Investing in real estate isn’t as pricey as you’d think. In this blog, we will talk about how to start investing in real estate with just $500.
Table of Contents
Most millionaires achieved their wealth through real estate investing. But for many, investing in real estate can be intimidating. However, when done right, real estate investing can be a great path to earning huge returns and building wealth, especially if you do it with the right real estate investing platform, like Mashvisor.
One of the most common misconceptions is that it takes a considerable amount of money to start investing in real estate. The main concern among most people is capital. The typical question that first comes to mind is, “how much money do I need to get started?“
It is mainly because most people only think of real estate investing in terms of owning a rental property or flipping houses. But you can actually become a real estate investor without purchasing a physical property.
The truth is that it’s possible to begin investing in real estate with $500 or less. While you won’t make millions immediately, it should get you on the right track. It’s just a matter of knowing how to go about it.
Read on to learn how to start investing in real estate with $500.
Related: Buying Rental Property with No Money Down: 10 Ways It’s Possible
Why Invest in Real Estate
Before we discuss the different ways of investing in real estate with little money, we need to talk about the reasons real estate investing is sensible. The why is as important as the how where real estate investing is concerned. It gives you the motivation to push through despite the challenges.
Real estate investing comes with certain risks. If you don’t clearly understand why you’re doing it, you won’t feel as motivated to see it through.
As a real estate investor, you need a motivator, which will give you the drive to make the right investment decisions. It is different from your goals, but they are a significant factor in determining what you want to accomplish.
The Rewards of Real Estate Investing
No how-to list will be complete without giving you the reasons behind it. Let’s look at some of the whys of real estate investing.
Cash Flow
Perhaps the most common reason people want to learn how to break into real estate investing is to find an additional source of income. Real estate investing gives you a reliable source of positive cash flow if you do it right. Investments such as rental properties offer you passive income regularly, especially if you’re in the right market.
If you want to get into real estate investing, you need to know how to calculate cash flow and how much you expect to make. If by calculating you end up with a negative cash flow, it already tells you to stay away from the investment opportunity. A positive cash flow, on the other hand, makes a potential venture highly attractive.
Tax Breaks
Another benefit of getting into real estate investing is the tax breaks. Investors take advantage of the tax benefits of owning real estate properties. You can deduct reasonable costs and expenses associated with owning and operating an investment property.
Make sure you consult with a tax professional, so you don’t miss a thing. Otherwise, you might be researching how to get out of real estate legal issues instead of learning how to break into real estate investing.
Appreciation
As an investment vehicle, real estate properties tend to increase in value over time. With the right property and enough time, you can make a very good profit when you decide to sell.
Rental income also tends to go higher over the years. So, as a rental property investor, you get to earn a decent income from renting the property out, and if you decide to sell, you make a lot more money compared to the total amount you invested.
Portfolio Diversification
Another reason investors decide to purchase investment properties is their diversification potential. Real estate demonstrates a very low correlation with the other asset types. Adding real estate investments to your portfolio decreases portfolio volatility and gives you a higher return per unit of risk.
Inflation Hedge
Inflation causes the prices of goods and services to go up. It also means that home values and rental rates inevitably go the same way. Therefore, investment properties help protect you from inflation as they give you rising rental income and greater appreciation.
6 Ways to Get Started in Real Estate With $500
There are many ways to get into real estate investing. It’s just a matter of knowing how to get into it in the most efficient way possible. Even without a large capital to buy a property, you can still figure out how to get into real estate investing if you genuinely want to.
If you want to know how to get into real estate with very little money involved, here is a list of great alternative investment vehicles to consider:
1. Invest in REITs
If you’ve been wondering how to start investing in real estate with $500, one excellent way to do it is to invest in real estate investment trusts (REITs).
REITs are companies where multiple investors pool funds to invest in a real estate portfolio that they may not be able to invest in individually, just like mutual funds or stocks. They allow you to invest in real estate without necessarily owning physical property.
REITs often specialize in one type of asset, primarily commercial real estate like apartments, office buildings, retail spaces, industrial property, and hotels. They generate income by renting, leasing, or selling investment properties, which are distributed to shareholders as dividends. Investors can use or reinvest their dividends to grow their investment portfolio.
If you have a few hundred bucks to spare and want a hands-off real estate investment strategy, REITs can be an excellent option.
