How I Invested In Real Estate For Under $10k — A Non-Millionaire’s Guide
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If you’re anything like me, you’ve been told to invest by a relative, a co-worker or some “rich” guy on Youtube who undoubtedly has written a book with methods and goals that you couldn’t possibly reach because you’re not a millionaire to begin with. Spoiler alert: There’s only 1 winner in that scenario and it’s not you. Yup, we’ve heard it all before.
Now it’s true; you ought to invest into real estate but it generally takes a considerable amount of capital. However, don’t rule it out just yet! In this guide, I’ll show you examples of how I’ve invested into real estate with just $10,000. By the way, you can start with less. We don’t discriminate.
MAKE GOALS
Now before we dive into these examples, a couple quick house keeping rules. Get it? house keeping? Real estate? — Yea, I’m a dad. #dadlife
I always advise friends to come up with a few goals and write them down. Whether it be you are looking to purchase a new car next year and you need a good down payment or you’re saving up for a little vacay to Vegas for the summer. Seriously, write them down. These goals can guide you with where you may want to allocate your money.
But Johnny, I just want to make more money! Isn’t that a goal?!
Not exactly. We all want to make more money but just trust me, goals are dope. Once one of your goals is achieved from investments, you’re going to feel amazing. Ever taken a long, hot shower after coming back from a weekend camping trip? That kind of amazing.
Here’s a quick example of a goal I achieved in November of last year. My goal was to purchase a new car for my in-laws because their 2003 Ford was on its last leg. I appropriately invested a sum of capital in the Spring that would eventually yield a comfortable amount to purchase a reliable car. We paid cash and got the car we wanted.
In other words, I invested money that gave me returns enough to purchase a car. The original investment is still invested. So I didn’t actually have to spend anything out of my bank account to purchase the car. We put a bow-tie on the car and everyone had a blast.
Here’s a simple goal: Invest into something that will give you returns that will is equal to your annual car insurance. That investment’s returns are just helping you pay that expense. Autopilot. Easy.
Lastly, if you’re not flipping homes in Los Angeles, I’d generally suggest playing the long game for these investments. This means leave your investments to grow for at least a few years. And with your returns, consider investing most of them back. This is how to build a good stretch of residual income. So while you’re netflix & chilling, you’re making some extra bucks. Incredible right? Let’s get to it.
LEAVE IT TO THE EXPERTS
So chances are you are not a real estate expert, you probably don’t have time to do all the research and even if you did, you might be making risky bets. Do what I do, and just leave it to the experts on this one. Real Estate involves property management, property tax, utilities, tenants, contractors, leases, brokerages, and so forth. It’s a lot of headache and if you work full time and want to maintain a decent social life, I’d consider leaving your money at the hands of experts. See it this way; they are people who are helping you reach your goal while you help them with their’s. #winwin
YOU DOWN WITH REIT? (Yea, you know me)
So there are these wonderful things called Real Estate Investment Trusts (REIT), which is generally a company or group that engages in commercial/residential investments, property management and financing. REITs are what mutual funds are for stocks. Essentially you are giving capital to a company who is pooling funds and using it to engage and make profit in the real estate industry.
Below are my two methods to invest into REITs. The first is illiquid, which means you can’t immediately take your money back without going through a process which may take time. The other is much more liquid and you can take it out virtually whenever you want. Both have their own advantages depending on your goals however both types will likely give you a return on your investment.
1. Invest into a REIT with illiquidity
There are a vast (read endless) amounts of REITs out there in various forms so finding one isn’t going to be difficult. Narrowing it down is where you might get stuck but never fear, I’m here for you! As a person who likes to try new products & services, Fundrise caught my eye and so far, I really dig it. On Fundrise, there are a few products you can invest into and they’ve created a platform for folks who want to start investing as little as $500. Woah! Talk about accessibility! Speaking of accessibility, the website’s content is easy to understand and fairly straight forward, even for noobs. #noobfriendly
Learn about Fundrise products here.
Now if you want make some real money, I would suggest starting with $5,000 or more. There are several products on the site you can invest into and currently you will receive income quarterly, while also being invested into an appreciating investment. According to their historical data, you can expect annual returns in the 10% range. Sign up, drop some money in, and boom you’re now a real estate investor. See that wasn’t so hard was it?
Note: I’m not in any way affiliated with Fundrise nor is this a sponsored post of any kind. I just really like their service/products so far!
2. Invest into a REIT with liquidity
Okay so now that you’re caught up with REITs, let’s talk about how to do it but with some liquidity. Liquidity is a term used to describe how easy it is to convert assets to cash. Sometimes when you’re nervous about investing, you’ll want to know that there’s a quick exit plan if things start to go sour with the investment. Or maybe you really want to do this but the assurance of being able to pull out fairly quickly is really what you needed to start.
For this method, you will need to have a means to purchase stocks. I personally love Robinhood App and I use it for most of my stock investments. Use my referral link and you’ll get a FREE stock just for signing up. I also get one so it’s a win win for all. share.robinhood.com/johnnyl25 #nobrainer
We got REITs down and now I need to tell you about Exchange-Traded Funds (ETF). An exchange-traded fund is a type of investment fund traded on stock exchanges. They are essentially a fund setup that invests into several stocks at the same time. Often times, ETFs focus on a certain industry or sector which makes it easy to invest broadly on a market that you think is hot.
You guessed it; there are REIT ETFs which invest into various real estate endeavors, sometimes through multiple companies and even other REITs. I’m being very broad so as you do your research you will realize how in depth the subject can be. When you buy shares in a given ETF, you are jumping into a pool of investments which create a sort of micro-diversification simply because it’s not just one company’s stock.
Here are some quick ETFs that you could look into to begin your research. I hold or have held positions in these ETFs. You can expect a range of annualized returns from 4%-12% annual from these ETFs.
iShares U.S. Real Estate ETF — IYR (YTD 9.85%)
Vanguard REIT ETF — VNQ (YTD 4.38%)
iShares Cohen & Steers REIT ETF — ICF (YTD 4.10%)
SPDR Dow Jones REIT ETF — RWR (YTD 3.95%)
Guggenheim China Real Estate ETF — TAO (YTD 53.96%)
Yes that last one is a Chinese Real Estate ETF with an awesome 54% YTD! I always like to help expand your horizons by throwing out a wild card to show you how you could make some great returns if you seek the right opportunity based on your goals. More on China next time. =)
YOU ARE NOW READY TO BE A REAL ESTATE MOGUL! #blessup
Well there you have it friends; 2 very simple ways to invest into Real Estate without having to be a millionaire, buy a DVD, or a scammy book.
The annualized returns might not be huge, but they are steady, low-risk, and help you diversify from other investments. Also it’s heck of a lot better than sitting in your savings account. #facts
Now keep in mind, this guide will get you started however it is broad and just the tip of the iceberg. As always, do your research, make goals and sit down and really plan it out. For those that I have advised, most of the individuals who make plans with goals in mind tend to get better results than those who just throw money in to see what happens. Both groups are welcomed but I can’t say enough about planning. Let’s build fam!
Hope you found this simple guide helpful. Feel free to reach out if you have any questions or want to learn more and I’ll do my best to get back to you!
-Johnny
Follow me on instagram for daily picks in my stories: @waltzinthestreet
P.S. What’s with Bitcoin? Check out my simple Crypto investing guide
“How I Avoid Bitcoin FOMO — A Guide To Low Risk Crypto Investing”
