Investing in real estate is an excellent way to grow your wealth. There’s one small problem though – it takes a lot of money to start. At least, that was the case for years. Tens of thousands of dollars were necessary for a down payment…until now. Thanks to technology, it’s possible to start investing in real estate with $1,000 or less and find success.
Due to real estate crowdfunding platforms, you can invest in real estate online with little money. Crowdfunding helps prospective investors in several ways, including:
- You can start with limited funds
- You don’t need to worry about personally managing properties
- Many platforms provide educational resources
If you want to know how to start investing in real estate with little money, our guide shares the five best ways to begin.
How to Get Started in Real Estate Investing
Just like investing in the stock market, education is vital when investing in real estate. You may attend something like costly real estate investment seminars and believe their methods are what’s necessary to be a successful real estate investor.
That is not the case. There are plenty of free resources online to help you start investing in real estate, not to mention books and podcasts. Take advantage of these resources to build a foundation of knowledge to invest in real estate.
As you learn about investment opportunities, you will discover there are three general ways to start investing in real estate. Those are:
- DIY approach – typically buying properties on your own
- Investing in a real estate investment trust (REITs) – these are companies that manage properties and trade like a stock
- Using a real estate crowdfunding site
Each of the above has its own risks and benefits, and all offer value. As you learn more about real estate investing, it’s essential to establish your goals.
If you plan to use the DIY approach, that requires a substantial investment. You may also need skills to manage and upkeep properties.
For the sake of this post, we’re focusing on crowdfunded investing as it represents the best way to start investing in real estate on limited funds.
Types of Property Available for Real Estate Investment
There are various types of properties available for real estate investments. Each has its own unique differences, but all are worthy of consideration.
Below are a few of the types of real estate investments you can pursue to grow your money:
- Single-family homes
- Multi-family properties
- Commercial real estate
- Retail properties
- Turnkey rental properties
Each of these are available on most real estate crowdfunding sites, and most platforms specialize in one or two types of investments.
Places to Start Investing in Real Estate with $1,000 or Less
Gone are the days where you need a lot of money to invest in real estate. This is excellent for individuals looking to diversify their attempts to increase their net worth.
Below are the best five places to start investing in real estate with $1,000 or less.
Fundrise is one of the best options to invest in real estate with little money as they allow investors to start with $500 or $1,000.
You have two portfolio options to choose from at Fundrise. Those are:
- Starter – requires at least $500 to start
- Core – requires at least $1,000 to start
The Core Portfolio provides a bit more diversity versus the Starter Portfolio. It allows you to choose between investments meant to supplement your income or focus on long-term growth.
Fundrise offers investments in both residential and commercial real estate properties. Additionally, the platform provides properties across the country, allowing you to diversify your efforts further.
The average return for 2018 was 9.11, according to the Fundrise website, net of the .85 management fee. Earnings are taxable, but Fundrise offers self-directed IRAs so you can shelter the income from taxes if you wish.
Head over to Fundrise to review investment properties.
RealtyMogul is another top platform to consider if you want to start investing in real estate with little money. The platform has a higher minimum balance requirement than Fundrise, starting at $1,000.
If you strictly want to focus purely on commercial property, Fundrise is an excellent platform to choose. RealtyMogul also uses multi-family residences in their investment portfolio, but those must be at least a fourplex.
RealtyMogul offers two portfolios for real estate investments: MogulREIT I and MogulREIT II. The former contains commercial properties, whereas the latter focuses on apartment buildings.
You can expect to earn eight and four and a half percent, respectively.
Fees are where RealtyMogul really stands out among the competition. The platform charges management fees of only .30 to .50 percent annually. Like Fundrise, RealtyMogul offers self-directed IRAs to shelter income from taxes.
Head over to RealtyMogul to review investment properties.
If fees are a major concern for your investing, stREITwise is worth a look as you start investing in real estate. The platform claims to have some of the lowest fees in the space, charging three percent upfront and a two percent annual management fee.
