Do you need tons of capital to start investing in real estate? Personal finance expert Grant Cardone recently tweeted from his Twitter account that the need for a lot of upfront capital to start breaking into real estate deals is the “biggest real estate misconception.”
The tweet, which is linked to Cardone’s live webinar on the topic of real estate deals, poses an interesting question. Do real estate professionals also agree that a lot of upfront capital isn’t entirely necessary to invest in real estate?
Why Upfront Capital Is Real Estate’s Biggest Misconception
Most real estate professionals who spoke with GOBankingRates agreed with Cardone’s tweet for several reasons.
Accessibility Created Via Tech Advancements
One key consideration is how accessible real estate investing has become in recent years, thanks to technology. Isaac Lidsky, CEO at Home Construction Collective, said technology — such as fintech and blockchain-based innovations — has lowered the cost of administration dramatically. Key examples include:
- Real estate crowdfunding
- Real estate investment trusts (REITs)
- House hacking
Real Estate Crowdfunding
In real estate crowdfunding scenarios, Lidsky has seen projects offer investment opportunities into rental units. These provide rental income streams to investors, often for as little as $100.
Real estate developer Eve Picker is the founder and CEO of Small Change, a crowdfunding platform for real estate development with social impact.
“Thanks to the launch of Regulation Crowdfunding, launched by the SEC in 2016, anyone who is 18 or older can invest via crowdfunding platforms,” said Picker. She uses Small Change as an example of a real estate crowdfunding platform where investors can invest as little as $250 in a project.
Real Estate Investment Trusts (REITs)
REITs, Lidsky said, are companies that own and operate income-producing real estate. Investors can invest in REITs through a brokerage account with investment minimums of around $1,000.
While this one is less tech forward than crowdfunding or REITs, