How much do you need to invest in real estate? And is investing in real estate safe? Keep reading to find out the answers to these vital questions.
What are your options in Real Estate investing?
There are many factors you should consider before investing in property, and before we answer the question of how much money is needed to start real estate investing, we must first know the available options. There are 2 main ways you can invest in and benefit from property investments:
- Direct real estate investment – best for people with significant capital who understand the market.
- Indirect real estate investment – best for people who are less experienced in the market and/or want to start with a smaller sum.
Direct Real Estate investing
Direct investing is when you purchase the property yourself, refurbish and renovate it to eventually resell or rent it out to clients and residents. So, you are the one in control of every decision made and hence you are responsible for the success or failure of the enterprise. It’s up to you to negotiate the initial price of purchase, as well as to develop and implement a plan of action with the building. You will be the one funding the entire renovation process and you will be the one finding a qualified team to carry out the renovation. As you can imagine, direct investment can be quite expensive, and time consuming. This method is best suited for people who already have significant capital and understand the whole end to end process. If you live and breathe real estate, then this is the option for you.
How much money do you need to invest directly into residential real estate
Now, coming back to our initial question, a residential property is the least expensive option for direct investment. How much you need to invest in real estate depends heavily on the location of the property. The median home price in the US as of 2022 is a little over $400k. Of course, the amount you need to invest in residential real estate changes depending on location. For example, the average home prices for in-demand states like California and Hawaii start at around $680k-$730k. But in states like Mississippi, Iowa, Ohio, or Kansas home values range from $120k to $151k on average. And so the amount of money required to start real estate investing is lower.
How much money do you need to invest directly into commercial real estate
Commercial properties are buildings for business purposes such as multi-family residentials, offices, retail, or industrial units. As we’ve already figured out, direct investment in general is more costly. But the route of direct commercial investment can end up being the costliest. It can start at around $100k, but that is the bare minimum and the numbers are usually much higher. When it comes to how much you need to invest in commercial real estate, you need to think in terms of millions for optimal results. And even if you manage to find a cheaper property in a more affordable state, you will likely still need to renovate, drastically raising the costs. You also need to calculate the Internal Rate of Return (IRR) when thinking about how much you need to invest in commercial real estate.
Indirect Real Estate investing
Indirect real estate investing is when you invest your capital with a company that specializes in property investments. The company handles the entire process from purchasing buildings and renovating them to reselling or renting out the properties. You then receive a percentage from your initial investment. This option of investment is far less time-consuming and does not demand the same amount of knowledge and experience in the market as direct investing. So if you are new to this game or want to delegate the process to experts, you can opt for indirect investing. How much money is required to start real estate investing? How to choose which companies to invest with? Keep reading to discover the answers
How much money do you need to start indirect real estate investing
The indirect option is the way to go if you are just getting into real estate or simply do not have the resources and time to do it on your own. There are multiple types of companies that offer this service to you. And if you have ever wondered how to invest in real estate with $10k or even less – know that there are ways to do this like REITs (Real Estate Investment Trusts) but they come with downsides. These are neither the most reliable nor the most profitable option and can hence be very counterproductive.
Can I invest in with $10k?
There are some options on the market to invest as little as $10k, however the returns can be smaller and slower as often multiple investors are required in order to be able to deploy the capital. So, exactly how much money is required to start indirect real estate investing? The starting price to see significant returns on your investment is actually around $50k. And while it may be more than $10k, it’s still significantly more affordable than the direct investing option. And the companies that will provide you with optimal returns on investments are private funds. They are far more tax-optimized than REITs, resulting in greater mobility of capital.
Is Real Estate investing safe?
Security is another prime concern for many investors. If you have been wondering whether investing in real estate is safe you may want to consider private debt funds. Not only do they offer investment opportunities at $50k, they also provide you with the highest level of security possible. Investing in real estate is safe with a private fund because of the control they have over their assets. All aspects of the process can be controlled by the company’s experts. So, if you are wondering if investing in real estate is safe, know that with private funds it is.
How to invest with a private equity fund
Many novices wonder if investing in real estate is safe. Indirect investing is the safest option simply due to the fact that once you delegate the job to the experts, the likelihood of success increases. The most beneficial aspect of indirect investing is the minimized risks due to the many precautions set by the company. And private funds specifically are simultaneously the safest and most profitable option available to you.
If you would like to invest with a private equity fund at a starting amount of $50k, we’re here to help, so you can start building your capital, and securing your future.
