According to financial blog The Ascent, home prices from 2020 to 2021 increased by 16.2%, creating a median price of $374,900 as of the second quarter of 2021. With the real estate market growing, investors found it challenging to invest because of high demand and limited inventory.
However, suppose you can only invest $100,000. Fortunately, there are ways to invest in real estate and earn passive income without exceeding your budget. Read on to learn about three of them.
If you search in the right places, you might find a single-family home priced at $100,000 or less. Some investors purposely look for affordable properties that they can repair and improve for the purpose of reselling them.
This investment strategy is called “house flipping.” Some investors are making the most out of the high demand for housing with this strategy. However, flipping homes and earning a profit is not as easy as TV shows like “Designed to Sell” and “Flip or Flop” make it seem.
Less expensive homes often come with underlying problems that can cost a lot of money to fix. For instance, a $100,000 property may have hidden structural defects or be in a bad neighborhood. In addition, the longer you hold the house, the less money you will make long-term. This is because apart from paying for the mortgage, you’ll also need to shell out money for repairs, interior design, and other services required to make a house more appealing to renters.
Another option is to rent out the property. However, monthly mortgage payments may eat up most of the rental income. In addition, if a tenant moves out, the property will stop producing income. while continuing to rack up maintenance and repair expenses as well as monthly liability payments.
Most multifamily properties cost much more than $100,000, but you can actually use this amount as a down payment. Then, you can use the rental income to repay the mortgage over time.
According to GlobeSt.com, the number of occupied apartments in the biggest metropolitan cities in the country increased by 219,909 units in the second quarter of this year. Additionally, as the employment rate increases, the demand for multifamily properties is likely to rise
The average rent rose by 5.4% in the third quarter of this year. In areas with high demand, you may be able to charge more for rent.
Some challenges facing those who choose to purchase multifamily properties are management and vacancies. Property management entails time-consuming and laborious tasks such as creating leases, collecting rents, and answering tenant requests for repairs and maintenance.
Vacancies are also a risk, especially in less populous areas. You may also have tenants who pay the rent late, disrupting your cash flow each month.
Real estate syndication is a strategy where several passive investors pool their resources to invest in income-producing properties which they could not purchase outright or manage by themselves.
A syndicator, either an individual or a company, is responsible for finding, acquiring, and managing the investment property. Syndicators typically have extensive experience in real estate and can be counted on to perform due diligence on behalf of the investors. They may also assist with arranging financing, creating a business plan, and negotiating with property sellers. The goal of syndicators is to deliver the most value to investors through strong returns.
Compared to other investment strategies, real estate syndication comes with fewer headaches. Investors won’t have to worry about property management, vacancies, and other challenges that come with purchasing and owning a single- or multifamily home. At the same time, they earn passive income on a monthly or quarterly basis.
Using your $100,000, you can invest in a real estate syndication deal and reap these benefits.
Another plus is diversification. Instead of purchasing one property, you can invest in multiple deals. By spreading out your capital over several properties, you may reduce risk. For instance, when one property underperforms, other properties in your portfolio will continue generating returns, which in turn ensures a steady cash flow.
Another benefit of real estate syndications is that they can increase the value of their properties through “forced appreciation.” Since they invest in multifamily properties whose value is based on their net operating income (NOI), syndicators can add value by increasing rent or reducing expenses.
As the real estate market continues to strengthen, affordable properties have become harder to find. However, with Plus One Syndications, investors don’t have to spend time, resources, and effort on finding and acquiring great real estate deals. With our help, both novice and experienced investors can reap the benefits of investing in income-producing properties without having to take on the challenges that come with it.
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