How to Get Started
Investing in REITs is as simple as opening a brokerage account. The process only takes a few minutes. Once you’re done, you can buy and sell publicly traded REITs just like any other stock.
On the other hand, if you don’t want to trade them individually, buy a mutual fund or ETF instead. They will vet and trade REITs on your behalf. The risks are lower, plus you get immediate diversification. Talk to brokerages if they offer such funds, as it will lessen the legwork on your end.
2. Real Estate Crowdfunding
You can also add real estate to your portfolio with as little as $500 through real estate crowdfunding platforms like Fundrise.
Real estate crowdfunding platforms allow you to invest in different types of properties online. Instead of a single investor buying an investment property, a number of investors pool their money together to fund a real estate project and work with experienced investors who invest the pooled money.
The company does the work of finding and acquiring real estate deals. You are paid dividends without doing any of the work.
The downside of investing through real estate crowdfunding platforms is that they tie up your money. Your investment in the platform will not be as liquid as it would be if you invested in REITs.
However, unlike REITs, you exercise more control over what real estate deals you invest in. It enables you to diversify your portfolio with relatively little money by investing in a variety of deals.
Real estate crowdfunding can be a good way for small investors to get involved in real estate markets that are traditionally available only to wealthy investors. While it is a lucrative option for a beginner real estate investor, you need to do your due diligence to ensure that you are investing with a legitimate company that is also a good fit.
For instance, you’ll want to know their minimum investment amount, their fees, their experience in the business, and their guidelines for investors.
How to Get Started
Finding real estate crowdfunding sites isn’t hard. All you need to do is log on to the internet and search for them. However, you must learn to discern which platforms will help you achieve your goals in the shortest amount of time. This is where due diligence comes in.
As an investor, you need to compare each site and its services to get the best return on your investment. Find out what the pros and cons are of crowdfunding solutions to see whether they work for you or not.
You also need to consider how much you’re willing to invest and the amount of return you’re expecting. Keep in mind that investing in these sites will tie up your money and leave you with no access to it for a considerable amount of time.
Also, determine the property type you prefer investing in. Then, prepare the necessary documents and forms to prove your status as an accredited investor.
Related: The Best Real Estate Crowdfunding Sites
3. Invest in Real Estate Limited Partnerships (RELPs)
A real estate limited partnership is one way to invest in real estate with $500.
Another great option about how to start investing in real estate with $500 is to partner with other investors. Much like REITs, real estate limited partnerships allow groups of investors to pool their funds to invest in real estate.
Usually, a real estate partnership has a general manager who handles direct management of the investment properties and assumes full liability.
The rest of the investors are limited partners who are liable only up to their actual investment. They have limited involvement and influence in the management of the real estate limited partnership. They only contribute money in exchange for an investment return.
A real estate partnership allows you to invest in a diversified portfolio. However, investors need to do their due diligence since this strategy is associated with high risks. Also, keep in mind that funds invested in RELPs are typically illiquid.
Related: What You Need to Know About Real Estate Partnerships
How to Get Started
Since RELPs are a bit high-risk investments, you need to put in the work and find out all you can before jumping in.
First, take an inventory of your buying power. Take a look at what each of you must contribute. Assess each other’s strengths and weaknesses to know your roles and responsibilities.
The next step is to draft and develop a partnership agreement that states your common goals and missions. It will hold all investors accountable. Once you’re done with this, you may now form a corporate entity and consult with legal and tax professionals.
Once the groundwork has been established, you must review, revise (if necessary), and reiterate your expectations as a team.
4. Real Estate Wholesaling
You can be a real estate investor with little to no money by wholesaling real estate. Real estate wholesaling involves entering into a contract with a property seller to purchase their property and later reassigning the contract to prospective buyers.
However, real estate wholesaling can be a risky business if you fail to find a buyer before the contract closes. You may need a few hundred dollars to market the property to potential buyers so that it sells fast.
Related: The Basics of a Wholesale Real Estate Contract and How to Prepare One
How to Get Started
Getting started in real estate wholesaling is quite easy. The most important thing you need to do is your homework. The level of your preparedness will make or break your success in this line of work.
Perform due diligence and gather as much information as you can about the market. It includes getting an overview of neighborhoods and determining the good ones. Next is getting an idea of how many homes are listed in the area and how much they’re selling for.
Once you understand your market better, find potential buyers first. Keep in mind that you’re acting as the middleman between the buyer and seller. Coming up to a seller first without a buyer in mind would be pointless. So, get to work on your buyers’ list and line them up.
