Investing in real estate is a great way to build passive income and improve your assets. However, real estate investment also requires more start-up cash than other forms of investing. While you may only need a few dollars to buy stocks or invest in a mutual fund, saving up for a down payment can set you back thousands of dollars.
There are ways for anyone with a little bit of money and a lot of ingenuity to become a real estate investor.
Start with the Home You’re in
You already have at least one home that you live in. Besides being a place where you live, it can be the seed for your growing real estate business.
You can rent out a portion of your home in a strategy called House Hacking. Use only part of your home while renting out your spare bedroom or spare floor. This will allow you to recoup your housing costs and create a seed fund for future investments. Even if you do not have an extra bedroom, some people rent out garages, basements, and even plots of land for camper parking.
If the idea of sharing your home with a stranger permanently does not appeal to you, then you can try short-term rentals such as Airbnb. Rent out a spare bedroom, couch, or even the whole apartment to people while you’re away on vacation.
It will cost less money to buy properties that are in worse shape and then fix them than it would be to buy a brand-new home. There are even tax incentives in place to make it even more worth your while to flip properties.
The IRS has a significant tax exemption that allows you to exclude up to $250,000 (or $500,000 if you are filing jointly) of the profits from selling your home if you were the primary resident for at least two years. This makes a fixer-upper even more worth it.
You can also accumulate properties in need of renovation and then rent them out instead of selling them. This increases your income sources.
Renovating houses can seem daunting, particularly to people with little experience in this realm. However, there are plenty of resources and incentives to help you go down this route.
Don’t Work Alone
If you know that you cannot come up with enough money for a down payment by yourself, you can work with others to begin investing. Form a partnership or invest in a Real Estate Investment Trust.
You can also break into the business by helping other sellers. Get your real estate license and become a broker, or work as a finder who connects sellers with great deals for a commission. It may take longer to save up the funds you need, but you will also learn more about the business in the process.
Real estate investing is a great way to make money and should be accessible to everyone. You can get involved in several ways, even if you don’t have vast reserves of cash on hand.