Many people who have reached financial independence have done so investing in real estate. But this goal might seem impossible to achieve if you’re only looking at the result.
Today we’ll talk about how you can get started in real estate investing. We’ll show you how to invest even if you don’t have a ton of cash in the bank.
You will need some money to invest in real estate. If you’re serious about investing, you should be able to save up money in a reasonable amount of time.
So make a budget that includes saving for this purpose. And help your goal along by cutting non-essential expenses.
For the sake of argument, let’s say you’ve got $1,000 saved and you want to get started with real estate investing. There are few options you can look at to get started.
In This Article
- What Is A Real Estate Mogul?
- How to Become a Real Estate Mogul
- More About Crowdfunded Real Estate
- Traditional Real Estate Investing
- There Are Risks When Investing in Real Estate
What Is A Real Estate Mogul?
A Real Estate Mogul is an entrepreneur that has been very successful investing in real estate and owns multiple properties.
How to Become a Real Estate Mogul
Maybe owning and managing rental properties isn’t appealing to you. Or you don’t want to put a lot of cash into investing.
However, you may still want to grow wealth through real estate investing. If so, you can consider trying crowd-funded real estate investing.
Crowd-funded real estate investing is similar to peer-to-peer lending. The idea is that you are a part of a group of people who pool their money with other investors.
Then they lend that money to experienced rental real estate investment property owners.
The work on your part with this type of investing is minimal. However, you still have the potential to make a serious profit from real estate investing.
There are many platforms for investing in real estate via crowd-funding. I’m going to talk about six of the biggest today.
1. Realty Mogul
Realty Mogul lets you start investing in real estate with just $1,000. The company helps you invest in real estate differently than some of the others we’ll discuss here.
When you invest with Realty Mogul, you purchase shares in one of their LLCs.
The company uses a different LLC to hold the title to the properties invested via the first LLC. There’s a reason they run the business this way. It’s so Realty Mogul can give you added options for real estate investing.
Once you become a member, you can browse your investment choices. You can also review due diligence materials for those investments.
Once you’ve made an investment decision, you can sign your documents online. Realty Mogul has a secure system for doing so.
With Realty Mogul you can invest as an accredited investor. However, you can even invest as a non-accredited investor.
Accredited investors have to meet certain criteria:
- They must have a single income of at least $200,000 or a joint income of at least $300,000. Note that you must have maintained the income minimums for the last two years. Also, they are expected to continue in the current year.
- There’s another way you can become an accredited investor too. You’re considered accredited if you have a net worth of at least $1 million. This number cannot include equity in your primary residence. The $1 million number can be solely-owned investments. It can be joint-with-spouse investments too.
As an accredited investor, you can invest in any of Realty Mogul’s offerings. As a non-accredited investor, you have different investment choices.
You’re limited to investing in one of their two REIT (Real Estate Investment Trust) funds.
What Types of Real Estate Does Realty Mogul Invest In?
Realty Mogul invests in several different types of properties.
Some of them include:
- Single-family investments
- Multi-family properties
- Office buildings
- Industrial sites
- And more
See the Realty Mogul website for more information on specific investment options. They have both short-term and long-term investment options.
You can invest in six-month investments or up to 10-years. They have many options depending on your investment goals.
Learn More: Realty Mogul Review
Another popular crowd-funding company is Fundrise. They opened in 2012 have a large selection of investments to choose from. Here are some of the specs for investing with Fundrise.
- $500 minimum investment threshold (Starter Plan)
- One percent annual management fee
- Non-accredited investors as well as accredited investors
- Residential and commercial real estate offerings
- Private market investment advisory and management services
Learn More: Fundrise Review
Groundfloor focuses on peer-to-peer lending in the real estate sector. Investors lend money to those looking to refinance or rehabilitate residential housing.
The minimum dollar amount you need to start investing with Groundfloor is just $10. You can be an accredited or non-accredited investor to invest with Groundfloor.
Groundfloor works to fund loans with grades from A to G. The lower the grade, the higher risk the loan is. However, with those higher risk loans comes an opportunity for a higher rate of return.
Groundfloor funds debt investments in real estate as opposed to equity investments. In other words, investors make money when loans to borrowers are repaid.
There are no fees for those investing via Groundfloor. The company’s average rate of return over the last six years is 10%+.
Learn More: Groundfloor Review
PeerStreet works with trusted private lenders all over the U.S. The minimum dollar amount you need to invest with PeerStreet is $1,000. Know that you need to be an accredited investor to invest with them.
They assess each investment property option offered to them by the lenders. Assessment includes running properties through their algorithm. They use data science parameters to analyze investments too.