The next thing you need to do is work on lining up your capital. You can’t purchase a contract without the right financing. You can start off with private or hard money lenders just to get you going.
With everything in place, start looking for the best possible deals in the neighborhood. It often involves distressed properties as they are most likely to sell at lower market prices because, in most cases, sellers are highly motivated to make a sale. Finding the right property is a lot easier with the help of Mashvisor’s Property Search tool and real estate heatmap.
Lastly, determine your exit strategy. Your exit strategy will determine how you make money from wholesaling. You can either sell a contract or execute a double closing. Your strategy will depend on the wholesaling deal you make.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
5. Rent Out Your Spare Room on Airbnb
If you’ve got a spare room in your home, you can get started in real estate with $500. You can rent your spare room via Airbnb, the most popular vacation rental online marketplace. For $500 or less, you can make improvements to make it ready for guests and start earning some extra income.
However, the location of your home will have a significant impact on potential returns. Be sure also to check the local short-term rental regulations. It should also be in an area with a high demand for short-term rentals. They are usually areas that are frequented by tourists and business travelers.
How to Get Started
If you have a spare room in your house that you wish to rent out, you need to make sure it is on par with Airbnb’s standards before having them listed on the platform. Knowing how to start a vacation rental is important because, as a rental property, it works differently from a traditional rental.
Getting a property listed on Airbnb requires you to meet its standards first before it allows you to post on the platform. Airbnb has strict guidelines for rental properties, even if it’s just a spare room or basement in your house.
You just need to spruce up the place and make sure it meets the minimum requirements, and you’re qualified to list your rental property on the platform.
Of course, you need to take care of legal concerns such as local Airbnb laws and regulations. Each state has its own set of rules.
Part of knowing how to start an Airbnb business is knowing the local short-term rental regulations. They cover things such as limitations on use, the number of properties a vacation rental owner can rent out, tax obligations, and neighborhood/community impact.
Once you have all of the above things figured out, you must then take high-quality photos of the room and write out a detailed description of the property. Include important and noteworthy details in your description that will make potential guests choose your property over the others.
If you’re in the market for vacation rental properties, make your search a lot easier with Mashvisor’s real estate heatmap. It will give you a good idea of which neighborhoods are performing exceptionally well with Airbnb rental income, cash on cash return, and occupancy rate.
6. Buy Real Estate Investment Software and Become a Property Locator
Many real estate investors are willing to pay you to find deals for them. But you need to be able to find great deals that the investor wouldn’t come across themselves. The best way to do this? Buy real estate investment software.
You might be thinking that the necessary software would be beyond your budget of $500, but Mashvisor offers several plans, one of which will surely fit your needs. For that price, Mashvisor provides a number of real estate investment tools that every beginner real estate investor should use.
With Mashvisor’s tools, you’ll be able to quickly identify investment properties for sale with a high ROI and present the full investment property analysis to your real estate investor lead.
Facilitating a few deals will allow you to start saving up money for a down payment on a rental property. Learn more about becoming a property locator here.
How to Get Started
This one’s pretty easy. All you need to do to get started is sign up for Mashvisor’s services. Once you subscribe to Mashvisor, you will be given access to a massive database of almost every market in the country. It gives you a better overview of markets outside your backyard, making out-of-town investing a lot easier and more manageable.
You will also learn how to find the right investment properties that will give you better returns. In most cases, finding the right investment property is the main challenge among investors. As a service provider, you can help meet their needs by giving them promising options using Mashvisor’s tools.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
The Bottom Line
Are you waiting to get thousands or hundreds of thousands of dollars to invest in real estate? Well, you don’t need to. Real estate investing is not just reserved for the ultra-wealthy. We hope this article has answered your question of how to start investing in real estate with little to no money.
There are several ways to invest in real estate, even if you only have $500 to spare. If you have $500 or even less to invest, you should consider one of the above real estate investment strategies. That is more than enough to get you started.
The fun thing about investing in the above low-capital alternatives is you can keep repeating the process until you have large enough capital to buy an investment property.
When it comes to a more substantial investment like that, you will do well to work with a real estate platform like Mashvisor. The real estate website has helped countless investors like you to find the right properties and discover the right investment strategies that will help them achieve their goals.
Why risk your hard-earned money when you can ensure greater investing success with the help of Mashvisor?
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.
