Embarking on rental property investment is a brilliant way to spread an investment portfolio. This is because a rental property has a low relationship with the stock market, and real estate prices are considerably less volatile than financial securities. In addition, property owners are also able to benefit from various tax breaks that improve the return on an investment (ROI).
Additionally, if financiers build rental properties portfolio in different geographical locations, it makes them stronger investors, capable of weathering different sorts of financial storms. From low-risk investment yet high returns on investment to passive income earnings. The benefits of investing in real estate cannot be over emphases
Hence, there is no doubt that rental property investment can be valuable to one’s future. In fact, many of those who have attained financial independence have invested in real estate. However, it does look like a pricey business enterprise that’ll cost thousands or millions of dollars in first investment.
And also, many people believe that rental property can only be a long-term investment as it’s generally believed that land, for instance, takes a while to appreciate. If you’re dealing with this, that’s okay! You don’t need 6 figures in your bank account to become a real estate investor.
This article will explore how to invest in rental property even if you’re on a budget, including the strategic method to invest in short-term rental properties.
Sounds juicy? Then, let’s get started.
Top 6 Strategies for Beginners Real Estate Investors on Budget
When it comes to investing in a rental property for beginners, it sounds like it will require an arm and leg. Or that you will have to wait an extended period to start making a profit. Fortunately, there isn’t just one way to rent property investment.
Here are six of the leading rental property investment strategies for beginners on a budget.
Private Lending
Private lending can be an excellent way to put the capital you have into investing and make earnings from the rental property investment. This strategy is for novices with no experience, time, or interest in real estate ownership as well. This is done by loaning your capital to other real estate investors with the experience and time to obtain the gains.
Numerous investors will accept as low as $5,000 or $10,000, enabling you to contribute to their property investments! While you may have a portion in the income or an attractive interest rate with regular cash flow payouts as a return on investment.
Investment Platforms
Investment platforms are one of the best options for beginners who aren't yet familiar with investment procedures. These platforms provide pre-built portfolios, making them simple to use and ideal for new investors. Investment platforms are online platform that enables investors to purchase investments online. Fund platforms may make investing easier or offer investments at a lower cost. There's techvestor which offers short-term rental investments as low as $25,000. Furthermore, the bulk of the investment work is done by the agency which also pays you your investment returns every quarter.
House Flipping
Some individuals take it a step further, purchasing properties to renew and resell. This investment strategy is known as the fix-and-flip strategy. It entails the business of looking for properties that require work, repairing, and reselling them at high value for a profit. Hence, flipping involves refurbishing properties and selling them afterward in short order.
Flipping success is measured by the income the seller makes over the acquisition price. It's also measured by how fast the home is sold, as the flipper continues to spend mortgage expenses while waiting for the property to be sold.
Flippers look for below-market-rate contracts, make adequate developments to boost the price considerably, and rapidly turn the properties over. A distraught property may be the most attractive to the flipper. As long as they can make significant enhancements while costs remain under control.
So, with a good system in place, like
access to cheap materials
a team that can offer a high-quality job at a reasonable price
and a real estate agent who can sell a property rapidly
This strategy is undoubtedly ideal for beginner investors with a tight budget.
Wholesaling Real Estate
Wholesaling is getting good deals on property investments and reselling them rapidly for a small markup. The bottom line of this business is being good at advertising and negotiating to get those decent deals. This investment strategy is among the best ways to begin rental property investment with a tight budget, say, with just 25 dollars.
Here, you first get a distraught seller and bargain to get him/her to sell the property for a considerably low amount. After dealing, allocate the property to a contract. Your work now is to look for a buyer and sell the home before the wholesale contract ends. As the wholesaler, you’ll mark a share of the income realized from closing the deal.
This investment strategy is ideal for beginner rental property investors for many reasons. Of course, it’s a good method of making money without spending much. Also, it’s good for investors who are not concerned about owning property. Plus, as a wholesaler, you won’t have to bother about mortgage payments or refurbishing the investment property.
Real Estate Investment Trusts (REITs)
Real estate investment trusts are popularly referred to as REITs. They are businesses that act like mutual funds for rental property investors. Therefore, enabling them to invest without possessing any tangible property. With this investment strategy, real estate investment begins to seem like investing in mutual funds or stocks.
A real estate investment trust work by taking investor funds, merging them, and investing in various commercial, income-generating properties. Those can be big buildings, apartments, office buildings, commercial property, retail space, warehouses, or hotels. Hence, this allows you to invest in rental property as a stakeholder, unlike an investor with a direct obligation.
This can be referred to as passive income. REITs often pay out shares to their investors. Returns differ – depending on the kind of Real estate investment trusts you invest in – but the standard ROI is 10% or more. And compared to most of the other investment strategies mentioned earlier, this strategy truly is passive once you buy it.
Therefore, as a beginner on a budget, if you’re looking to
invest in rental property in a way that’s considered a passive income method
provides tax profits
and is less risky with good returns on investment
Then investing in a real estate investment trust might be just what you need.
House Hacking
House hacking implies occupying a property that also generates revenue, like in a duplex, triplex, or property with additional rentable space such as a guest house, basement, or extra bedrooms. As such, you can cut down your overall housing costs. This is one of the simplest ways to invest in real estate on a budget as a beginner.
House hacking is done by buying a multi-unit property (duplex, triplex, fourplex), occupying one unit out of it, and renting out the remaining ones. This way, you can limit your mortgage payments with the rental revenue, and in some instances even make a return.
Here, as a house hacker, you can
spend this supposed passive income any way you want
make a large purchase
pay down the mortgage
Or even save for another property to enlarge your portfolio.
Numerous real estate investors recommend this investment strategy. They agree that it’s one of the simplest and most amazing strategies to enter the real estate investing market with a budget.
This is not just because of the above benefits but also because you learn the property-owner business while occupying your rental. And when you are done occupying the property, you can move out and convert the house to a long-term rental.
Conclusion
You’ve now read through the top 5 real estate investing strategies; these are the different ways up the financial highland using real estate. Each has its own pros and cons. Bear in mind that most investors merge various strategies at different periods. For instance, you may start with house hacking, change to wholesaling, and do a few property-flipping deals on the side.
And also, don’t freak out if you attempt one strategy and discover it doesn’t work for you. Rental property investment is a business venture. You have to experiment and attempt things that do not work before you get your sweet spot.
Good luck with your choice of real estate investing strategies!