Investing in real estate is one of the best ways to grow wealth for the future, and property can be a great hedge against inflation that holds its value. But what if you don’t have much money? Can you still invest in property? In many cases the answer is yes, provided you have a small amount you can use to get started, or you have property or other collateral that can be used, instead.
There are ways to invest in real estate with no money, so you can start building wealth and create a strong portfolio. Most people who invest in property either start out by using property they already own to get another one, or they save up a small amount so they can get their first loan. Then they continue building on that start. Here’s what to know about investing this way.
Hard money lenders, microloans, seller financing, and lease-purchase options are all ways to start investing when you don’t have the money to go out and purchase investment properties. Be aware that some of these options require you to have a little bit of money, such as the amount required for closing costs, to get started with your first property.
Before you agree to any type of alternative lending, make sure you ask about all the details. A hard money lender will typically have a higher interest rate, for example, and you generally can’t finance with them for a long term the way you would with a bank.
Microloans can be easier to get because they’re small, but they may not work for you if you need a much larger loan. With seller financing or lease-purchase options, you’ll need to own a property that you can sell or lease this way. The right understanding of your costs and obligations can help you choose alternative lending solutions wisely.
Choose Shares in a REIT
Another way to invest in real estate with essentially no money is to buy shares in a REIT (real estate investment trust). The cost of the shares can be extremely low, and it’s just like buying stock. With the right money management you can buy a few of these shares as often as possible, and soon you’ll own a stake in several commercial properties.
For people who don’t have a lot of money to invest in property, and for those who don’t want to be landlords or have upkeep on rental properties, a REIT can be a great choice. These investments typically get good returns, allowing for wealth-building activities that are easy to maintain and pose reasonable risk.
Apply for an SBA Loan
An SBA (Small Business Administration) loan can be used by those who qualify, and who want to purchase commercial properties. You will need a small down payment, but you can generally get a loan for your small business as a real estate investor more easily than you might be able to get a standard purchase loan. If you’re interested in investing, this can be a good option.
When you work with the SBA, though, you need to have a small business that wants the loan. That might mean you need to get a business license or other documentation if you haven’t already. In most places that’s not hard to do, and you don’t need any special qualifications to have a small business that invests in real estate, as long as you’re not investing for others.
Use your Current Home’s Equity
A common way for many real estate investors to get their start is to use the equity they already have in their current home to purchase their next property. Once you do that, you can use the equity in that property to purchase another one in the future. As you continue to do that you end up with more and more properties, but you’re not using any of your own money to buy them.
Finding the right way to buy more real estate and build wealth is a great way to begin securing your future. As you research your options, you can choose the way that works for your situation, so you can invest in real estate with no money.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He’s been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What’s Your Story, and more.
He loves to share his personal finance tips and money management wisdom with others on his website, ShawnManaher.com, to help them find financial freedom.