Real estate investing is often seen as a path to wealth, but many believe it requires a large upfront investment. That’s not always true. With the right strategies, you can start building a real estate portfolio even on a small budget. This guide explores eight proven methods to invest in real estate with little money, from passive options like Real Estate Investment Trusts (REITs) to hands-on approaches like house hacking. Whether you’re a beginner or looking to diversify, these strategies can help you get started.
Introduction
Investing in real estate can provide income and long-term growth. Many think you need thousands of dollars to begin, but there are ways to enter the market with minimal funds. From buying shares in real estate companies to renting out part of your home, you can start small and scale up over time.
This article covers eight effective methods to invest in real estate on a small budget:
- Real Estate Investment Trusts (REITs)
- Crowdfunding Platforms
- House Hacking
- Real Estate Mutual Funds and ETFs
- Wholesaling
- Partnering with Others
- Using Private Money or Hard Money Loans
- Lease Options and Rent-to-Own
We’ll also discuss key considerations before investing and tips for finding great deals. By the end, you’ll have a clear roadmap to begin your real estate investment journey.
Methods to Invest in Real Estate with Little Money
1. Real Estate Investment Trusts (REITs)
What are REITs?
REITs are companies that own, operate, or finance income-generating real estate, such as apartment buildings, shopping centers, or office spaces. By buying shares in a REIT, you become a part-owner of these properties and earn dividends from rental income or property sales.
How to Invest in REITs
You can purchase REIT shares through a brokerage account, similar to buying stocks. Many REITs are listed on major stock exchanges, making them accessible to individual investors. Examples include Simon Property Group (shopping malls) and AvalonBay Communities (apartments).
Pros
- Low Entry Cost: Start with the price of one share, often under $100.
- Liquidity: Buy and sell shares easily on stock exchanges.
- Professional Management: The REIT handles property management tasks.
Cons
- Market Volatility: REIT prices can fluctuate with the stock market.
- No Control: You have no say in property management decisions.
Recent Performance
As of early 2025, the FTSE All Equity REIT Index showed gains of 1.0% in January and 4.2% in February, following a negative fourth quarter in 2024 .
Action Step
Open a brokerage account and research REITs that align with your goals. Consider real estate ETFs for added diversification.
Read: What is a REIT?
2. Crowdfunding Platforms
What is Real Estate Crowdfunding?
Crowdfunding allows you to pool money with other investors to fund real estate projects. Platforms like Fundrise and RealtyMogul connect investors with developers seeking funding for properties like apartment complexes or commercial buildings.
How It Works
You invest a small amount, typically $500 to $10,000, in a project. In return, you earn a share of the profits, which may come from rental income or property appreciation. The platform often manages the investment for you.
Pros
- Low Minimum Investment: Start with as little as $500.
- Diversification: Invest in multiple projects to spread risk.
- Passive Income: Many platforms handle management tasks.
Cons
- Less Control: You rely on the platform and developer.
- Illiquidity: Funds may be tied up for several years.
- Risk: If the project fails, you could lose your investment.
Returns
Top crowdfunding platforms report annualized returns between 2% and 20%, according to Investopedia research .
Action Step
Research platforms like Fundrise or RealtyMogul and start with a small investment in a project that matches your goals.
3. House Hacking
What is House Hacking?
House hacking involves buying a multi-unit property, such as a duplex or triplex, living in one unit, and renting out the others. The rental income helps cover your mortgage and other expenses, making it an affordable way to invest.
How to Do It
- Find a multi-unit property you can afford.
- Live in one unit and rent out the others.
- Use the rental income to offset your housing costs.
Benefits
- Builds Equity: You own the property while tenants help pay it off.
- Potential for Cash Flow: If rents cover expenses, you may profit.
Challenges
- Landlord Responsibilities: You’ll need to manage tenants and maintenance.
- Mortgage Qualification: Lenders may have stricter rules for investment properties.
