An initial investment of $10,000 provides for plenty of opportunities to add real estate to your portfolio. FHA loans and publicly traded real estate investment options offer entry into the world of real estate even without extraordinary capital.
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
Why Invest $10K in Real Estate?
Real estate investing advice frequently focuses on those with already-deep pockets and overlooks those keen to enter the market with less cash up front. Fortunately, technology puts investment opportunities at our fingertips and makes it worthwhile and accessible no matter the amount.
Depending on an individual’s investment goals and risk tolerance, the initial investment can be a first step into an aggressive strategy to build wealth. Alternatively, real estate investment can be a conservative way to develop a smaller amount of passive income and enjoy a higher rate of return than available through CDs or savings accounts. Regardless of the long-term goal, this article addresses some of the best options for investing $10,000 in real estate.
Real Estate Investment Trusts & Exchange-Traded Funds
Real Estate Investment Trusts (REITs) remain a popular investment vehicle for both newer and experienced investors. Not only do they have no minimum investment amount, but they are also easily accessible through popular investment platforms and retirement accounts.
REITs are entities that own and manage income-producing properties or the mortgages that finance those properties. REIT shares are traded on major stock exchanges and can be purchased for the cost of only one share.
Investors like the ease of use of REITs and the diversification they bring to portfolios, and of course, the income. REITs must pay out at least 90 percent of its taxable income to shareholders in the form of dividends.
REIT exchange-traded funds also provide a low cost-of-entry investment option. The REIT ETFs are a collection of REITs that passively track real estate indexes, often focused on a particular asset type like medical office space or hotels. They also offer high dividends.
Purchase a Property
For prospective investors who want more hands-on involvement than REITs offer, purchasing a property is still an option, even with a small budget. Three federally insured loan programs reduce or eliminate the need for a down payment, but FHA loans are the most widely used and available.
The Federal Housing Administration permits qualifying buyers to put only 3.5 percent of the price of the property down. This means a $10,000 down payment could purchase a $285,000 property.
FHA loans do require that the purchaser to live in the home for at least one year, but the owner can rent out all or a portion of the home at the same time, meaning this could be as simple as having a roommate.
These loans can finance 1-to-4 unit properties, so investing in a true income-producing property is a possibility, and being a long-term landlord is just one option. Homeowners can also use a web-based option like AirBnb or VRBO to turn their home into an income-generating property by using the sites to connect with short-term guests.
Of course, whether or not this is a viable option greatly depends on the area. Zillow reports that the typical home value in the United States is $281,000. While $285,000 will not buy a property in the Bay Area, it can in much of the country.
This investment option does have a lot of benefits, but it does come with risk. The homeowner must budget for vacancies and keep funds in reserve for maintenance and other expenses.
Find a Partner or Consider Crowdfunding
Entrepreneurial-minded investors know that a small budget can still be mighty with the help of one or more partners to provide additional capital. Bringing more people into a project can reduce individual risk, and of course, reward.
Conduct market research and property comparisons to pitch the project to potential partners. Pooling funds and knowledge is ideal, but finding a business partner can be easier said than done.
Fortunately, the Internet can solve that problem via crowdfunding platforms. Real estate crowdfunding sites connect investors with those seeking funds for a project. The platforms do vet the projects, but investors should still do their own research as well. Minimum investments and investor restrictions vary based on the site.
Final Thoughts
Newer investors have several doors open to them, but those options come with very different levels of risk and required skill. When deciding how to invest $10,000 in real estate, carefully consider how long the money will be committed and how much risk you are truly willing to bear.
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
