What a good feeling to finally see a healthy balance in the nest egg account. The emergency fund is funded, the bills paid down, and time to make some smart investments. You have looked around and real estate keeps coming up in conversations and articles. There is about $50,000 sitting in the account, and you are wondering – how can I make money with $50,000? Is that enough to realistically invest in real estate?
You can start investing in real estate with little money. You have to do it carefully, with forethought, but it can be done. A number of different options are available as a means to do it, too.
Not everybody has the desire or nerve to be a full-time real estate investor. You can benefit (and it is safer by far) to distribute your savings into different investments, though, and real estate is usually not a bad option. Most people think it takes a lot of money to invest in real estate and do not even try because they do not have a hundred thousand dollars or more to buy a rental. There are ways to do it with far less initial cash, though.
- You have to learn about real estate investing
- Credit reports matter
- What is your real estate savvy and style?
- Want to rehab or flip?
- Where are the best returns on rental property?
- Planning for emergencies and the unknown is a must
- Live in Buy and Flips
- Turn-key investment properties
- Is a real estate investment joint venture or group right for you?
- The new kid on the block is peer-to-peer or crowd funding real estate
- So is your head about to burst from TMI?
- There is an easier way to make great return than real estate on way less than $50,000
You have to learn about real estate investing
The first order of business that all the professionals and those who are actively investing in real estate will tell you is do the diligence and educate yourself. The recommendation is to spend six months monitoring markets, reading everything you can, learn the terminology of the industry, watching podcasts and reading blogs, and keeping an eye on trends. Real estate, while not as volatile as the stock market, still has risk and can be affected by the economy, politics, and world situations that come at us every day. You need to invest the time and energy to know the local market and community that interests you as well, so you know your investment money is going into a wise location.
Credit reports matter
Spend some time making sure your credit report is as clean as possible and up to speed. Your credit worthiness, along with the percentage you are willing to make as a down payment, both affect your ability to obtain a mortgage for primary or secondary property at a good rate of interest, if at all after the recession. It also affects your ability to qualify for FHA loans, if the property qualifies – the standards are fairly strict. Do not forget first time buyer, or VA benefits, or other potential programs to help bring the cost of borrowing that money, down. And, if all else fails, look for seller financing. Often they will work with particular issues on credit that a financial institution won’t.
I did a lot of research when I started to make good money in my lead gen business and wanted to find a source for second income. There are different ways to invest in real estate, and you can invest $50,000 and make a return. I will touch on a few of them. If you are interested in how I made my extra cash to invest quickly in my lead gen business, you can click on this link and get some free information, no obligation https://www.bestrealestatedirectory.com/lead-gen/
What is your real estate savvy and style?
How you choose to handle your $50,000 real estate investment depends on lot on your style, abilities, and time. Being aggressive or passive weighs things like your ability to do remodeling and repairs yourself, rather than hiring it out. (If it were me, I would hire it out and gain a lead gen client from the service provider. But that is just me.) Like to fix things? Like the challenge of remodeling? As an aggressive investor you can make a good return on the right property. If you are still in a career and your time is limited, or you can not see every weekend swinging a hammer or pushing a paint brush, investing passively in a group or as a funding agent might be more your style.
Want to rehab or flip?
One of the most common ways to invest a small amount for real estate is to buy a property that needs repaired. This could be a distressed property, one that is older, or went through foreclosure and was damaged. The common term is a rehab or flip property. A flip often needs repairs, remodeling, or cleaning up, requiring time and money. Some people buy and flip, some buy, remodel, and rent out, referred to as a buy and hold, utilizing the rental income to pay the mortgage.
If you are a savvy shopper, you can watch bank repossession sales, quick sales, and as-is properties for a good buy. The general rule to make a decent return is your investment should target the purchase price, repairs, and other costs total no more than 80% of the value of the property. It is important to know something about the neighborhood or town, too, as issues ranging from annexation, tax base changes, large projects being built and affecting value, can all take place while you are fixing up a place to rent or sell. $50,000 can provide a down payment, money to repair, and enough equity to secure a hard money loan (HML) for about 75% valuation on the total price for a buy and hold, or up to 85% on a flip generally. If your credit is good, you may be able to score a 5% down, especially in a challenged area.
Where are the best returns on rental property?