After properties get approved, they offer them to PeerStreet investors. As an investor, you can choose the investments you want to participate in.
Or a second option is to set your investment criteria through the PeerStreet investment tool. This feature will match you with loans that fit criteria you set.
Generally, their service fee will be in the range of 0.25%-1.00%. However, you’ll know the fee you’ll pay before you invest.
Learn More: PeerStreet Review
5. Equity Multiple
If you’ve been able to save up more than $1,000 consider Equity Multiple.
Like PeerStreet, they only accept accredited investors. Their minimum investment amount is $5,000, and they offer investment lengths between 12 and 120 months.
Some of the types of properties they invest in include:
- Student housing
- Mixed use
- Office buildings
As far as fees, Equity Multiple charges a 0.5% service fee, along with another fee of 10% of all profits.
HoneyBricks is a crowdfunded real estate platform that focuses on commercial real estate.
What’s different about HoneyBricks is that you are investing in professional managed, high-quality tokenized real estate.
Each investment is tokenized on the Ethereum blockchain, allowing for fractional ownership and distribution of tokens directly to your digital wallet.
You can use U.S. dollars to invest or invest directly from your crypto wallet. Returns are deposited into your connected crypto wallet(s).
The company focuses on commercial real estate in strong growth areas in 15 of the most populated cities in the U.S.
The minimum to invest is $1,000, although some investments may have higher minimums.
Only accredited investors can use HoneyBricks as of this time.
There is a 12-month minimum hold period on your shares as defined by U.S. Securities law, although you can redeem your shares back to HoneyBricks at any time.
HoneyBricks does charge management fees, which are outlined in the Terms and Conditions report you’ll receive when you sign up.
AcreTrader is only open to accredited investors. You need a $10,000 minimum investment, and the holding period can be as long as ten years.
As an investor, you own a portion of farmland you can rent out to farmers, which is how you earn your monthly income. The farmland is usually suitable for cash crops, but you make money from rent; you aren’t dependent on the crops.
AcreTrader pays an average rate of return between 3% – 11% and has fees upfront and annually. The annual fee is equal to 0.75% of the land’s value.
Learn More: AcreTrader Review
FarmTogether is another crowdfunding platform for farmland. You buy shares of an LLC that owns and manages the farmland.
Investors earn quarter or annual cash distributions from lease payments and harvesting. They also make distributions when the land is sold, if it’s sold for a profit.
Like AcreTrader, the platform is only open to accredited investors, and the minimum investment requirements are on the higher end.
FarmTogether pays an average 7% – 13% rate of return, but you have an entirely passive investment. Once you invest and pay your fees, you sit back and earn the profits that the farmland creates.
Learn More: FarmTogether Review
YieldStreet offers options to invest in artwork, marine vessels, commercial properties, and short-term small business loans if you’re an accredited investor looking for other ways to diversify your portfolio.
Like all crowdfunding platforms, you pool your investment with other investors to buy a part of the investment. Most have terms of six months and five years and have a higher than average rate of return of 8% – 13%. However, higher returns often mean higher risk.
The minimum investment is $10,000, and there is one option for non-accredited investors with a minimum investment of just $500.
Learn More: Yieldstreet Review
Roofstock is a real estate investing site, but it’s not your traditional platform. Rather than investing in crowdfunded real estate, Roofstock offers turnkey investment properties for sale.
Turnkey properties are those that already have tenants and are earning rent. The current investors want to sell the property and are ready to turn it over and make earnings immediately.
Roofstock handles all the due diligence required to vet investment properties, including the inspection. So if you find a property you like on their platform, you can bid confidently and close on the property quickly without seeing it in person.
This allows you to diversify your portfolio with real estate investments across the country, not just in your local area.
Roofstock also offers an investment option strictly for accredited investors. Roofstock One is an investment in shares of real estate investment properties. You must invest at least $5,000, and you earn a prorated amount of the property’s earnings after expenses.
Learn More: Roofstock Review
More About Crowdfunded Real Estate
Investors who invest their money in crowdfunded real estate investments have a unique chance. They can invest in a small piece of a real estate investment or the entire investment.
Statistics charts on crowd-funded sites track an investment’s earnings history information. And they often provide investors with year-end tax information as well.
Also, investors can manage their investments online.
The main attraction of crowdfunded real estate investing is that it’s easier for the investor.
For instance, someone else does the work of finding the property, getting a mortgage loan on the property, etc.
And investors don’t have to worry about screening tenants, managing tenants and the property.
Also, the dollar amount you’ve invested is minimal. Besides, someone else is responsible for the property loan or loans you invest in.
This means you don’t have to worry about the added debt on your credit report.
