Real estate investing is often painted as a game for the wealthy. You see headlines about cash buyers snatching up properties and millionaires flipping luxury homes. However, what if you don’t have deep pockets? What if you’re just starting out with a decent eye for opportunity but not much saved up? Fortunately, you can invest in real estate without a six-figure bank account. What you need is a strategy. Here’s how to break into this field.
Start Small and Think Local
As appealing as it might seem, you don’t need to start with a downtime high-rise right off the bat. Plenty of successful investors began with a single small rental unit or a fixer-upper. Focus on what is available in your local market. Even in competitive areas, there are overlooked neighborhoods or underpriced homes that need a little sweat equity.
Use Other People’s Money
You don’t have to fund the whole investment deal yourself. Many investors use other people’s money (OPM) to get started. Robert Kiyosaki, the personal finance guru known for writing ‘’Rich Dad Poor Dad’’ emphasizes using OPM to turbocharge investments.
You use external sources to fund your real estate projects. The money may come from a partner who puts in the capital while you do work or private, hard money lenders who focus on the property’s value and not your credit.
One example is Pacific Northwest Capital loan programs, available for a range of real estate projects, including land deals, constructions, and fix-and-flips. If you have a solid strategy, lenders like these can help bring your first project to life. You can also work with a broker to get the best deal on loans.
Spot Undervalued Properties
Some of the best entry-level investments are sitting right in front of people who don’t know how to recognize them. Unfortunately, online searches alone won’t cut it. You need to learn to identify distressed properties that may need cosmetic updates or inherited homes that heirs want to sell fast. Similarly, look for landlords tired of managing tenants who may be ready to offload a rental. Finding these properties needs a lot of legwork. You’ll have to go to open houses and talk to real estate agents who specialize in investment properties.
Use Equity to Scale
To start, you buy a property below market value, improve it, and increase its equity. Once the value goes up, you refinance, pull out some of the equity as cash, and use it to buy the next one. This is known as the BRRR strategy, where you buy, rehab, refinance, and repeat. This way, you recycle your capital and build a portfolio without needing to stack up six-figure savings each time.
Be Willing to Learn
The people who succeed in any kind of investing are the ones who learn as they go. Listen to podcasts, read books, or shadow a local investor for insights. You can also join local real estate meetups or online investor groups. The point is to surround yourself with people who are doing what you want to do.
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If you have the right approach and mindset, you can break into real estate investing even if you’re not ultra-rich. It will take a little more hustle and grit, but it’s definitely doable. Start looking for your first property to get your foot in.