This blog post is for all the real estate investor rookies who don't have much money but have a big dream. Did you ever think you couldn't invest in real estate with just $20k? Well, think again.
Here's how to start investing in real estate with only $20,000.
We said it's possible to invest in real estate with just $20,000. We didn't say that it would be easy. Real estate investing with only a small down deposit requires a massive amount of hard work and sacrifice if you want to become a successful real estate investor. Can you build a real estate business with only $20k? Absolutely. But most won't. Do you think you have what it takes?
Nothing that's good in life comes easy. So unless you're loaded with cash, if you want to make money in real estate, you need to be willing to work hard and sacrifice... pretty much everything.
Our founder, and the founder of Ohio Cash Flow, Engelo Rumora, moved from Australia to Kansas City. He was in search of real estate investment opportunities that were affordable and which he knew he could make money from with a bit of hard work. With only $15,000, he bought a D-class property for $9,000, then renovated it for $4,000. Into the deal for a total of $13,000, Englo then sold that Kansas City home for $27,000. Real estate investing with only $20,000 is possible, but you need to be creative.
Remember, nothing comes without hard work and sacrifice. So if you're living in California, New York, or any other state where the market is completely out of control, you need to pack up and move to a market where the numbers actually make sense. Ideally, you want to be able to buy a property outright.
If you have $20,000, it is possible to start investing in real estate with little to no debt, but you need to be in the right market.
The best deals in real estate are properties that no one else wants to buy. When you begin investing, you must develop your negotiation skills and remember the importance of patience. You don't need to purchase the first property that comes across your desk. Patience is the key component of negotiation. When one door closes, another will open.
Find a distressed asset in an inexpensive real estate market. You have a few options, but preferably you'll be looking in the Midwest. You'll probably have to look in less-than-desirable areas, even venture into a C- or D-class area to find the opportunities other investors overlook. But that's not the end of the world! This is your first step to acquiring income producing real estate.
Next, you need to renovate that property with as little money as possible. Fortunately, if you've purchased using an all cash investment, you won't need to worry about monthly payments and can focus your funds on renovating the property as quickly as possible.
The least amount of money you invest, the lower your risk. However, even if you have a high risk tolerance, you don't want to overextend yourself in a real estate deal. Furthermore, make sure that you have a contingency emergency fund set aside.
Ideally, your long-term financial goals include building a rental property portfolio so you can enjoy rental income and passive income for years to come. That means you want to be careful and start with a low minimum investment. However, to get to that point, you'll need to build up enough cash to hold onto rental properties while flipping homes.
Consider unique ways that you can invest and stretch your capital. For example, can you find a property owner that offers seller financing? Have you checked the foreclosure property list?
When starting your real estate investing journey with only a small amount of money, you want to make sure you're buying smart and getting a great deal. Remember, you make money when you buy, not when you sell.
They don't call it sweat equity for no reason. If you have any renovation skills, it's time to put them to work. If you don't, roll up your sleeves and work alongside your contractor. The more work you do yourself, the more profit you're likely to make. Remember, this state of starting your real estate business is all about hard work and sacrifice.
If possible, find a way to market the property without listing it with a real estate agent. Agent commissions are going to eat into your profit quickly. Consider owner-occupier listing sites, Facebook, local networking, and even craigslist before you engage an agent.
The people and professionals you bring to your real estate team will make or break your investing journey. It's not possible to walk this path alone. You need to build trust and relationships with key people who will help you get to where you want to be. Professionals you need to get on your team include:
- An experienced real estate agent.
- A real estate attorney.
- A title company.
If you have a little more cash and a lot less time, consider a turnkey property with Ohio Cash Flow. Ohio Cash Flow does all the hard work for you by finding the distressed property, completing the necessary renovations, and then finding a tenant. Find out how Ohio Cash Flow can get you started on your real estate investing journey.