If someone wants to invest in real estate but doesn't have much cash to get started, they don't have to give up their investment dream. Instead, they simply need to get creative. Here are four real estate investment opportunities accessible to people without large savings accounts:
1. Leveraging positive credit
If someone has a good credit rating, they may be able to buy real estate regardless of how much cash they have on hand. In fact, when a buyer uses an FHA loan, they often can get into a home with just 3 percent down.
These loans require the buyer to live in the property for a certain number of years, but once that time period has ended, the buyer can move out and rent out the property as a rental. In other cases, the buyer can use the loan to buy an owner-occupied duplex or triplex. With that purchase, the investor gets a home and an investment property simultaneously.
2. Investing in cheap land
If a buyer cannot get a loan approved for an expensive property, they may want to consider buying a cheap plot of land. Although it is impossible to predict the future, a bit of acreage just outside of a growing town may increase in value as the town grows that direction, and in ten to twenty years, the buyer can try to sell the once cheap acreage at a profit.
3. Using owner financing
Investors who have neither cash nor good credit history can consider owner-financed properties. An owner-financed property is one where the buyer pays the owner directly. Instead of paying the bank monthly mortgage payments, the buyer pays the owner an agreed upon amount monthly for an agreed upon period of time.
Many people use owner financing to buy their primary homes, but people who already have somewhere to live can use owner financing to buy an investment or rental property.
4. Investing in Real Estate Investment Trades (REITs)
If someone has a little bit of money to invest but cannot or does not want to buy physical property for any reason, an REIT may be an alternative. REITs work like stocks – if they earn money, the investor does.
However, this investment is rooted firmly in real estate and may be backed by equity real estate or mortgages. In the first case, earnings come from property rent, but in the second case, profits are generated from the interest on mortgage loan repayments. This type of investment offers the chance to earn from real estate without having to worry about paying for or taking care of an entire physical structure.
Have other questions? Want to learn more? Try contacting a company like Jakob Pek Fund with any questions you have.