio that are already occupied by tenants and are generating a rental income. In this case, all you need to do is to pay the down payment, get the rest from a lender, and acquire ownership of the investment property. The turnkey company would have already analyzed the investment property and they will continue to manage it after you purchase it. So, really, this is the safest real estate investment strategy for a beginner investor who is looking for the minimum amount of risk.
Real Estate Partnerships
Having a business partner can make any real estate investment strategy available to you. As long as you can provide a certain amount of money (which in this case, 50k is plenty), you can even turn to large-scale real estate investments. For example, having a partner or two will enable you to start with multi-family real estate right away. In this way, you can grow your real estate portfolio faster and, of course, start making more money right off the bat.
So, what are REITs and how to invest 50k in real estate through them? Well, you need to pay attention to this one.
REITs are a type of company which invests in real estate. But, the difference between REITs and the forms of investments in the next section (syndication and crowdfunding) is that you invest in the REITs’ stocks and not the actual property. Therefore, the cash investment could be as little as the cost of each stock you buy from the company.
There are so many forms of REITs all over the United States which means you have so many options to choose from. There are private REITs, public exchange-traded REITs, and public non-traded REITs. Each form is different in terms of liquidity, the minimum amount you must invest, the regulations they meet, and a few other factors. However, no matter what you do, make sure you perform proper research on a few options before choosing one. Some forms are riskier while others are considered low-risk investments. As a beginner, you want to go with the latter option.
Real Estate Syndications and Crowdfunds
So, you are wondering how to invest 50k in real estate syndications and crowdfunding. Easy! As a matter of fact, it might not even consume the entire 50k you have. But first, what’s the difference between the two forms of real estate investing?
A real estate syndication and a real estate crowdfund are technically the same things if we are looking at the definition. Both are creative ways of pooling financial resources to fund huge real estate projects. However, a real estate crowdfunding is done mostly online. In other words, with a crowdfund, you can find a website online and invest through the website. So, really, the only difference is the way they pool the funds.
Now, why are syndications and crowdfunds a great idea to invest 50k in real estate? The answer is that both require little capital (no external funding) and are forms of passive income investing. As for the capital, if you have $50,000 in hand, that is more than enough to invest in these strategies. You can actually invest in multiple projects with the money you have. As for passive investing, there is no better way for how to invest 50k in real estate and not be involved than these two. So, pretty much, you will have nothing to do with the project except for providing the funds and collecting your share of the profits.
If you want to learn even more about the above-mentioned investment strategies, Mashvisor’s real estate investment blog has everything you need in terms of real estate education.