Are you wondering how to invest in real estate with $5,000? Then you’ve come to the right place.
You should not become one of the millions of people who stay away from real estate investing as they assume that you need a lot of cash to get started. Indeed, investing in real estate with a very limited budget is absolutely feasible.
In this article we will show you how to start investing in real estate with as little as $5,000 in 5 different ways.
To learn more about how to invest in real estate with $5,000, watch our latest video available below:
Buying Rental Property (The Best Way of How to Invest in Real Estate with $5,000!)
One of the real estate investment strategies which can be implemented with a budget of $5,000 is investing in rental properties. Buying an investment property to rent out on a long term or short term basis offers many benefits. Most importantly, you get to make money in both the short run (through rental income) and the long run (through real estate appreciation).
There are three different ways to invest in an income property with as little as $5,000.
First, you can conduct investment property search in one of the cheapest housing markets in 2020. As a real estate investor – rather than a home buyer – you will need to pay a minimal down payment of 20% of the home value. This means that you have to find a really affordable rental property to fit within this budget.
Alternatively, you can check if you quality for an FHA loan. An FHA loan is a mortgage insured by the Federal Housing Authority (FHA) designed for lower-income borrowers. Thus, it comes with numerous benefits. Most importantly, you can get a down payment as low as 3.5% of the property price.
A third option to buy a rental property with a little initial investment is to take a loan from private money lenders or hard money lenders. Private money loans and hard money loans come with more flexible terms and fewer formal restrictions than mortgage loans. You can negotiate the terms of the loan with the lender directly.
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Wholesaling Real Estate
Another way of how to invest in real estate properties with a limited budget is to wholesale real estate. This is one of the fastest ways to invest money in real estate to make more money. However, as a beginner real estate investor, you should keep in mind that this is the opposite of passive real estate investing.
For real estate wholesaling, you need to find a distressed property for sale below market value. You have to agree on a sale price with the property owner. If you find a motivated seller, it will be much easier to negotiate a good price.
Next, you have to market the real estate property and find a buyer who is willing to pay more than the sale price. However, you should still be offering the property below market value to succeed as a real estate wholesaler.
The last step is to arrange the property ownership transfer from the original home owner to the property buyer who can be a real estate investor or a home buyer.
Wholesaling real estate properties is a feasible strategy how to invest in real estate with $5,000. The only money you need to spend are on marketing the investment property for sale.
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Airbnb Rental Arbitrage
Another answer to the quest how to invest in real estate with 5k is through Airbnb rental artitrage.
This real estate investment strategy is related to investing in rental properties. Airbnb rental arbitrage refers to renting a long term rental property from a landlord and subletting it on Airbnb or another vacation rental platform.
The key to success with this approach is to find a US housing market with low traditional rental rates and high Airbnb daily rates. To do this, you need to conduct careful neighborhood analysis to obtain both traditional and Airbnb rental comps. Furthermore, you need to perform rental property analysis to be sure that the exact income property you are planning to rent and sublet will leave you with positive cash flow.
The only money you need to spend on with Airbnb rental arbitrage is to furnish the long term rental property (if you go for an unfurnished rental) and to market the vacation home rental.
To find the traditional and Airbnb data you need to succeed with this real estate investment strategy, sign up for Mashvisor now.
Renting Out Extra Space on Airbnb
How to invest in real estate with $5,000 can be done from your own home. If you own a single family home, a duplex, or another home with an extra room or two, you can rent out the extra space on Airbnb or another short term rental platform.
This is one of the best investments for beginner real estate investors as it will provide you with a very hands-on experience. Moreover, renting out a room on Airbnb in your own home is very cost-efficient. All you need to do is to possibly repaint the space and furnish it in a way which allow for a comfortable short term stay.
Real Estate Crowdfunding
Last but not least, crowdfunding can be a way of how to invest in real estate with as little as $5,000. Crowdfunding real estate is the best way to invest money for busy individuals who are not tempted by the idea to buy an investment property and rent it out. This is one of the most passive real estate investment strategies for beginners.
All you need to do is to find the best real estate crowdfunding platform and decide how much money to invest. Some crowdfunding websites allow you to start with $500. Now you know how to invest in real estate with $5,000 to make money in the short and/or long run. If you lean towards one of the first four real estate strategies, make sure to start your 7-day free trial of Mashvisor to search for and analyze investment properties in any US housing market.