Rental property returns best in a neighborhood where rents are fairly high, need for rentals is strong, and rental fees are higher than local mortgages and expenses total. While renting is a good long term strategy as the rent can hopefully pay the mortgage, a flip usually stands to make a higher percentage of return on your investment, especially if you did a lot of the work yourself and did not have to hire it out. Flipping is riskier, though. You never know if you are getting into much higher repair bills than appeared at first. Just remember that appreciation alone is not ever a good plan when buying property, especially single family residences, unless there is some inside information you have written in stone.
Renting works best when the property is a duplex, four-plex, or multi-unit, as it allows you to leverage your $50,000 investment. You can live in one, and the rent from the other units pays the mortgage and hopefully at least a portion of your expenses. Some buy and hold investors also buy like they are going to flip, remodel/repair, then refinance the property to use the rental income to pay the mortgage, and the gained equity to invest in another property – the best of both worlds. Multi-units that are rental ready may prove easier to find than ones needing repairs, however. The later inventory overall is less, and they are snapped up quick.
Planning for emergencies and the unknown is a must
A word to the wise on renting out property – always have a cash reserve put aside to deal with issues that arise, because they will. Make sure you estimate expenses correctly, including vacancies, insurance, taxes, and any utilities included. It is also smart to invest in either a management company handling the property, or at a minimum a credit and background service to check on potential renters. There are regulations and laws that strictly control access to that kind of information, so a highly rated company with good security is a must. Knowing who you are renting to can save many headaches, and hopefully provide a smother, consistent cash flow for your return.
One thing to remember, though, is planning on the increased value of property to be your ace in the hole is not a sound strategy in the long run. Property fluctuates with the economy, so your increase in value can just as easily become a decrease. Something that you can count on, such as rent, especially in areas where there is limited affordable housing, is a much safer investment plan. Finding a good real estate broker that is willing to help educate you and establish a long term relationship can be a valuable asset.
Live in Buy and Flips
A variation on the buy and flip is the buy and live in flip. You have to have a place to live, right? Maybe the house needs a bathroom and kitchen remodel, and you can do the work, and can also live with what is there while you do it. This can be a good way to build up equity in a property, and once the remodeling is done, list the house and use the added value to find your next house to live in. Each time you can go up in value, or use the extra cash to finance additional properties while living in the current project. This model also may have tax advantages if you stay in the house long enough, as profits usually are not taxable after so long a time of residency. Talk to your tax professional about your state laws and your particular tax situation.
Turn-key investment properties
If you are a passive investor and do not have the time or desire to rebuild a property, a turn key property investment may work well for you. Just like it says, the property is usually ready to rent. There are a few companies that buy the property, have you pay for it and the upgrades, and then manage it for you. Either way, someone else takes care of the hands-on part and you get a return. While less of a hassle, your return generally is smaller, and you also need to make sure to do your own investigation on the property and potential costs to make sure a good buy, is.
Turnkey properties and companies have caveats, though. There is a habit for properties to be higher cost than they should up front, especially for out of market investors who may not know the real prices and issues of an area. And, too often there are incentives for companies to have tenants come and go and repairs to be more than they should, since they make management or repair fees off them. If you decide to go this route, a lot of homework in advance is the only safe bet.
Is a real estate investment joint venture or group right for you?
Another real estate investment strategy growing in popularity is a network of seasoned investors working together in an investment group. Sometimes these are set up as joint ventures, or you can just write a loan to the group with the property as security. This usually affords you a set return with regular payments. You can usually get involved either as an equity investor or straight out lender. Do not agree to too small a return on your money, such as single digits. It does not allow cushion or a sufficient return for the time it may take to get all your money back if the market shifts.
It is important to know who you are dealing with, especially if the investments are flip properties. Are they a seasoned investor who is willing to share their real estate financials with you? It takes a lot of money pooled together from a number of sources to buy larger properties, making it sometimes more challenging to know who you are dealing with.
Most partnerships and projects are technically illegal to advertise for a partner. Ask around your network first who is looking for equity money. Check into local investor groups. Since new investors often can not qualify for larger mortgages, and often investment agreements involved higher ticket properties, such as syndications that buy apartment complexes and the like, your money’s safety often rests on the credibility and ethics of the other investors. Also, make sure that the division of profits is fair, and what fees will come out. Ask questions up front before you sign the check.