Action Step
Look for multi-unit properties in your area and calculate if the rental income will cover your costs.
4. Real Estate Mutual Funds and ETFs
What Are They?
Real estate mutual funds and ETFs invest in a portfolio of real estate companies, including REITs, developers, and related businesses. They offer a diversified way to invest without buying individual properties.
How to Invest
Buy shares through a brokerage account. ETFs trade on stock exchanges, while mutual funds are purchased directly from the fund company.
Pros
- Diversification: Exposure to many properties and companies.
- Liquidity: Easy to buy and sell.
- Lower Risk: Less risky than owning single properties.
Cons
- Fees: Management fees can reduce returns.
- No Control: You don’t choose specific properties.
Action Step
Research real estate ETFs or mutual funds and invest through your brokerage account for broad exposure.
5. Wholesaling
What is Wholesaling?
Wholesaling involves finding undervalued properties and selling the contract to another investor for a profit, without owning the property yourself.
How to Get Started
- Find distressed properties at a low price.
- Negotiate a purchase contract.
- Find a buyer willing to pay more than your contract price.
- Assign the contract to the buyer for a fee.
Risks and Rewards
- Rewards: Can be done with little money upfront.
- Risks: Requires strong negotiation skills and market knowledge. You might not find a buyer.
Action Step
Network with local investors and learn how to identify motivated sellers.
6. Partnering with Others
Forming Partnerships
Partnering with others allows you to combine resources and expertise. One person might provide capital, while another finds deals or manages properties.
How to Find Partners
- Join real estate clubs or online forums.
- Look for people with complementary skills or capital.
Structuring Deals
Clearly define roles and responsibilities. For example, one partner might handle deal-finding, while another manages finances.
Action Step
Attend local real estate meetups to connect with potential partners.
7. Using Private Money or Hard Money Loans
What Are These Loans?
Private money loans come from individuals or private companies, while hard money loans are short-term loans secured by the property itself.
When to Use Them
Use these when you can’t qualify for traditional loans or need to close quickly.
Pros
- Faster Approval: Less paperwork than banks.
- Flexible Terms: Can be tailored to your needs.
Cons
- Higher Interest Rates: Often 8-12% or more.
- Shorter Terms: Typically 1-3 years.
Action Step
Research local private lenders or hard money lenders and understand their terms.
8. Lease Options and Rent-to-Own
How Do They Work?
A lease option lets a tenant rent a property with the option to buy it later at a set price. As an investor, you can use this to attract tenants who want to own a home but can’t get a mortgage yet.
Benefits for Investors
- Higher Rent: Tenants often pay extra for the option.
- Potential Profit: If the property appreciates, you can sell at a higher price.
How to Set It Up
- Find a buyer who wants to rent with an option to buy.
- Agree on the purchase price and terms.
- Collect an option fee upfront.
Action Step
Look for tenants interested in rent-to-own and structure a lease option agreement.
Things to Consider Before Investing
Before starting, keep these points in mind:
- Market Knowledge: Understand local trends, rental rates, and vacancy rates.
- Risk Tolerance: Real estate can be illiquid and risky, especially with leverage.
- Team: Build a team of professionals, including a real estate agent, lawyer, and accountant.
- Education: Continuously learn about real estate strategies and laws.
- Tax Benefits: Real estate often offers tax advantages like deducting mortgage interest and depreciation. Consult a tax professional for details.
Tips for Finding Good Deals
- Network: Attend real estate meetups and join online communities.
- Online Tools: Use platforms like Zillow or Redfin for off-market deals.
- Auctions: Look for foreclosure auctions.
- Direct Mail: Send letters to absentee owners or probate listings.
Conclusion
Investing in real estate on a small budget is achievable with the right strategies. Whether you choose passive investments like REITs or active approaches like wholesaling, there’s a method that fits your goals and resources. Start small, educate yourself, and gradually build your portfolio. With persistence, you can achieve financial growth through real estate.
For more insights, check out our other articles on real estate investing: