They say it takes money to make money, and that can definitely hold true within the realm of real estate investing. If you want to buy an income property, for example, you’ll generally need to bring a sizable down payment to the table. Similarly, if you’re buying a home to flip, you’ll need money to purchase that home and cover the cost of renovations.
But sinking thousands of dollars into a single property is something you may not want to do. Or, it may not be an option if you don’t have much in the way of cash reserves.
But the good news is that it’s more than possible to make money in real estate without putting down a lot of cash. In fact, if you have a mere $100 to your name, you can start investing in real estate today.
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An easier way to get started
It’s a big misconception that the only way to invest in real estate is to go out and purchase property. Instead of doing that, you can invest in REITs instead.
REITs, or real estate investment trusts, are companies that own and operate different properties. Within the realm of REITs, there are different sectors to consider.
Industrial REITs, for example, operate warehouses and distribution centers. Healthcare REITs operate hospitals and skilled nursing facilities. And retail REITs operate indoor and outdoor malls and shopping centers.
Now some REITs are privately held, and those tend to have a pretty large buy-in. For example, you may need a minimum of $25,000 to own a piece of a privately held REIT. But many REITs trade publicly, the same way stocks do. And it doesn’t take a lot of money to buy shares of a publicly traded REIT.
Imagine you’re interested in investing in a healthcare REIT and decide to buy shares of Medical Properties Trust, which happens to be a REIT with an attractive dividend. As of this writing, shares of Medical Properties Trust are trading around $18 apiece, so even if you’re short on funds, you can still put money into that company.
Furthermore, it’s generally possible to buy REIT shares on a fractional basis so that even if you have limited money to invest with, you can still own a piece of the companies on your wish list. Say you have your eye on American Tower Corp., a well-known infrastructure REIT. Right now, shares of American Tower are trading around $234. If you only have $150 to invest with, for example, you can simply buy a portion of a share rather than have to wait for the share price to come down or for when you have more money.
Work with what you have
Some people don’t like the idea of tying up thousands of dollars in a rental property — an investment that’s fairly illiquid. Plus, you may not have the money to put down on an income property. But that doesn’t mean you need to stay out of the real estate investing game. If you’re willing to invest in REITs, you can really go a long way with a small amount of money.
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Maurie Backman has positions in American Tower and Medical Properties Trust. The Motley Fool has positions in and recommends American Tower. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
