You don’t have to be sitting on a pile of cash to start investing in real estate. In fact, just about anyone can start investing in real estate, even with as little as $10, thanks to technology and loosened crowdfunding regulations.
When most people think about investing in real estate, they think about purchasing a rental property or commercial real estate. These are both great ways to start investing in real estate, but they might not be the most feasible options for everybody.
Luckily, there are several other options available to get started in real estate that don't require major financial commitments. No matter what your budget is, or how much time you have available to invest into managing your real estate investments, there are opportunities available.
Why You Should Invest in Real Estate
People have been building wealth with real estate for thousands of years. In fact, historians have even found evidence that some cavemen provided shelter in exchange for some form of currency. Real estate is one asset that will always be necessary and provide value.
Perhaps the greatest thing about investing in real estate, is that there are now more options available than ever. While this asset class used to be reserved for the select few, virtually anyone can invest in real estate with virtually any amount of money today.
While the benefits to real estate investing are countless, below are some of the main reasons you should consider this asset class.
Tax Advantages
Real estate offers an array of tax advantages that aren’t available with other types of investments. The current tax laws allow investors to keep more of the income they earn through their property investment. This is done through deductions and capital gains tax deferral strategies. Some of these tax benefits include:
Cash Flow
Investment properties that produce rental income from a tenant can provide you with extra income each month. The money that’s left over from rent payments after covering your expenses is called cash flow. This is money that will continue to come in each month while you own real estate.
Appreciation
While property values fluctuate as the real estate market goes through cycles, over time real estate values have always increased. This means that a property you purchase today is most likely going to be worth more in 10 years.
Security
One of the greatest advantages of real estate is the security that it provides. When you buy stock in a publicly-traded company, you always have the risk of that company going under and losing its value. Real estate, on the other hand, is a tangible asset that will never dissolve. There’s also a limited supply of it since they can’t simply make more. This provides a level of security unlike any other type of investment available.
Investing in Real Estate Through Crowdfunding
Crowdfunding has quickly grown in popularity since the JOBS Act was signed into law in 2012. Since the act was first introduced, the federal government has made even more changes in regulations making it even easier for real estate investors and developers to raise capital from the general public.
The introduction of real estate crowdfunding has made it possible for an individual investor to earn passive income by participating in a wide range of available real estate investments. There are investment opportunities available for investors with with different levels of investing experience and virtually any budget.
However, not just anyone can invest in any crowdfunding deal. Many crowdfunding platforms and sponsors raise funds using Regulation D Rule 506(c). This rule only allows accredited investors to participate and most people don't meet the requirements to have accredited investor status.
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Luckily, there are a growing number of options for non-accredited investors. Regulation A+ and Regulation CF allow almost anyone to participate in crowdfunding deals that fall within the regulations' guidelines. And more and more companies are starting to use these regulations to raise capital. This makes it easy for anyone to invest in real estate with little money.
The important thing to remember with private placement offerings, like crowdfunding, is that the deal sponsors aren’t held to the same disclosure requirements as publicly traded companies. This means you have to do your due diligence before making an investment.
Invest With as Little as $10
That’s right, you can start investing in real estate today even if your budget is limited to $10. While you won’t be making an equity investment, you can invest in the debt secured by real property. This is similar to how a mortgage REIT operates.
Groundfloor offers a crowdfunding platform where you invest in short-term loans made to real estate investors that are buying and rehabbing properties. Once you join Groundfloor as an investor, you can browse available loans, view details on the properties secured by the loans, and choose which ones you want to invest in.
Groundfloor uses an algorithm to assign a grade to each loan based on the level of risk. The amount of interest you’ll receive on a loan depends on its risk grade.
Investors just starting out with a limited budget can set up monthly deposits into their Groundfloor account to grow their investment portfolio over time. And since the loans on the platform are typically only 6 to 12 months, your money isn’t tied up for a long period of time.
The best part is that Groundfloor is available to non-accredited investors, so virtually anyone can invest.
Invest With as Little as $100
Arrived Homes is a real estate crowdfunding platform that allows investors to purchase shares of rental properties with a minimum investment of only $100. The company handles all of the property management responsibilities while passive investors simply collect a quarterly dividend as the rental property increases in value over time.
Investors earn a return in 3 ways through Arrived Homes. 1 - They receive cash flow from the properties in the form of quarterly dividends. 2 - The properties appreciate in value over time, so they make a profit when their property is later sold. 3 - The amount of equity in the property increases each month as the principal balance on the mortgage is paid down.
Invest With as Little as $500
DiversyFund is a private REIT that invests in value-add multifamily real estate. The REIT is open to non-accredited investors and has a low minimum investment of only $500. You can even make recurring investments into your DiversyFund account to increase your overall investment over time.
The beauty of DiversyFund is in its dividend reinvestment structure, which turns on the magic of compounding interest for investors. In order to maximize the growth of your investment, DiversyFund reinvests your dividends, increasing your equity each month. The more equity you have the higher your dividend payments are, so your equity grows more each month.
Deciding How to Invest in Real Estate With Little Month
As you can see, there are multiple options to invest in real estate with little money. Now it's up to you to decide which option is best for you. You should first consider how much money you currently have available to invest and how long you can commit to leaving that money tied up. Remember, the goal of real estate investing is building wealth over the long term.
Also, keep in mind that you don't have to choose just one method and stick with it forever. You can grow your investments over time with one of the crowdfunding platforms we discussed, and later use that money to purchase your own property. Or you might find that crowdfunding is the best option for you for the long-term, and continue growing your investments in these platforms.
Whichever method you choose, the most important thing you can do is get started. Whether you have $10, $100 or $500 to invest today, the best thing you can do is simply get started.
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