You’ve been working diligently and have managed to save $10,000. Now, you’re ready to put your hard-earned money into real estate investment, but you’re unsure about where to begin.
Investing your money is a monumental decision that should not be taken lightly. If you’re seeking a relatively safe option with the potential for building wealth and passive income, becoming a real estate investor might be the right path for you.
There are numerous methods to invest in real estate, each with its own benefits and drawbacks. The key is to find the strategy that aligns with your goals, risk appetite, and investment timeline.
In this article, we’ll guide you through ten diverse ways to invest in real estate using just $10,000.
10 Ways to Invest $10,000 in Real Estate
1. First-Position Mortgage Liens
Concreit, a platform designed to help individuals build wealth in real estate, lets you invest in a broad range of high-yield first-lien mortgages across the United States. Previously limited to hedge funds and private equity funds, this cash flow strategy is now accessible to everyone.
Concreit is an ideal choice if you want to diversify your investment portfolio and reduce exposure to riskier assets. The platform invests in numerous high-yield, income-focused first-lien mortgages across the United States, which minimizes risk.
Dividends with Concreit are paid weekly, with an average annualized return of 5.5% over the past year. You can cash out at any time after an initial 60-day settlement period, and there’s no minimum investment duration requirement.
By offering a more liquid alternative to directly investing in mortgage notes, the Concreit app is managed by a team of experts who carefully select each investment for the portfolio.
However, it’s important to note that investing in mortgages may not suit individuals seeking higher-risk opportunities, such as loans to speculators who fix and flip homes. Returns from first-lien mortgages are generally more predictable but may be lower compared to investing in real estate equity when the housing market recovers. Real estate equity offers higher potential returns but also comes with higher risk. Real estate debt, on the other hand, tends to be much safer, providing dependable income and the potential for weekly payouts. Additionally, it can help mitigate the effects of inflation.
With Concreit, you can easily invest in options that align with your evolving needs and interests. Whether you have short-term or long-term financial goals, the platform simplifies the investment process. Check out this short YouTube video to learn how to create an auto-investment schedule directly from your smartphone app.
If you’re looking to expand your investment portfolio beyond the stock market and secure regular income, investing in first-position real estate debt through Concreit is an excellent option. You can invest any amount, making it accessible to individuals with diverse budgets.
To start investing with Concreit, visit their website here.
2. Tax Liens
When property owners fail to pay property taxes, municipalities place a tax lien on the property. This allows them to collect the unpaid taxes, along with interest and penalties, from the property owner. Municipalities often hold auctions for tax liens, and investors can participate by placing bids for the lowest interest rate or paying the highest premium.
Tax liens can be attractive investments due to the potential interest rates of 10% to 12%. However, they can be difficult to research and track effectively, unlike mortgage liens. There’s also the possibility that the property owner will redeem the tax lien, resulting in receiving only the interest on your investment rather than foreclosing on the property.
Furthermore, if an investor repossesses the property due to unpaid taxes, they may need to make significant repairs or evict the previous owner or tenant.
3. Invest as a Limited Partner
Trusting and having a good working relationship with a partner is essential when considering investing as a limited partner. By investing $10,000 in residential properties as a limited partner, your partner(s) may match your investment. Additionally, responsibilities for managing the property can be shared between you and your partners.
However, limited partnerships can be risky investments, as all partners are exposed to the property’s performance fluctuations. It’s crucial to review all documents carefully before investing as fees and expenses can impact your returns. Lastly, there’s always the risk that the general partner may mismanage the property, resulting in financial losses for all investors.
4. Real Estate Wholesaling
Real estate wholesaling involves finding motivated sellers willing to sell their property for less than its fair market value. Instead of purchasing the property yourself, you put it under contract and assign that contract to another investor.
Being a real estate wholesaler requires excellent negotiation tactics and marketing skills. Once you possess these tools and dedicate time to building a strong network of regular investors, you can embark on a successful wholesale venture.
5. Turn Your Home into an Airbnb
If you’re considering investing $10,000 into an Airbnb rental property, several factors should be taken into account. Firstly, determine whether you’re exclusively renting out a home, as this impacts your potential earnings. Additionally, carefully research the pros and cons of investing in Airbnb before making a final decision.
