There are more ways to invest in real estate investment than buying a rental property or a fixer-upper. In fact, real estate investment has a place in nearly any investment budget, because capital requirements vary so greatly across the spectrum of investment types. If you’ve ever wondered how much money you need to invest in real estate, read on to find the right option for your wallet.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More
Entry-Level Investment: Real Estate Investment Trusts
Minimum investment: 1 share
Real estate investment trusts (REITs) are companies that own and sometimes operate income-producing properties. These companies have to meet several SEC qualifications, including that they must pay out at least 90 percent of taxable income as dividends to shareholders.
REITs are publicly traded on national securities exchanges, and shares can be purchased just like any other stock. This means that the cost of entry is simply the cost of a share or the transaction minimum of your preferred platform. Kiplinger’s Top 13 REITs, for instance, range from $30 to $220 per share.
Public, non-listed REITs and private REITs commonly have investment minimums that range from $1,000 to $25,000. Private REITs are limited to accredited investors and are not regulated by the SEC.
REIT Exchange-Traded Funds
Rather than individually selecting each REIT for investment, you might consider REIT Exchange-Traded Funds (ETFs) to buy a collection of REIT stocks at once. REIT ETFs are professionally researched and managed, but there is no guarantee of a certain rate of return.
The minimum investment required for REIT ETFs is also the cost of a single share. They are popular investment products for retirement accounts, so many people already have access to them through their 401(k) and IRA account allocations.
Both REITs and REIT ETFs have the benefit of being easily managed and liquidated through easy-to-use brokerage platforms. Those who already manage their own investments will likely find these transactions easy to navigate.
Mid-Level Investment: Real Estate Syndication
Minimum Investment: $50,000
Greater capital commitment brings the chance of increased earnings and greater equity growth. Real estate syndication is a form of real estate crowdfunding, where a group of passive investors contribute to a larger project, pooling funds through an overarching project sponsor. The project’s sponsor is responsible managing the project—including securing funding, obtaining the property, property management, and eventual sale—while individual investors receive monthly passive income through rent collection according to the terms of the deal.
The minimum investment for real estate syndications will vary depending on the project, but Life Bridge Capital has multifamily project investment opportunities for as little as $50,000. When choosing a real estate syndication, be sure to vet the sponsor and the project before committing funds.
Multifamily syndications are popular investments due to the likelihood of early and regular returns through tenant rent collection. Depending on the syndication structure, investors may also see a growth in equity that is realized when the project terminates with the sale of the property.
Syndications do tie up investor funds for a number of years, usually 5 to 10. Whereas REITs and REIT ETFs are very liquid, investors may not be able to exit a syndication project until it terminates years down the road.
High-Level Investment: Property Purchase
Minimum Investment: $25,000+ (20% down payment), depending on area and property type
Individually purchasing real estate requires the greatest investment. Remember, however, that investors can finance the property rather than buying it outright, so the entire purchase price is not needed up front. A down payment of at least 20 percent is ideal to avoid the expense of mortgage insurance.
Even though you can get started with a relatively low down payment, the purchase of a property remains the most financially intense investment for the average person. After purchasing the property, you will be required to continue making mortgage payments. In addition to the ongoing monthly finance payments and annual property taxes, the property owner will continue to encounter costs related to the property, many of which will be unforeseen expenses. The owner will be solely responsible for these expenses, and will also be the only one to absorb the inevitable lack of income due to vacancy.
Of course, purchasing a property does hold the possibility of great reward. Buying and holding the property, renting the property, and flipping and selling the property are all ways to profit on your initial investment.
Final Thoughts
Investors who think outside the box of a traditional real estate purchase will find a spectrum of investment opportunities to accommodate their desired level of risk and financial commitment. Becoming a landlord is not the right fit for everyone, and the market is already saturated with fix-and-flip entrepreneurs. If you’ve been considering investing in real estate with a lower budget, consider adding REITs and real estate syndications to your portfolio, which both require less time and financial commitment than a traditional property purchase.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More
