Investing in real estate, in general, was always thought to be something that only those with significant capital and time on their hands could ever have access to the market.
With median house prices growing by 17.0% as of June 2022, it’s even more lucrative to dabble in an industry that is projected to increase even further, but many may not know that you can invest in real estate with as little as $100 and a bit of patience.
We first have to identify that this isn’t a guaranteed way to accumulate wealth, and each method we outline below comes with some form of risk, as low as this could be for some.
Keep reading to learn how to invest in real estate with $100.
1. Invest In A AHP Fund
The American Homeowner preservation has the goal of purchasing distressed loans and helping families who are at risk of foreclosure on their homes. By investing here, you can get a financial return on your investment.
The fund has two types of offerings available for new investment, and these are the AHP title fund and the preREO. The AHP title fund sells securities to the public in what is referred to as an offering.
The most significant benefit here is that it helps many of those who are at risk of losing their homes. With dips in the economy, this has, unfortunately, become the case for many people across the country, as this fund can be a great lifeline for many of these people.
You also find that you get broader exposure to the property market while having an annual return of between 7-9% and being paid monthly, so all of this can be accessed with an initial investment of only $100.
As good as this sounds, there aren’t any guarantees that the fund will earn enough profit to allocate a 9% return to investors or even a return on your initial investment, so this may be paid
out later than the fifth anniversary of the purchase date so that returns may be slower in some cases.
For the preREO option, you’ll have to pay a program fee of 5% of the purchase price or $2,500 minimum, so your options are limited in what fund you go with, and the preREO investment is more of a longer-term strategy.
2. Invest In Real Estate Investment Trusts
This is another way that you can have exposure to the market without having to become a landlord and works by choosing a fund and by investing regularly, and setting up your account in a way that has auto-invest and dividend reinvestment features.
REITs come in different forms, whether these be private equity REITs or simple domestic stock that you can find at brokerage firms, and you get returns based on the real estate profits that are realized over time.
With some investment services like Fundrise, you can invest as little as $10 to get started, and if you want to raise this, you then have access to more options, like choosing the level of risk you are prepared to take.
You also don’t have to worry too much about spending too much time deciding where to invest, as these platforms automatically distribute your investment across multiple properties and developments, which can range from commercial lots to rentals.
Some of these types of REITs can be risky and aggressive, as some of these options are appropriate to those with a long-term investment plan in mind, so something like 5-10 years, and some of these have a quarterly distribution cycle.
This means this type of investment is best if owned alongside other investments so you can take the hit in case your REIT doesn’t work out, as these aren’t as liquid, so if you’re starting out with $100, you’re going to be spreading that investment pretty thin to start with.
This might be the most diverse way of spreading your income, as platforms allow you to invest as little as $100 to purchase shares on rental properties, and this may be more inviting for those who want to invest in a property type that will always be in high demand.
The way you make money is by collecting it from rental income and waiting for the property to appreciate in value over time. Most properties have a hold period of five to seven years, so you can make an easy income and get a share of the profits when the property is sold.
This is a moderately safe way to earn some income from rentals. If the property were to depreciate over time, you could put this under your expenses when filing your tax return, which means you can reduce your total tax liability and extends to maintenance repairs.
You’ll also find that these returns are in line with stocks, and these properties have been carefully selected to provide the best return profile that offers stable dividends and appreciation potential, so it is less risky than stocks.
One problem here is that predicting earnings can be pretty volatile, as some of these properties use financing, which could adversely affect the available equity depending on the percentage of financing, and this may not satisfy your investment preferences or objectives.
As risk-averse as this may be, this might work against you as these may have a lower potential for equity returns. A hypothetical 7.5% return for $100 might only see you only get $7.53 per year.
How To Invest In Real Estate With $100 – Frequently Asked Questions (FAQs)
Does The 50% Rule Apply To Me?
If you’re buying shares of a property, this may not apply to your situation as many funds and portfolio holders have already considered these costs, so you can see your yield and potential return as these costs have already been factored in.
If you were to buy larger shares by yourself or a whole property that you intend to rent out, the 50% or 1% rule is more beneficial as it gives you an idea of how much you should charge for rent.
Can I Invest In Property Without Any Money?
The only way we can see this as being possible is if you and a friend were to go in for shares, but your friend pays for the investment and could perhaps arrange for you to pay at a later date, but many people may not be comfortable with making investments in this way.
If you want some kind of return, you will have to invest some money, though some share and fund institutions may only ask for an initial $20 or $50 to get started, though if you want active management of your fund, you may incur other fees.
If you’re deciding to go with one of these methods, be aware that some of these platforms may not give you a consultation and assume you have done your own research and have sought financial advice prior to your investment.
One way to counteract what might be small returns is to have as diverse a portfolio as possible, which may mean investing in stocks, bonds, currencies, options, or mutual funds, most of which give you options to invest as little as $100.
Paul Martinez is the founder of BendingDestiny.com. He is an expert in the areas of finance, real estate, and eCommerce.
Join him on BendingDestiny.com to learn how to improve your financial life and excel in these areas. Before starting this blog, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.