They set themselves apart with their transparency, and claim a net return of ten percent for 2018, according to their website. StREITwise allows investors to open an account with as little as $1,000 and focuses primarily on retail and commercial properties.
Once you open an account with stREITwise, you can increase your investments in $500 increments. One thing to note about stREITwise is they put some limitations on smaller investors, which is typical.
You can invest up to ten percent of your net worth (excluding your home) and less than ten percent of your annual income. This is due to the risks associated with real estate investing.
Like other platforms, stREITwise allows you to invest in self-directed IRAs to shelter income from taxes. You can read our stREITwise review to learn more about the platform.
Head over to stREITwise to review investment properties.
Roofstock operates a little differently than other platforms on our list. The platform focuses on turnkey rental properties. Other sites offer properties that developers plan to list for sale or rehab.
That is not the case with Roofstock, as you buy the property directly through their platform for rental. You might think this requires you to manage the property personally, but thankfully Roofstock does that for you.
Roofstock has properties in over 40 markets, so think of it as a marketplace to find rental properties.
There is no minimum to open an account with Roofstock. However, you must provide a down payment of at least 20 percent to purchase any property. This makes the platform an attractive option for those looking for long-term investments.
Roofstock charges an account setup fee of .50 percent. You must pay a commission to buy and sell properties but is half the cost charged by traditional realtors. Like other platforms, you can invest within a self-directed IRA.
Head over to Roofstock to review investment properties.
PeerStreet is the only platform on our list that only allows accredited investors. In short, an accredited investor is one who meets one of the following two qualifications:
- Have a net worth of at least $1 million
- Earn at least $200,000 per year
That qualification aside, PeerStreet is an excellent choice for those wanting to start investing with $1,000 or less as they have a $1,000 minimum balance requirement.
PeerStreet is to real estate investing as LendingClub is to loans. It’s a platform containing available loans backed by investment properties. It focuses on single-family residential properties as investments, and you can select specific loans or a portfolio that’s in-line with your goals.
Returns average between six to nine percent, net of fees, according to their website. Though for accredited investors, PeerStreet shines when it comes to fees, charging only .25 to one percent.
Like other platforms on our list, you can invest within a self-directed IRA if you wish.
Head over to PeerStreet to review investment properties.
If you want to learn more about the above platforms and others, check out our guide on the best real estate crowdfunding platforms.
How to Invest in Real Estate with No Money FAQs
If you’re new to real estate investing, you may have questions before you begin. Below are answers to common questions about how to start investing in real estate with $1,000 or less.
How much money do you need to invest in real estate?
This depends on your approach and goals. In years past, this required a substantial amount of funds. Thanks to crowdfunding platforms, you can start investing in real estate with $500 or less.
How do I start investing in real estate with little money?
Again, thanks to technology, it’s possible to invest in real estate with $1,000 or less. Find a platform you like and open an account.
Is owning rental property worth it?
Yes, owning a rental property can be worth the investment. If you have the funds for a down payment and the necessary skills to manage it, it can be an excellent way to grow your wealth.
If you have the funds, but don’t wish to manage the property personally, a platform like Roofstock is an excellent alternative.
Is real estate crowdfunding a good investment?
Yes, real estate crowdfunding is a good investment – if it meets your goals. Like any investment, investing in real estate has risks, so it’s possible to lose money. Do your due diligence, and you will be fine.
Are returns taxable?
Yes, if you receive dividends on your real estate investments, they are taxable. A great way to avoid this is to invest in real estate in a self-directed IRA.
This shelters income from taxes. Still, it’s best to consult a tax professional to learn how it will impact your tax situation.
How to Invest in Real Estate with Little Money: Bottom Line
Real estate is an often overlooked way to grow your wealth. Many believe you need a significant sum of money to start. Thankfully, that is no longer the case.
There are several ways to start investing in real estate with $1,000 or less. Find the platform that works for you and start today!
What is holding you back from investing in real estate? Does knowing you can invest in real estate without a lot of money motivate you to start? What other ways are you working to increase your net worth?
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