How to Start Investing in Real Estate on a Budget

01-12-2016 | Ramona |

invest in real estateWhile investing in real estate has proven to offer excellent returns, getting started is not always easy.

After all, properties by their very definition tend to be expensive things to buy. This, in turn, can make getting started on a budget quite challenging.

While some real estate investors have launched their empire by re-mortgaging their family home, and re-investing the profits into a second property, for many people this is a risky proposition.

In addition, many mortgages for landlords are quite different to those for residential purchases, often requiring far larger deposits than you may have available.

However don’t let this limitation hold you back.

If you’ve made up your mind that you want to start investing in real estate, but you have a relatively small budget to get you started, there are still some creative ways to enter the market…

Use Crowdfunding Networks

Thanks to the wonders of the Internet, it’s becoming ever-easier for investors with liquid capital to buy shares in a property.

These so-called “crowdfunding” sites let dozens – or even hundreds – of investors club together to invest in a single property. The profits are then shared out based on your initial investment.

While crowdfunding may not be quite as exciting as buying your own rental property, the returns can still be quite healthy, while your risks are minimized.

Furthermore, depending on which platform you opt to use, you can get started for as little as £10, which means property investment really is available to virtually all of us.

Lend to Borrowers

Another way to invest in real estate, without even needing to deal with a broker, is through peer-to-peer networks. Here your money is gathered together with that of other investors, and then leant to house buyers as a mortgage.

Unlike crowdfunding, you won’t personally own any part of a property, but you’ll still benefit from the interest that the borrower pays you on their outstanding mortgage.

Platforms vary, with some putting all your money into a single mortgage, while others spread your capital across a range of mortgages.

This can significantly impact the “risk” of such an investment, so do your research before you jump into this option with both feet.

Shop for Cheap Properties

Just because many properties are expensive doesn’t mean to say that they all are.

Shop around and you’ll often find that more rural areas offer properties far below a similar home in an urban location. Assuming you’re willing to use a managing agent to look after your investment for you, geography need not necessarily be a major issue.

A handful of specialist property investment companies concentrate on cheaper areas, allowing you to buy properties for cash without the need for a mortgage.

Find a Partner

It would be a mistake to assume that you’re the only person in the world considering investing in real estate.

All round the country – and even the world – other people like you are having similar thoughts. For all you know, a family member or neighbour may even have some cash they’re looking to invest.

By partnering with others you’ll greatly reduce the total amount of money you need to invest to secure a suitable property.

So ask around, and visit real estate investment forums like Bigger Pockets and make connections with other interested first-time investors.

Think Outside the Box

Lastly, don’t assume that investing in real estate has to mean buying an apartment or family home to rent out.

There are a whole range of different opportunities available if only you’re willing to look further afield.

Some real estate investors, for example, buy parking lots, beach houses or areas of forest, all of which can offer similarly impressive rates of return, but with a far lower cost of entry.

The point is, if you’re confident that you want to invest in real estate, but your funds are limited, there are a whole host of opportunities out there for those people willing to go and find them.

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