Of course, you still need some form of down payment to get started. In an era when housing prices grew far faster than wages and inflation, how could someone afford a down payment? In my hometown, the median home price is about $560,000, meaning a 25% down payment would require $140,000! But what if there is a better way to get started investing in real estate with less than six figures? Lucky for us, there are a few paths to get started.
In my podcast, the Personal Profitability Podcast, I recently interviewed real estate investment expert Clayton Morris. In our interview, I learned about a world of investing where you don’t need a massive down payment. In fact, you may be able to buy a home outright for just $40,000! Welcome to the world of low-cost turnkey property investing.
In our discussion, Clayton told me all about investment opportunities around the country in low-cost markets filled with life-long renters. For just $40,000 to $60,000 with another $5,000 to $10,000 in rehab costs, investors can own a property outright. For a low down payment, you can start investing in low-cost homes with around $10,000 for a return on investment around 10%.
I have not gone and pulled the trigger just yet, but I’m very excited at the prospect of investing in low-cost properties with a great ROI.
Trailer park investing
One week later I welcomed the king of mobile home investing, Jefferson Lilly. We discussed methods to buy mobile home lots in larger mobile home parks, and the financial returns look a lot better than the failed plots in the Netflix hit show Trailer Park Boys.
In many markets, you can buy a trailer park lot for around $5,000 to $10,000. Of course, that does not include the home sitting on the lot, but that means you are not responsible for maintenance and other costs in the home. You just get to buy the land and collect rent.
I looked at lots in my local Southern California market, and again they were higher than what I would want to spend to start investing. But getting a little farther from the beach, lot prices become much more reasonable. If you want to own land without the hassles of maintenance, this could be a great option to get started.
Start saving with REITs
If you have a very small starting investment, even just a few hundred dollars, you are not locked out the of the real estate world completely. The lowest cost investment option works more like a stock market investment than real estate, but gives you a piece of the action in a physical world property.
REITs, or Real Estate Investment Trusts, are companies that manage properties on behalf of investors. They are legally required to pay out a high portion of profits in the form of dividends, which you can reinvest as your REIT value grows. Eventually, you may find yourself with enough market value to cash out your REIT and buy into an investment property directly.
Sure, this is not quite as glamorous as handing over the keys to a new renter for the first time, but it is a path to real estate ownership that starts with just a few dollars. Some REITs operate as a single brand, like well known brand Public Storage, while others own a wider variety of rental apartments, homes, or commercial properties. Either way, you can buy it just like a stock even without extensive real estate knowledge or experience.
You don’t have to be a millionaire to invest in real estate
If you want to start investing in real estate, you don’t need millions of dollars. “Thousandaires” can absolutely get into the real estate markets and start earning passive or semi-passive income.
Real estate is a great asset to own. It is in limited supply, so inevitably it should grow in value. Particularly in growing markets where more people are competing for properties, values are likely to increase. But if you wait around, you won’t get a cut of the profits. Start investing in real estate today to get the best return for years to come.