How to Invest in Real Estate with Little or No Money Down - 5 Creative Ways to Invest for Financial
By buying and flipping properties, Amon and I made over $400,000 in real estate in the San Francisco Bay Area. We loved working on our real estate properties in the states. At the same time, it took a lot of time and energy.
Thinking about the time it takes to invest properly (not to mention the cost!) can be enough to send potential investors packing. But never fear! I’m here to share five unconventional ways you can start investing in real estate without a lot of money.
#1. Buy An RV
This one may seem a little strange, and it isn’t strictly real estate, but hear me out!
Nowadays the idea of simplistic living and minimalism is becoming more and more appealing to people. Just google “tiny house movement”: - you’ll see that I mean! The growing popularity of tiny homes just goes to show how interested people are in alternative living, especially in smaller spaces - maybe not necessarily as a permanent solution, but definitely as a temporary interest.
That’s where the RV comes in! I’m talking about buying an RV and renting it out - not as a long-term living situation, but on a for-hire/night-to-night basis in the same way you rent out a hotel room. Say your expenses for the RV are around $200-300 a month. If you charge around $100 a day for your RV rental, even a week's worth of renting it out would cover your expenses more than twice over.
You can do this by advertising your RV on sites like AirBnB (more popular with homes but also frequently used for smaller mobile dwellings like RV’s and campervans) or Outdoorsy, a site specifically for renting out RV’s. Through Outdoorsy people can arrange to pick up your RV from your own house and take it for however many nights they choose. This is helpful because unlike AirBnB, Outdoorsy doesn’t require you to have your own land to sit the RV on.
#2. Real Estate Investment Trust (REIT)
Investing in a REIT is one of my favorite options for small-scale real estate investment. So what is it?
Well, REITs are investments that you can buy on the stock market that consist of different types of real estate. REITs are sold are individual stocks, actively managed mutual funds, index funds, and ETFs. The great thing about REITs - all REITs are required to pay dividends. So, by purchasing a REIT, not only are you investing in real estate - you’re also getting paid a consistent dividend when you do it!
What Amon and I like most about REITs is that you actually don’t have to contribute all that much to get started with this kind of investment. The other great benefit is that it introduces you to the basics of real estate investing, without the difficulties involved. Basically, you can own a portion of a property without the responsibility of the care and maintenance that comes along with it.
#3. Live and Flip
Amon and I did the live and flip when we lived in the San Francisco Bay Area. And it’s not just us - people all over the world are doing it! The idea behind the ‘live and flip’ is that you buy a property that you plan to live in for a while, and you flip it! So ideally you’ll buy a somewhat rundown property that needs some work and isn’t overpriced. That way, you can enter the real estate market without spending exorbitant amounts on high-end properties.
Another trick to saving on the live and flip: With a live and flip, you typically have access to low down payment programs because you’re living in the property as a primary residence. For example, with the FHA programs, we only had to put down 3.5%! These types of programs are brilliant because they essentially allow you to buy investment properties with little money down. Generally, if you want to buy an investment property that you don’t plan to live in, you’re looking at putting down 20%.
There are other benefits too. Flipping the house you live in also means you can take your time to renovate and learn as you go along, as opposed to the short period you have to flip an extra property for profit. You also don’t have to pay the capital gains tax that investors have to pay on their properties, as long as you live at the property for a minimum of two years.
This gives you the time to not only level up your home through renovation, but also for your home to go up in value while you rake in the capital gains. It’s a win-win!
#4. Master Leasing
Master leasing is less common, but it’s a great way to get into real estate without having to own or invest in property directly. The idea is that you contact landlords who have trouble renting out their properties and you guarantee to rent out their properties for an agreed-upon price and an agreed-upon time frame (usually 1-3 years).
The investment side of it comes through agreeing to a rental rate with the landlord that’s at a lower-than market rate, while then subletting the property at a much higher rate!
But why would a landlord want to do this? Well, if they’re living out of state (for example) they may have a lot of trouble securing quality renters because they don’t have the time to travel in and out holding viewings and meeting renters and, at the same time, they may not want to pay for the extra cost of a property manager. That’s where you come in.
If you’re looking for a master leasing opportunity, look for properties that have been on the market for a while. Contact the landlord and try to get a gauge of why it hasn’t been rented out. If the landlord lives out of state that’s a great start, but you want to make sure the property’s in good condition as well.
#5. Multi-Family Property
This might be our favorite creative way to invest in real estate! Multi-family properties are duplex, triplex, or four-plex properties. And similar to a regular property, when purchasing a multi-family property, you can typically use the FHA loan with a 3.5% down payment. Similar to buying a single family home property, you do have to be living in the space - but the catch here is that you can rent out the other sections of the property to pay your entire mortgage. You would essentially be living mortgage-free!
So not only do you have to put down a minimal 3.5%, but you also have a space to live, and income from renting out the rest of your unit that can then be used to pay off your mortgage. Depending on the size of the place, you could potentially split your property into three or four units of studio, one-bedroom, or two and three-bedroom apartments. If you were to live in the smallest unit on the property, you could potentially earn more than just the mortgage - meaning you could be collecting additional income, too!
So these are just a few of some more creative methods for investing in real estate on a smaller budget. Investing in real estate is an incredible way to achieve financial independence and to retire early. What’s great about it is that there are so many different ways to invest. People often think about the most traditional ways to invest in real estate. But, I challenge you to think outside the box, to get creative, and to make that real estate investing money!
See Our Renovated Portugal Villa - Our Master Bedroom/Garden Oasis! (We Retired Early to Portugal)
