How to Invest $50k in Real Estate

If you have $50,000 in investable capital, you have several viable strategies for putting it into real estate. One approach many investors take is buying a rental property, perhaps using a house hacking strategy. Other options can include investing in real estate investment trusts (REITs), joining real estate partnerships and crowdfunding.

If you're interested in building a real estate portfolio, a fina n cial advisor can help you analyze and manage investments.

Before You Invest

If you are considering investing in real estate, start by identifying your financial goals. Are you seeking steady income, long-term appreciation or a combination of both? Answers will help clarify your objectives and shape your investment strategy.

Next, you should acquire a working understanding of market conditions. This includes analyzing current and historical trends in property values and rental rates as well as local economic factors that can influence real estate performance.

Location is widely regarded as a key factor in real estate investment success. With this in mind, researching neighborhoods, their growth potential and proximity to amenities can provide insights into future property value and rental demand.

Ways to Invest in Real Estate With $50k

After assessing your financial objectives and familiarizing yourself with the market, it's time to examine ins and outs of the different strategies for investing in real estate. Here are some methods for getting started in real estate:

Buy a Rental Property

With $50,000, investing in a rental property can be a viable strategy. Begin by evaluating different real estate markets to find areas with affordable property prices and high rental demand. Consider neighborhoods with strong economic growth and low vacancy rates to maximize your investment potential.

The size of your investment fund will help focus your search. Lenders typically require a down payment of at least 15% for investment properties. This suggests you could potentially afford a home priced at approximately $250,000. Your $50,000 would pay a 15% down payment of $37,500 with the remainder going for $12,500 in closing costs , which typically range from 2% to 5% of the purchase price.

House Hacking

House hacking involves purchasing a multi-unit property, living in one unit and renting out the others. The rental income helps cover the mortgage.

For example, a hypothetical investor with $50,000 might acquire a $500,000 duplex with a down payment of $40,000. Since the home will be owner-occupied, the buyer could potentially qualify for a lower down payment of 8%, leaving $10,000 for closing costs.

After moving in, the buyer lives in one unit and rents the other for $1,200 per month. In this way, house hacking leverages $50,000 to turn a primary residence into a profitable investment that generates income while building equity.

The BRRRR Strategy

BRRRR stands for "buy, rehab, rent, refinance, repeat" and describes a potentially powerful approach to real estate investing. You can start implementing a BRRRR strategy by identifying a distressed or undervalued property in need of some work.

Next, you'll arrange a hard money loan to buy the property, conserving as much of your $50,000 in capital as you can to pay for rehabbing the property. After you've gotten the property in shape to rent, you can generate rental income.

Next, you'll aim to refinance the property based on its improved value and income generation. A successful refinance can repay the hard money loan and free up additional capital. At this point, you can repeat the process with another property, gradually building a real estate portfolio.

Real Estate Investment Trusts (REITs)

Real estate investment trusts (REITs) offer a way to invest in real estate without directly owning property. These are publicly traded companies that own, operate or finance income-producing real estate across various sectors, including commercial, residential and industrial properties. REITs are well suited for investors with limited capital because the only price of entry is the cost of a single share.

This investment can provide regular income through dividends, as REITs are required to distribute at least 90% of their taxable income to shareholders. Another benefit: Buying shares in a REIT allows an individual to broadly diversify their portfolio across many properties and types of properties with a single transaction.

Real Estate Partnerships

Real estate partnerships make it possible to pool resources with other investors. This collaborative approach allows someone with $50,000 to participate in larger projects that might be unattainable individually.

In a real estate partnership, you share costs and profits with your partners. This can help mitigate risks and provide a more stable return on your $50,000.

Crowdfunding

Real estate crowdfunding is another way to join forces with others. Crowdfunding can enable an investor with limited resources to participate in higher-value residential and commercial properties that might otherwise be out of reach.

Platforms like Fundrise and RealtyMogul provide opportunities to invest in diverse portfolios of properties from apartment complexes to commercial spaces. This approach has a low barrier to entry and can help manage risk by spreading a small amount of initial capital across multiple properties.

Bottom Line

Investing $50,000 in real estate can allow you to grow your wealth through a combination of different strategies. From purchasing rental properties and house hacking to leveraging the BRRRR strategy, investors can adjust their approach to align with their financial goals and risk tolerance. REITs, real estate partnerships and crowdfunding platforms can also offer additional avenues for diversification and potential income.

Tips for Real Estate Investments

• A financial advisor can help you create a personalized real estate portfolio. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• A big part of real estate investing is getting the proper financing, especially if you're looking to spread your cash across multiple investments. To estimate how much you might need to pay on financing, consider a free mortgage calculator .

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