Above all, your workload is minimal, yet the potential for profit can still exist.
Crowdfunding Has Changed Things
Before the world of crowdfunding, only those with connections could invest in private real estate deals. The Securities Act of 1933 established that rule.
This act ruled that private securities could not market investments such as real estate investments publicly.
You had to be “in the know” if you wanted to fund the real estate ventures of wealthy real estate moguls. And the select group of people who had access to these deals often had to invest massive amounts of cash.
At times, they had to invest in the six-figure range for the privilege of investing in private real estate ventures.
But crowdfunded real estate investing has changed that. It allows investors of all different backgrounds to get in on ground-floor investing deals.
Now it doesn’t matter who you know, whether you’re a first-time or seasoned real estate investor. You can start with as little as $1,000 or less, and start making passive income in real estate.
Basically, crowdfunded real estate investing has leveled the playing field. No more closing the door on real estate investing to everyone but the super-rich.
There are hundreds of crowd-funded real estate investing companies out there. Here are some tips for picking crowdfunding real estate wisely.
Do Your Research
It’s important to research the crowdfunding companies you’re considering. Be sure to ask questions like these:
- How long have they been in business?
- What is the experience of their leadership team?
- What are their guidelines for borrowers? For investors?
- What is the minimum investment amount?
- What fees do the crowdfunding companies charge?
- Do investors have access to historical returns?
The more transparent the crowdfunding company is, the better. For this reason, you’ll have more information with which to make an investment decision.
Understand What You’re Getting Into
It’s important to understand how the process works with crowdfunded real estate investing. Each company has different methods for calculating and distributing investor returns.
There are generally two types of crowdfunding investments when it comes to real estate. They are debt investments and equity investments.
With debt investments, you earn your money as the real estate borrower pays back their loan. With equity investments, your return depends on the performance of the rental property and its income.
For instance, let’s say you invest in commercial real estate property. This property can house several tenants.
In this case, you as the investor make more money if all of those spaces get rented out. If the commercial building sits half empty for a while, you earn lower returns.
Do your research on each crowdfunded real estate company. Learn which types of investments they fund. Then choose the type of investment that fits your risk tolerance and investment education level.
The more you educate yourself, the better you’ll understand the risks and benefits. This will help you to make smarter investing choices.
Traditional Real Estate Investing
Another option to consider is traditional real estate investing. In other words, you buy rental properties and rent them out to others. Traditional real estate investing is a great option for growing wealth.
However, there are some downsides with traditional real estate investing. Consider these downsides before you go that route.
First, traditional real estate investing requires heavy time input. You may need to look at dozens of houses before you find the right one for rental purposes.
Then after you make your purchase, you’ll spend time doing other work. You’ll be readying the house for tenants and searching for tenants. Also, you’ll be managing and maintaining the property.
Second, let’s say you’re starting with a minimal amount of money down. If so, you’ll need to first purchase the home as an owner-occupied home.
Then you’ll have to live there for at least twelve months before renting the house out. For this is the rule with most lenders for purchasing an owner-occupied home with a minimal amount down.
Carrying a Loan
There’s another added task with traditional real estate investing. And that is that you hold the mortgage loan on the property.
Let’s say you’ve saved $5,000. And you put five or so percent down (on a $100,000 purchase if your cash available is $5,000).
Then you are holding a loan with very little safeguard between you and a housing market downturn.
I’m not against traditional real estate investing. However, when you’re going in with a small amount of cash to start with its essential to be aware of the risks.
There Are Risks When Investing in Real Estate
Whether it’s traditional or crowdfunded real estate investing, there are risks involved.
For instance, traditional real estate investors may be unable to rent a property in a bad area of town. Or they may be the recipient of a housing market crash.
Plus, they may have to do massive repairs if a tenant damages the home.
And when investing in crowdfunded real estate investments, you’re still at risk. The investments you choose also have the potential to lose money.
It’s important to educate yourself on the pros and cons of both types of real estate investing. Do this before choosing which type of real estate investment is best for you.
Your risk comfort level is a factor as well. With crowdfunded real estate investing, you don’t carry the entire burden of rental property ownership. Instead, you’re sharing the risk with several other investors.
Either way, the potential for increasing wealth is a reality. It’s possible for both traditional and crowd-funded investing. Crowdfunded real estate investing has opened the door for many investors.
With nearly any amount of cash, you can grow your net worth via real estate investing.
In brief, people will always need a place to live. And companies will always need to conduct their businesses in offices. Those facts make real estate investing in any form a smart investment to consider.
So even if you’re only able to start with a small amount of cash, think about real estate investing. By doing so, you can make your way to “real estate mogul.”
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