The new kid on the block is peer-to-peer or crowd funding real estate
One of the newest methods of investing smaller amounts of cash into property is crowd funding and peer-to-peer funding. A big advantage to crowd funding is that the investors they work with are already vetted. You can also usually start with as little as $500 to begin the investment process, with $1,000 – $10,000 the average, and can spread out the amounts to different loans. There are some fees associated with the accredited investors, and it does limit the investors you have access to, but generally, is safer. Since this is a new form of grouping funds to make money, the list of crowd funding sites that will work with non-accredited investors (you when you start) is small. It is sure to be an area of growth in the future, and becoming accredited is gaining accessibility.
Last but not least is real estate investment trusts, or REITS. These funds are purchased usually through your brokerage account, and act like other funds groups. They vary tremendously by the initial investment amount, but most must distribute 95% of their earnings to shareholders. They range from private to traded accounts, and fees vary and may be higher than other forms of real estate investment. Ask your broker for clarification and what is currently available as they tend to bury information in massive bulletins. Know not all are liquid, so you may be locked into something you do not want to be in the future. Make sure to ask questions about fees, returns, values of the company, risk factors, and how they distribute.
So is your head about to burst from TMI?
I know mine was when I started looking into real estate investing when I had my first nest egg out of my lead gen business. I knew when I graduated from college that I had to find another means to put money away, so after starting the corporate grind for $35K, I looked into many money making opportunities, ranging from MLM and drop shipping to real estate. I did not have enough to invest in real estate at the time, so I hunted for a good business to do on the side. Since my background was in computers, I started there. I made a little, but the hours, along with the corporate job, were killing me. Rehabing real estate is kind of like that, every weekend spent cleaning, tiling, fixing, plumbing, painting, digging, pounding. Not the most fun. Especially for a 25 year old. We want to snowboard and party some!
I was making a little decent money and started looking at real estate investing with a small amount of money. I realized quick I did not have enough to make much return. While I was looking I ran across articles about digital real estate, in other words, owning things that lived on the web. That got my interest since my background was in computers. So much of the stuff I had investigated up til then had looked like get rich quick schemes. Then I ran across an article about a guy named Dan who was building lead gen sites. Those are websites that hook up someone searching for a product or service and the company that can help them with it. And he was making killer money doing it.
There is an easier way to make great return than real estate on way less than $50,000
After a good amount of research, and finding out this Dan guy appeared to be pretty real, I signed up on this link https://www.bestrealestatedirectory.com/lead-gen/ for a call to discuss their business model and what the training cost.The call was free and there was no obligation, and no pressure when I talked to them. They wanted a good fit as much as I did, which I really liked. And I got all my questions answers, no avoiding stuff. That was super important.
So after the talk, I decided to pay the tuition and learn the model. Man am I ever glad I did. My little bit of nest egg more than paid for the tuition and getting my first site up, that I wrote while I was talking the training. It took me about six hours and this is it:
I still own this site and I hardly ever touch it. And I have made after expenses in the last 4 ½ years over $34, 600 in profit on it. Seriously. I rented it out the same week I wrote it to a business owner, who still pays me $750 a month and has for 4 ½ years and is thrilled to do it to get the business I send him. Nice profit for a not-quite 30 year old.
That first small win was followed by others. In just five months I was able to kill the corporate job, paying all my bills and building my business. And I have never regretted the decision. I love being my own boss, working when and as much or little as I want.
Yeah, it was scary at times, and it took some work, but since I had already been in business on the side, I knew any business, period, took work. I continued to build my websites and grow from my home. Today, 4 ½ years later and less than 8 after graduating from college, I am going to clear close to seven figures in profit this year, and I have not passed my 30th birthday yet.
How would you like to put in 5 months of work and in less than 5 years be making 7-digit profits on a business you own, control, working when you want to and for you, not someone else making a buck off your sweat?
This is one of the fastest growing, highest need and potential industries world wide in business right now. The potential is limited only by your working the plan. Are you interested in finding a way to actually have the money to buy property as a secondary income stream, and not have to worry about the economy, or a storm taking what pays your bills, out?
If you are ready for a real opportunity with no pressure, no obligation, no cost up front to get your questions answered, click this link https://www.bestrealestatedirectory.com/lead-gen/
In the six months it takes you to learn real estate jargon, you can be cashing in to invest in a real chunk of real estate, not just $50,000 worth.