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how to invest in rental property with little money

 

How to invest in rental property with little money.

The greatest obstacle to 99% of aspiring real estate investors comes down to limited capital. Forget about the so-called “No Money Down” gimmicks and other scams. But, other options exist.

 

Consider these Options to Learn How to Invest in Rental Property with Little Money

 

Wholesale Houses

 

Wholesaling houses offer a way to enter rental property investing with no experience, no credit, and little cash. That’s a formula for good profits when done right.

Savvy investors find that obtaining transactional funding to flip wholesaling houses and real estate purchase contracts with fast closings reap nice profits.

Yet, always consider the costs. Financing and purchasing cost, earnest money deposits, and finding buyers always affect your investments.

Experts claim that the costs can amount to $5,000 or less. Another factor is the time it takes to complete and flip these investments.    

 

REITs and Real Estate Stocks

 

Real Estate Investment Trusts (REIT) provide a low-cost method to invest in real estate. A closed-end investment company owning many real estate’s assets like land, buildings, and real estate securities.

Publically traded REITs sell shares on a stock exchange. Listed on a national securities exchange, where individual investors buy and sell. The U.S. Securities and Exchange Commission (SEC) regulates public REITs.

Publicly related real estate stocks offer various types of real estate portfolios including rental properties. Convenient for investors too busy for active involvement with investments. However, the downside of multiple layered fees and costs often not providing investors with high yields.

Like other public stocks, these volatile investments don’t guarantee good returns. Especially in a downturn real estate market. Never invest more than you can afford to lose. Don’t expect big gains that direct real investments offer.

Public Non-traded REITs must register with the SEC. However, they don’t trade on security exchanges. This makes them less liquid than REITs publicly traded. Yet, they tend to be more stable as market fluctuations do not affect them like shares in a publicly traded REIT. 

 

Private Real Estate Partnerships and Private REITs

 

These provide a hybrid of investment opportunities. Blending the ease of passive income of stocks with the benefits of direct investments into income-producing flipping houses, rentals, and mortgage debt investing.    

Private partnerships now use advanced technologies enabling both new and sophisticated investors to leverage the energy, time, and expertise of industry pros. Invest your money and let the pros do all the work. Earn income based on your percentage of participation.

Private REITs raise money by finding individual investors. Private REITs do not trade on national security exchanges and are not regulated by the SEC. REITs must distribute a minimum of 90% of their taxable income to their investors. Their income derives from leasing properties, rent, and managing fees they collect.

Some Private REITs and Partnerships allow investors to put in $10,000 or less. Look for solid management and track record before investing.  Also, consider transparency of their financial activities along with access to your funds before investing.

 

Tax Liens

 

Many property owners fail to pay their property taxes on time creating a “Tax Lien” on the real property. To make matters worse, this debt incurs interest on top of the existing tax debt.

Many investors find bidding at local real estate auctions very profitable. The biggest problem these properties present is their poor condition. Property owners unable to pay their taxes usually let their properties run down. Consider the cost of repairs when bidding on tax lien auctions.

A few thousand dollars often win the bidding. Factoring in repair costs on top of the bid leaves room for profits.

 

Real Estate Auctions

 

Besides tax liens, many banks, lending institutions, and counties across the country hold real estate auctions. Usually conducted by a civil court, many occur in county courthouses as court-ordered foreclosures. Other auctions include non-distressed REOs and short-sales.

Investors love auctions because they offer undervalued properties sold by competitive bidding to the public. Auctions occur online or in person. Fix & Flip investors find good deals at public auctions. Likewise, long-term investors find bargains on rentals.

Expect to pay from 5% to 10% deposit and pay within 30 to 45 days if you win the bid.  

Different types of properties end up sold at auctions including:

  • Single-family homes;
  • Multiple-family units;
  • Apartment buildings;
  • Commercial properties; and
  • Raw land.

 

Investing in Rentals

 

If you intend to pick up single family homes, multi-family units, apartment buildings, or commercial buildings as long-term rentals you need to know this.

 

How to Avoid Long-Term Rentals Hassles

 

Hassles – Dealing with bad neighbors and even worst tenants creates hassles many investors wish to avoid.

Maintenance – Keeping up with necessary maintenance requires visiting all of your rentals to inspect and inquire about any problems. Periodic maintenance takes time.

Wear & Tear – Mending and repairing structures, appliances, curtains, carpets, and furniture takes a lot of your time. Electrical and plumbing need periodic inspections too. Tenants often don’t mention problems until something breaks.

Real Estate Contract Laws – If you are not a lawyer, you need to know contract laws to avoid errors allowing your tenants’ loopholes to get out of keeping their written obligations.

Screening Potential Tenants – Prior to renting to new tenants you must advertise available rentals, reply to all inquiries, and properly screen potential tenants to find the best ones.

Rent Collections – Don’t expect your tenants to automatically pay their rent on time. Some disorganized tenants are always late. Others simply don’t pay. A few may have lost their job and can’t pay.

Evictions – At times you have to evict bad tenants. If they fight the eviction, you must hire a lawyer and go to court and testify. All this costs you time and money.

State and Federal Housing Laws – Landlords expected to keep up with all laws about renting, contracts, discrimination, and other housing laws and regulations.

Record Keeping – Renting, balance sheets, profit analysis, paying taxes, and keeping records of all income and deductible expenses takes education and time. Poor record keeping leads to tax audits, loss of profits, and inability to justify your sales price when you decide to sell.

Avoid the Hassles of Long-Term Rentals by hiring a professional Property Management Company that does all the above-mentioned tasks. Saves you time and money over the life of your long-term rentals.

Contact Us to learn how we help landlords and rental investors to avoid the hassles. 

Now that you learned how to invest in rental properties with little money. Enjoy life without the landlord problems. Let us deal with your tenants, screening prospective renters, repairs & maintenance, rent collecting, evictions, and record keeping.      

Steven Rich, MBA – Guest Blogger

 

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