The average real estate investor makes between $70,000 and $124,000. But, in order to make this kind of money, each real estate investor has to invest a large amount of money into their properties. Then, they will get their investment plus return back in time.
That is how it works, right? Well, not exactly.
Anyone can get into real estate investing. Even people with little to no money for investments can learn how to start investing in real estate, including you.
Keep reading and we will tell you how to invest in real estate. There are plenty of options to choose from.
1. Real Estate Investment Trust
REIT, real estate investment trust, companies own or finance real estate across different sectors. Similar to mutual funds, REITs offer everyday people the ability to invest.
More specifically, REITs allow everyday people to get dividend-based income and returns. By buying an individual stock or mutual fund, anyone can invest in real estate.
By investing in REITs, you will earn a share of the income that the REIT company makes. Even better, you do not have to directly buy, finance, or manage the property that you are investing in.
2. Hard Money Loan
Hard money loans go by many different names:
- Bridge loans
- Short-term asset-backed bridge loans (STABBL)
- Asset-backed loans
No matter what you refer to them as, these kinds of loans offer short-term financing for mortgages.
However, only private and individual lenders offer hard money loans. You will not be able to find these loans with a bank or credit union.
Because you will be working with a private or individual lender, hard money loans are easier and quicker options to invest in real estate. You get to skip all of the financing processes and approvals that you would need to have with a traditional financial institution.
It is also notable that hard money loans are asset-based. So, it does not matter if you have bad credit. All you need is something to back your loan.
3. Government Loan
The United States government also offers loan programs for real estate investing. There are multiple programs to choose from, but here are some of the most popular:
- FHA Loans for first-time homebuyers
- Homeownership vouchers
- Department of Veterans Affairs (VA) home loan program
- Rural housing loan program
If you are interested in any of these government programs, you can do a quick search on Google or another search engine to find programs near you. There are local, state, and federal options that you can choose from based on your qualifications.
4. Seller Financing
When buyers do not have enough money or a good enough credit score to get a loan from a traditional financial institution, they can go through the home's seller. Rather than giving the seller the full value of the home off the bat, you would work out a repayment plan with the seller.
Seller financing is beneficial to both sides of the deal. The seller gets even more money than they would have originally gotten from the sale, and you (the buyer) do not have to go through a traditional financial institution.
Opting for seller financing may also get you a better deal in terms of loan downpayment, loan interest rate, and other terms.
5. Lease Option
If you opt to start real estate investing using the lease option, you as the property owner will charge the buyer a monthly or yearly premium. This will come across to the buyer as higher rental payments.
The extra money that you make from these payments will go towards the purchase price of the property.
All in all, this buying option allows you to make a real estate investment by using a slightly higher rental fee. Over time, you will make more money so that you can make larger payments towards the purchase of the property.
6. Microloan
Microloans are relatively new to real estate investing, but they are still a great option for those of you who are learning how to invest in real estate. Microloans are typically reserved for startups and other newer businesses because these businesses require more resources to grow.
As the name implies, microloans offer smaller amounts than traditional financial institutions; however, microloan programs are also less strict when it comes to their qualification requirements. This means that people with bad credit will have an easier time applying for and getting approved for a microloan.
If you are struggling to get funds for your real estate investment, a microloan is a great option.
7. Equity Partnership
Making a real estate investment partnership is another great way to get the funds that you need to start investing in real estate. Having a partner makes getting funds easy when you are learning how to invest in real estate.
Plus, it is great to have another person to talk with while you are learning the business.
Your equity partner would be another individual that you bring into the real estate transaction. They can help you with financial burdens, real estate knowledge, and more.
The way that your partnership is set up depends on the preferences of you and your partner. Before starting on your real estate venture, you should draw up a contract for both of you to sign and follow.
Make sure that you both understand the terms of the agreement before getting started with the deal. You should discuss financial burden, individual tasks, partner decisions, and more before starting with your real estate investment.
You should also meet with multiple people before landing on your pick for a partnership. You want to make sure that the other party is as invested as you are before signing a contract with them.
8. Wholesaling
Wholesaling is the process of selling multiple properties to a retail seller. This seller then renovates and sells those properties to a third party; however, this resell will be at a much higher cost to offset spending during the renovation.
The original seller, the wholesaler, can charge the retailer a lower price since they are selling a large volume of homes.
You could take advantage of one of these deals if you are willing to take on more than one real estate property at a time. By taking advantage of lower up-front costs, you could make much more in the long run.
9. House Hacking
House hacking involves becoming a homeowner and a landlord through a multi-family property. You live in one unit and rent out the other units.
If you cannot find a multi-family property that you would be willing to live in, you could always transform a single-family property into a multi-family unit. Even if you only have an apartment to rent out, you can make a lot of money back.
You may even be able to cover most or all of your monthly mortgage payments for the property.
10. Home Equity Loan
Home equity loans are extremely valuable when property values are high, and they are a great option for those of you who do not have any money available up-front.
If you have existing equity available in your home, you have two options:
- You can do a cash-out rewrite so that you can refinance on the first mortgage loan that you had
- You can keep the first loan and take out a home equity line of credit (HELOC)
If you opt for the second option, you need to find a lender that offers HELOCs on rental properties.
When you take out a HELOC, you sign up for a form of revolving credit that allows you to borrow money from your home equity. The lender that you sign with will set a maximum limit within an agreed period.
The collateral for this loan is your existing home. So, if you are unable to make your payments back, you could lose your home.
However, as long as you make your payments, a HELOC is a great choice if you are looking to invest in real estate.
11. Private Money Loan
Private money loans are exactly what they sound like: sums of money that you get from private investors. Because you would not be going through a traditional financial institution, private money loans are quicker and easier.
However, these loans may also come with interest rates between 6% and 12%.
When you are looking for a private money loan, you need to meet with multiple lenders to find out what different terms and conditions are out there.
12. Small Business Loans
Lastly, we want to highlight small business loans from the small business association.
If you are looking to purchase commercial real estate for rent, then you should look at obtaining an SBA 504 loan. These kinds of loans only require a 10% down payment for funding amounts from $125,000 to $20,000,000.
How to Start Investing in Real Estate With Hommati
If you are ready to use your knowledge of how to start investing in real estate, get started with Hommati. Our professional licensed realtors can help you find your first real estate investment property.
From there, you can start renting out the home and making money like the professionals make. You just have to figure out what kind of financing you want to take advantage of.
So, what are you waiting for? Get started on your real estate dreams today!