How You Can Invest in Real Estate With Little Money

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Think you need thousands of dollars to invest in real estate? Think again. Real estate can seem like an investment option available only to the wealthy—but that’s not true.

In the past, you may have needed enough money to purchase or finance a rental property or office building on your own. However, today’s creative financing tools, online platforms and strategic partnerships offer ways to get started in real estate investing without having deep pockets.

We’re going to look in-depth at how you can start building wealth through real estate—even if you only have a little money to start with.

Start with Real Estate Investment Trusts (REITs)

If you want to invest in real estate without having to buy a physical property, real estate investment trusts (REITs) are a good option. Some types of REITs own rental properties and pay you a slice of the income, typically in the form of dividends.

Publicly traded REITs are listed on stock exchanges and are super easy to buy, often for just a few bucks. Private REITs usually require more money and aren’t as flexible. With a REIT, you don’t get control over decisions, but you get exposure to the real estate sector and can earn income.

Further, this type of investment is much more liquid than owning traditional real estate.

Try Crowdfunding Platforms for Property Access

Crowdfunding platforms such as Fundrise, RealtyMogul and Arrived (formerly Arrived Homes) make it possible to invest in real estate with as little as $10 to $100. However, some initial investments must be much higher. All of these sites pool money from many investors to buy everything from single-family rentals to large commercial developments.

You don’t need to be a landlord—just choose a project and let the platform handle the rest. It’s a clever way to access professionally managed real estate deals without the traditional upfront costs or the headaches of direct ownership.

Try House Hacking

House hacking is when you buy a home, live in part of it, and rent out the rest, such as a basement apartment, extra bedroom, or even an entire unit in a duplex. The rental income can help cover your monthly mortgage payments, homeowner’s insurance and real estate taxes.

Amid today’s high interest rates and high housing prices, house hacking can provide an affordable avenue for homeownership. In addition to lowering expenses, house hacking offers tax benefits, builds equity, and sets you up for long-term wealth through asset ownership.

Explore Wholesaling as a Low-Capital Entry Point

Real estate wholesaling is the process of finding an undervalued property, getting it under contract, and then reassigning that contract to another buyer for a fee, typically 5% to 10% of the property price. Usually, you only need a small downpayment known as “earnest money” to get things rolling.

However, you need to be able to read the pulse of the market to find properties that lend themselves to these types of transaction—often distressed homes. You also need connections who can help you find the right investors. The financial risk is low since you’re not buying the property outright, but you’ll need to follow local real estate laws to make sure every transaction is legal and profitable.

Consider Seller Financing or Lease-to-Own

If you don’t qualify for a traditional mortgage, seller financing can be an alternative technique. In seller financing transactions, the seller acts as the bank, letting you pay them directly over time. Another option is lease-to-own, where you rent with the ability to buy later, and possibly apply part of your rent payments toward the purchase price.

Both approaches let you get started with relatively little upfront cash, but ultimately let you purchase the property. That allows you to build equity over time. With either procedure, you want a contract that avoids ambiguity by spelling out such details as the amortization schedule, the eventual purchase price, and how many rental payments (if any) can be applied to the purchase price.

Weigh the Risks and Do Your Homework

Even with low-cost entry strategies, investing in real estate has risks. Local markets, zoning rules and property management are important factors that can affect your returns, so it pays to do your homework ahead of time. Even with passive options such as REITs or crowdfunding, you need to understand what you’re investing in.

The Bottom Line

Getting started in real estate doesn’t always require a big bank account. From REITs and crowdfunding to house hacking, wholesaling and seller financing, there are plenty of paths for beginners with little money. The key is knowing your comfort level and doing your homework.

Investing in real estate can be a powerful way to build wealth, and by taking smart, low-cost steps today, you can set yourself up for a more secure financial future.