Renting out your home on Airbnb offers an additional income stream. By listing your place on the platform, you have the potential to earn thousands of dollars per month. The flexibility of choosing when and how often to rent your property is a significant advantage.
However, investing in Airbnb comes with certain drawbacks, including the possibility of difficult guests and property damage. As the host, you’ll be responsible for associated fees, such as cleaning or listing fees.
6. Join a House-Flipping Club
Consider partnering with an experienced house flipper or joining a house-flipping club or course in your area. House-flipping clubs involve a group of investors pooling their money to purchase, renovate, and sell properties.
These clubs typically have a defined structure, including a designated leader and a team of experts responsible for various renovation aspects. The goal is to buy properties at discounted prices, complete inexpensive and speedy renovations, and ultimately sell them at a profit.
Pooling resources with other investors allows you to purchase more expensive properties and undertake complex renovations. Additionally, you gain access to experts who can assist you in overcoming challenges. However, it’s important to note that house-flipping clubs are generally considered a more speculative form of real estate investing, and you may relinquish some control over the process.
7. Invest in a REIT
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. REITs can be publicly traded on stock exchanges or privately held. Their primary objective is to provide investors with exposure to the real estate market without the need to directly purchase and manage properties.
REITs come in various types, with the main classifications being equity REITs and mortgage REITs. Equity REITs invest in properties and generate rental income, while mortgage REITs invest in mortgages and other loan products secured by real estate.
Investing in a REIT offers the potential for higher returns and diversification benefits. Compared to traditional real estate investing, REITs generally involve lower risks. However, it’s important to consider that REIT share prices can be volatile and that not all REITs may be suitable for every investor. Some REITs can also be illiquid and high-risk investments.
8. Real Estate Mutual Funds
Real estate mutual funds pool money from numerous investors to purchase real estate assets. These funds differ from REITs in a few ways.
Firstly, REITs are legally obligated to distribute at least 90% of their taxable income to shareholders as dividends. Mutual funds are not subject to this requirement, potentially resulting in higher payout ratios for REITs. Secondly, REITs are required to invest at least 75% of their assets in real estate, while mutual funds can diversify into a wider range of assets, including stocks and bonds.
Due to their narrow focus, real estate mutual funds tend to be more volatile than investments diversified across various sectors and companies. The value of your investment can fluctuate based on real estate values and economic conditions. Moreover, these investments often come with higher fees that can affect your potential returns.
9. Fractional Real Estate Investing
Fractional real estate investing involves purchasing a share of a property rather than the entire property itself. It allows investors to diversify their portfolios with minimal capital and provides greater flexibility compared to traditional real estate investing.
A disadvantage of fractional real estate investing is the challenge in finding suitable properties for fractional ownership. Additionally, many fractional real estate platforms offer illiquid investments, making it challenging to sell your shares if you require immediate cash. Lastly, fees associated with fractional ownership can eat into your potential profits.
10. Real Estate Crowdfunding
Real estate crowdfunding entails pooling money with others to invest in properties. The risks and rewards are shared among the investors, while a professional team typically manages the properties.
The advantages of real estate crowdfunding include portfolio diversification and the potential for higher returns. However, it’s important to consider the possibility of losing your entire investment as well as the illiquidity of these investments.
What’s the Best Way to Invest $10k in Real Estate?
There are numerous ways to invest in real estate, each with its own pros and cons. It ultimately depends on your priorities—whether you aim for a high return on investment or prioritize stability and income generation. Your individual goals and risk tolerance play a significant role in determining the right choice for you.
If you prioritize income generation, investing in first-position mortgage liens through Concreit may be particularly appealing. First-position liens offer a higher degree of security compared to other real estate investments since they are paid off before other debts in the event of a foreclosure. This makes them attractive for risk-averse investors.
Additionally, first-position mortgage liens typically yield more than other real estate investments, making them an excellent choice for maximizing income. To learn more about investing in first-position mortgage liens, visit Concreit.
Remember, investing in real estate requires careful consideration and research. Explore your options, assess your goals, and choose the strategy that aligns with your financial aspirations.