Real estate can be a particularly lucrative investment. From owning rental properties to working with a Real Estate Investment Trust (REIT), there are many options when it comes to investing in real estate. However, many of these options require a substantial initial financial investment. If you are interested in real estate investments but have a limited budget, there are ways you can still reap the rewards without accruing too much financial strain. Of course, you should have a financial reserve for investment purposes, and you will typically be able to obtain additional external support through loans or other means in order to initially secure properties.
When looking for a property to invest in, you can identify properties on your own with relative ease. Check out expired MLS (multiple listing services) listings; these are listings that have been on the market from anywhere between 60 and more than 120 days. At this point, sellers may be frustrated with the lack of interested buyers or they may not have the finances to effectively market their home again. Sellers will be more likely to appreciate new offers and may be willing to settle for less than the amount they listed for the property. Not all expired listings will lead to an investment opportunity, but spending time looking into these properties can be fruitful.
Additionally, when searching for properties suitable for investment, you should be aware that you do not necessarily need to deal with a real estate agent to locate potential properties. Look for homes with “for sale by owner” signs in their yards; negotiating directly with a homeowner may allow you to purchase a property at a lower cost.
Living in your investment property prior to converting it into a rental property is a great way to build equity and access more financing options than are typically available to buyers of investment properties. With this course of action, you will typically need to live in the property for at least one year, but you can do so with a lower credit score and a smaller down payment than what is required for rental properties.
Home Equity Line of Credit
Most commonly used for short-term house-flipping endeavors, a Home Equity Line of Credit (HELOC) can utilize the large amount of equity on your primary residence or rental property and provide you with a way to finance additional real estate investments. The interest rate can be relatively low, and a HELOC will essentially place a second mortgage on your property. If you are looking to invest in multiple properties and earn higher returns, this can be a smart move. However, the more debt you use to finance an investment property, the more risk you are taking if the value of that property falls.
Investing in real estate can provide exceptional returns, and while you will need to be willing to devote time and money to these investments, there are ways you can benefit from real estate investments without spending more money than you can afford.