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How Much Capital Do You Need to Invest in Real Estate? (2019 Update)

Have you ever wanted to invest in something a little more tangible than stocks, but you weren’t sure if you really had the money for real estate? There is a lot of misinformation about real estate investing and how much capital you actually need to become an investor. You may be surprised at the numbers that it actually takes to invest in real estate, and how easy it can be to get started, even if you don’t have all the capital you need just yet.

First, the Numbers

Most of the time, aspiring investors will hear anything from $5,000 to $50,000 being quoted as the opening range for investing in real estate. The truth is that the amount you need depends totally on what type of investing you are starting out with, and while you could need more than $50,000 if you’re choosing to go into solo commercial real estate investing, for example, you could also need less than $5,000 to start out with in certain models.

So the truth is: there’s no specific number for getting started in real estate investing. But if you want a basic goal to begin saving towards, $5,000 is a good number for several different types of real estate investing.

Affordable Investment Options

The cheapest way to get started in real estate investment is either to go through an REIT, or to go through a crowdfunding platform.

An REIT is basically a commercial real estate market that allows investors to trade on real estate stocks, but also involves some direct mortgage investment. This type of investment is highly liquid, and is great for those who have experience with stocks because it offers a familiar structure. Getting into the asset class of REITs can take as little as $500. If you have $2,500 in an investment savings account, you would be able to do some enthusiastic trading in an REIT.

Crowdfunding is a new, but growing, method of investing in real estate. Instead of relying on just a few investors with large sums of capital, dozens or hundreds of investors with smaller investment amounts can join together to fund an investment. The average crowdfunding real estate investment options start either around $500 or $5,000 per investor.

The Next Rung

If you’re able to do a little more than $5,000 to start, there are some middle-of-the-road options that can allow you to see higher returns, but without requiring six-figure investments. The most common method in this group is utilizing an investment group or a private partnership.

An investment group is a professional group of real estate investors sponsored by a company. The group makes decisions on what type of investments they want to purchase, and the company performs all the day-to-day tasks and paperwork. As an investor, you’d need between $5,000 and $50,000 to become part of an investment group in most cases.

A private partnership, on the other hand, is a private agreement between yourself and one or more other investors. You’ll split the cost of an investment, and assign the paperwork and day-to-day duties of managing the investment among yourselves. This is a great way to pool money with other beginner investors; if you can invite a more experienced investor into the fold, you’ll also get a great education on how to grow your real estate investments.

In the Future

Once you’re able to dedicate more than $50,000 to your real estate investment fund, you’re ready to consider solo investing. Now is the time when you can purchase properties on your own, to become a landlord or to flip. This is the riskiest type of real estate investment, but also the most rewarding.

Starting out with an REIT, investment groups, crowdfunding opportunities, and partnerships allows you to learn the ropes without risking a significant chunk of money right off the bat. Sometimes as little as $50 is enough to get you started as an investor!

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Is Now a Good Time to Invest in Real Estate? (2019 Update)

While most young adults and new families struggle to even create a savings account, much less consider investing for the future, now is one of the best times in recent history to make investing a priority.

The fact is that investing is what moves a person or family from one income level to the next. Getting raises or second jobs only creates more opportunities for spending; investing is what builds permanent wealth. And one of the most common types of investments is real estate.

But after so many millennials grew up or came of age during the housing market crash in the 2000s, it’s easy to see why the current generation of young investors would be hesitant to put money into real estate. However, the real estate market has finally bounced back, and many investment experts believe that the current year is the best time to buy real estate.

Interest Rates

The first reason that this year is the best time to invest in real estate is that interest rates are still very low. It’s an interesting fact, because before 2016, interest rates were actually climbing, and most analysts predicted a hike in rates. That doesn’t mean that they’ll continue to drop, however. Experts agree that the rates will start climbing again very soon. This is the year to get in on real estate before those go right back up.

The Perfect Storm of Affordable Urban Growth

A decade ago if you wanted to invest in real estate, you looked in New York City, San Francisco, or other major cities such as those. But the prices in those areas have climbed to astronomical rates that many new investors could never afford on their own – and could certainly never make a profit on.

But there’s a perfect storm brewing in up-and-coming cities such as Dallas, Houston, Raleigh-Durham, and Berkley. These places aren’t historically real estate stars. But thanks to sudden growth in the business sectors of these cities, real estate construction has picked up – and yet these areas are still priced much lower, based on the historic housing prices of what were once less populous areas. Now is the time to take advantage of these low-priced homes and commercial buildings before the prices catch up with the growth.

You Can Invest from Your Home

Thanks to the wonders of the Internet, you don’t even have to leave your home to invest in real estate. In fact, through crowdfunding platforms, mobile apps, and tons of investing websites, you have more options for real estate investing than ever before. You can research properties all over the world, take advantage of market growth in other areas, and send and receive payments for investments from your phone if you wanted to.

Crowdfunding especially has changed the way that many real estate investors are interacting with potential properties. Because it requires a smaller investment amount, and gives investors the chance to diversify with many investment opportunities, crowdfunding real estates platforms have grown exponentially over the last year.

The Year of Free Knowledge

Finally, the last reason that this is the best year to invest in real estate is that knowledge is totally free. It used to be that real estate was hidden behind expensive courses and a country-club mentality. These days, researching a property, or an investment opportunity, is as easy as sending a text message.

There are thousands of websites, blogs, eBooks, forums, podcasts, and many other free educational sources online that can be accessed at any time. Have a question about a new type of real estate investment? You can easily shoot an expert real estate blogger an email, or connect with other investors through a forum or a social media website.

For all of these reasons, real estate has never been a more attractive investment. As more young adults and families start focusing on creating a stable future through investments, real estate should always be at the top of the list.