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6 Ways to Invest in Real Estate With Little Money

By Aly J. Yale - Jan 30, 2022 at 7:00AM
Person viewing real estate properties on a laptop.

6 Ways to Invest in Real Estate With Little Money

Investing in real estate isn't always expensive

Real estate can be a great way to build wealth and enjoy passive income. And despite popular belief, you don't need a whole ton of cash to get started. There are several ways to invest in real estate with just a few dollars -- in some cases, with no upfront cash at all.

Are you hoping to invest in real estate but don't have a ton of funds to get started? Try these six options.

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1. Buy real estate stocks

A great way to get started is to buy stocks in real estate companies. That can mean homebuilders, real estate platforms, brokerages, or anything adjacent to the real estate world. If you're unsure where to start, The Motley Fool has regular recommendations you can monitor for guidance.

This month, it's Vail Resorts, NVR, and American Tower.

ALSO READ: 3 Real Estate Stocks to Buy in January

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2. Invest in REITs

REITs -- or real estate investment trusts -- are another affordable way to invest in the real estate market. These are companies that own a portfolio of commercial and income-earning properties. By purchasing a share in a REIT, you also buy a stake in the money those properties produce.

You can buy shares of REITs on the major stock exchanges, and there are also REIT mutual funds, REIT exchange-traded funds (ETFs), and tons of sector-specific REITs, like mortgage REITs, office REITs, self-storage REITs, to name a few.

ALSO READ: Want To Get Richer? Invest in These 5 REITs and Wait 10 Years

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3. Crowdfund a deal

If you're interested in real estate development, crowdfunding is a fun way to get your foot in the door of up-and-coming projects. You can put funds toward a new apartment complex, an industrial park, a self-storage facility, and more.

All you do is sign up for a crowdfunding platform (Fundrise, Cadre, RealtyMogul, and Crowdstreet are just a few of your options), browse the current deals, and start investing.

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4. Try house hacking

If rental income is something you're eyeing, a great way to get started -- at least without tons of startup capital -- is with a little method called house hacking. This strategy entails buying a multiunit property (e.g., duplex, triplex), living in one unit, and renting out the others.

The big perk here is that it allows you to use a low-cost mortgage, like an FHA loan, which is technically allowed on primary residences only. You'll then pay just 3.5% down and end up with a new home and multiple rental properties in a single deal. As long as you're choosy about the property, you should be able to earn enough to cover your mortgage payment and make extra cash on top.

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We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

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Person talking on phone in front of a fence with a sign hanging on it that says Room for Rent.

5. Rent out a room in your house

If you already own a home, you can also just turn a room, a portion of your property, or even the entire thing into a short-term rental. You'd then list the property on Airbnb, VRBO, or another similar platform and market it to potential travelers.

The logistics of this strategy depends on where you live, as some cities require business licenses or may even have laws limiting these types of rentals. There also may be ordinances dictating how many days out of the year you can rent your home, so make sure to read the fine print.

ALSO READ: Why I Decided to Turn My Home into a Rental Property

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6. Tap the equity in your current home

Own a home? You might be able to tap the equity you have in the property to use toward your investing goals.

There are several ways to do this, but typically, you'd pursue a cash-out refinance, home equity loan, or home equity line of credit (HELOC). Cash-out refinances are generally the most affordable, as they come with the lowest interest rates of the three.

Once you've turned your equity into cash, you can use those funds toward any of the previous real estate investments we've covered -- REITs, real estate stocks, or crowdfunded deals.

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Low barrier to entry, high potential returns

Real estate can deliver serious returns over the long haul, so if you haven't started investing in this sector just yet, it's time to consider it. You can also talk to a financial advisor or investment broker for guidance. They can point you toward the right types of investments for your long-term goals.

The Motley Fool has a disclosure policy.

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