Are you wondering what to do with 20k in savings? Or better yet, what would you do if you won 20k or someone handed it to you? Would you buy a car or pay off your debt? Some would opt to take a trip to their favorite destination. Others may choose to put the money in a savings account. Well, there are many options. However, did you know it is also possible to invest that 20k in real estate?
Real estate has been one of the most preferred investment vehicles because of its positive cash flow, tax advantages, appreciation, and passive income potential. Even so, investing in real estate is the last thing that will cross most people’s minds when they have only 20k at their disposal. Real estate investments are often viewed as out of reach for many beginner investors due to the high up-front costs and high risk. However, this does not mean you cannot invest in real estate with only 20k. No matter how little you may think your money is, or even if you don’t have any, there are always ways to invest in real estate that can suit your financial situation.
Are you thinking of how to invest 20k in real estate? It is definitely possible! Although it is hard to guarantee profits from every strategy, with the right real estate education, you can invest 20k wisely and build wealth. Here are 4 smart ideas on how to invest 20k in real estate.
1. Put a Down Payment on a Rental Property
If you aren’t sure how to invest 20k in real estate, this is one of the best options to consider. You can use the 20k at your disposal as a down payment for rental property and then get a loan. This is the best way to invest 20k if you want total control over your investment. With a good source of income and credit score, you can probably qualify for a big loan. This may be a better idea than waiting to have enough money to invest in real estate without credit. If the money is just sitting in your account, it will often end up being spent. 20k is enough money to use as a down payment for a modest rental property. For example, you can pay a 20% down payment for a rental property worth $100k.
However, it is important to note that there are a lot more costs associated with buying a rental property. There will be closing costs, which may amount to thousands of dollars. It may be tempting to stretch your budget in order to purchase your dream rental property. However, to maximize your return on investment, it is advisable to find cheap real estate with high returns. The property you buy should be within your price range or even slightly lower.
Related: How to Find Rental Property That Will Actually Make You Money
You can use Mashvisor’s property finder to find the best investment property in the market for you. This online real estate investment tool helps investors to quickly find a rental property within their budget that is worth investing in by providing essential metrics that project the performance of an income property. You just key in basic investment property filters and it gives you all the top-performing properties in a location along with key performance indicators including cap rate and cash on cash return. Try this tool out for free now.
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2. Real Estate Investment Trusts (REITs)
Investing in a REIT is another great option to consider if you are wondering how to invest 20k in real estate. REITs are companies that own commercial real estate and individual investors can pitch in on the investment to earn dividends. Therefore, instead of owning a particular investment property, you’ll own a portion of multiple investment properties within the REIT’s portfolio. These income properties can include everything from malls and warehouses to office buildings and hospitals.
REIT investing is one of the easiest ways to get into real estate if you have little capital. They also have high liquidity. Moreover, REIT investing doesn’t have the hassle of being a landlord since it is passive real estate investing. Apart from having high potential dividends, REITs are also diversified, which helps to lower risk. They also have tax advantages in regard to capital gains obligations. The downside of REIT investing is that you have little control over the purchase of the real estate investment. If you have minimal real estate investment experience, then a low-risk investment like a REIT would be your best way to invest money in real estate.
3. Real Estate Crowdfunding
Real estate crowdfunding is a relatively new avenue for investing in commercial real estate projects. Crowdfunding allows a real estate investor to take a small amount of money and join other investors in buying investment properties. The investors then become stakeholders in the real estate project. The internet has made this real estate strategy much easier. Investors communicate online via social media and other platforms and pitch in money to fund a real estate project. After pooling their money, investors themselves choose the property they wish to invest in.
Regardless of the amount of capital you have, you can invest in a crowdfunding platform. With 20k, you can join a trusted crowdfunding platform and enjoy regular income as well as long-term appreciation. It is an easy and low-risk way to get started in real estate, make passive income, and diversify a retirement portfolio. If you were unsure how to invest 20k in real estate, real estate crowdfunding is also a great strategy to take into consideration.
Related: The Best Real Estate Crowdfunding Sites
4. Real Estate Partnerships
If you are thinking of how to invest 20k in real estate without a loan and take the reins on the investment property, real estate partnerships are the way to go. 20k is not a lot of money if you want to buy a rental property without credit. However, if you decide to partner with an investor, it is possible.
If you were investing the majority of the money, a real estate partnership can be a good way to make passive income. Most of the work can be done by your partner. However, in a real estate partnership where you are the one contributing a smaller sum like 20k, be ready to be the one taking care of the search and management of the investment property. You will be leveraging your partner’s money to make a better return on investment. However, ensure you find a real estate partner that is trustworthy and reliable.
Related: What You Need to Know About Real Estate Partnerships
The Bottom Line
Never buy into the idea that you need a lot of cash to get into real estate investing! As we have seen, there are a number of ideas on how to invest 20k in real estate. With 20k at your disposal, there are a number of real estate investment strategies you can use to grow your money and build wealth.
Therefore, if you are thinking of how to invest 20k in real estate, you won’t run out of options. However, the right choice for you will depend on your unique long-term goals. Before you make a choice, learn as much as you can about the different real estate investment strategies. Whichever strategy you choose, be sure to commit and work hard. Depending on your strategy and commitment, you could gain a good return on investment down the line. Making your first real estate investment will always be the most difficult. As your cash flow improves and you gain more experience, subsequent investments become easier.
Be sure to use Mashvisor tools if you want to buy your first rental property. To subscribe to our services with a 15% discount today, click here.
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