Investing in real estate with a capital of $20,000 can seem daunting for beginner investors. However, there are several ways to get started in real estate even with limited funds. This article will explore 4 potential options to invest in real estate with $20,000, including real estate investment trusts (REITs), real estate crowdfunding, wholesale real estate, and house hacking. We will analyze the pros and cons of each approach, and help investors determine the best real estate investment strategy based on their goals, risk tolerance and expertise.
Invest in REITs to gain broad real estate exposure
$20,000 can buy a diversified portfolio of real estate investment trusts (REITs) on public stock exchanges. REITs own and manage income-producing real estate and trade like stocks. Investors can gain exposure to a variety of property sectors and geographic regions through REITs. This allows smaller investors to invest in institutional-grade real estate without large capital. REITs provide liquidity, professional management, steady dividends and diversification benefits compared to direct real estate ownership.
Participate in real estate crowdfunding for fractional ownership
Real estate crowdfunding platforms allow investors to pool funds together to invest in specific properties. Investors can invest as little as $1,000 to $5,000 in a crowdfunding deal to gain fractional ownership in a property. Real estate crowdfunding provides access to private real estate deals that were traditionally only available to wealthy accredited investors. However, it comes with the risks of illiquidity and less control over decision making.
Try wholesale real estate with little upfront costs
Wholesaling real estate involves putting a property under contract and then selling that contract to another investor for a markup without taking ownership. Wholesalers can profit by finding discounted properties and marketing them to cash buyers. $20,000 provides enough working capital for marketing and covering the assignment fee. Wholesaling can be done part-time and generates quick paydays. However, it requires networking skills and in-depth real estate market knowledge.
House hack a multi-family property to live for free
Investors can house hack a 2-4 unit multi-family property, live in one unit and rent the others out. A 20% downpayment of $20,000 can secure financing for a $100,000 small multi-family home in some markets. Rental income can cover the mortgage payments. House hacking offers investors affordability, control, tax benefits, and the ability to build equity through tenants paying down the mortgage. The challenge is finding the right property and dealing with landlord responsibilities.
While $20,000 limits options, smart leverage and creativity can open doors to real estate investing. Each approach has pros and cons to weigh. Investors should assess their skills and risk appetite when choosing the optimal real estate strategy.