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Best Ways to Invest in Real Estate: Options for Beginners, Those With Extra Funds or Almost No Money

It is a well-known fact that the best way to manage your money is not by saving but by investing. And, there are few investment sectors as alluring as real estate. There’s a reason Andrew Carnegie allegedly said, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined.” While plenty of things have changed over time, and the property owner doesn’t equal real estate investor anymore — investing in real estate stays as popular as ever.

Here we list the most popular options — for those who want to become a real estate investor with little money, people sensitive to risk, those searching for alternative ways of real estate investments, and others.

Best Ways to Invest in Real Estate

Just two hundred years ago, there were not so many options for real estate investments. Property ownership was a privilege of the rich and powerful, and a good deal of the country’s wealth was associated with land and properties. Thankfully for all modern-day real estate investors, now there are plenty of ways to make your money work for you without the need to accumulate hundreds of thousands of dollars in advance. 

Best for Beginners and Those With Little Money: Investing in PropTech and Real Estate Startups

Investing in startups has plenty of benefits both for you, a person searching for a smart way to place their hard-earned money and the economy and society. By supporting developing companies, you create new workplaces and finance innovations and positive change. 

That sounds good, but you wonder what’s in it for you?

Let’s start with the fact that you can invest in startups starting for as low as $100. If you’re a real estate enthusiast but don’t have much spare cash to invest, this could be your best bet. Also, investing in startups operating in real estate is great for beginners searching for real estate investment options, as it will let you learn more about the industry, trends and gain some more confidence before investing large sums. 

Investing in startups works similar to diversification by itself — putting a small amount of money into different companies, you never know which one might skyrocket. Maybe, you just invested in the future household name of the real estate industry. 

Inspiration for this guide was Rentberry’s own Regulation A+ offering on StartEngine, as we noticed massive interest in real estate investments from people all over the world. You can learn more about our campaign and its updates here, or check out our campaign page on the StartEngine platform

Best for a People Person: Becoming a Landlord

Renting out a property might be one of the most straightforward ways to invest in real estate and the first thing that comes to mind of an average person when they think about making money out of real estate. While some people actually make a living out of it and consider being a landlord a full-time job, others treat renting out a property as a great way to receive extra cash every month. 

There are many ways to approach renting out a property, depending on your starting point, expectations, and preferences. Just think about it: you can rent out a spare room even while being a tenant yourself, or you might have enough resources to buy a second house solely for the purpose of renting it out. You can go into short-term rentals and take a closer look at the whole concept of Airbnb, or stick to long-term renting to save yourself from the constant worrying about vacancy rates and tenant turnover. 

Piece of advice, if you make up your mind and decide to become a mom-and-pop landlord, make sure to read and understand landlord-tenant laws carefully — federal, state, and local. And, remember that certain regulations are different depending on how many properties you have, so always pay attention to details!

Best for Diversification: Real Estate Crowdfunding

Getting involved with the real estate crowdfunding platform is another way to become an owner of a property without almost any financial resources. Here, you and hundreds of other investors chip in together to finance projects related to real estate, such as the development of an apartment complex, purchasing a fixer-upper, or buying out commercial property.

Usually, you have an option to select specific projects you want to invest in or simply choose a portfolio strategy, and the platform’s brokers will take care of the rest, handpicking the projects for you depending on your goals.

But, not everything is so rosy as it sounds — even though it is possible to start investing from as low as $500, many real estate crowdfunding platforms seek exclusively for accredited investors who meet the Securities and Exchange Commission requirements. And, many projects require much greater initial investment starting from thousands of dollars. Finally, you should remember that choosing a real estate crowdfunding platform associates with long-term investments and a low level of liquidity.

Best for Stock Market Fans: Investing in Real Estate Investment Trusts (REITs)

If you seek to add real estate to your investment portfolio but simply want to invest your money without diving into the world of maintenance, tenants, or house refurbishings, REITs are another good option. Most of these companies are traded on the stock market, and you can buy their shares just like you do with any other company. 

In a nutshell, a REIT uses investors’ money to purchase and run properties, either commercial or residential, depending on the REIT you choose. As an investor, you receive an interest based on the company’s profit — to be qualified as a REIT, they are obligated to pay at least 90% of the taxable income in dividends. 

To start investing in REITs, you’ll need from $1,000, so it is one of the cheaper options when it comes to the world of real estate investments, and it is also highly liquid — just like with any other stocks, you can sell your shares anytime. Overall, you should take a closer look at REITs if your preferred type of investment is the stock market, but you’re looking into entering the world of real estate. 

Best for Experienced Real Estate Enthusiasts: Flipping Houses

House flipping is a trickier way of generating income from real estate, and we would not recommend it for those who only get started in the world of residential properties. But, at first, let us describe in a few words what exactly house flipping is.

Basically, flippers buy cheap properties that, they believe, have great potential and are sold below their market price. Immediately after the purchase, they perform certain renovations and refurbishing and sell the house for higher. In some cases, an experienced flipper might even recognize a great opportunity that does not require any additional activities by buying a property when the market is record low.

As you can imagine, being a successful flipper requires an excellent knowledge of the local market, a good eye, and a significant amount of time you can dedicate to this project. While it can offer large and quick returns, this real estate investment option comes with higher risks.  Also, it requires a significant initial investment and substantial experience in various areas, such as real estate, interior design, negotiation, project management, and more. 

Best Tips on How to Make Money Investing in Real Estate

Don’t put all eggs in one basket.

This is one of the biggest investing rules in general, and the same will be true speaking of real estate investments. In the article, we mentioned a few different ways to invest in real estate, but the truth is, the best idea would be to combine a few options and create a diversified investment portfolio. Another approach would be to invest in properties in different cities or even states. 

Never stop educating yourself.

No matter if you’re a small-scale investor or have hundreds of thousands of dollars and many advisors at your disposal, you must stay on top of changes and trends if you want to be successful. It goes without saying that you should have a good knowledge of the market, understand emerging and established patterns, and what can be expected on the market in the future. 

Be mentally (and financially) prepared for occasional losses.

Remember that if you deal with investments, there is always a level of risk involved — even with the safest way of investing. If you’re a landlord, you might face a prolonged vacancy, and if you’re a flipper, there is always a chance the market will cool off. Learn from your mistakes and analyze what could have been done differently, but don’t fixate on your losses.

Frequently Asked Questions About Real Estate Investing 

  • How much money do I need to invest in real estate?

The initial investment largely depends on the types of real estate investment you decide to go with. The best options for those with little money and novice investors would be investing in real estate startups and crowdfunding — here, you can invest from $100. For example, the minimum investment in the Rentberry campaign is only $300!

  • Is it hard to become a real estate investor?

It is easy to start — if you choose to invest in REITs or proptech startups, you don’t need much of the market knowledge or specific skills. But, if you want to make money out of flipping houses or certain real estate crowdfunding projects, you’ll need to acquire a superb knowledge of the market or become an accredited investor. 

  • Do I need to purchase a property to be a real estate investor?

Absolutely not! Although buying and reselling or managing rental properties are valid and common ways to generate income, there are plenty of options to invest in real estate without actually dealing with commercial or residential properties. 

  • What is the best investment strategy for me?

The answer to this question will mostly depend on your financial situation, your experience in real estate, and your goals. Hopefully, after you read our article, you have a few ideas on how to start your journey!

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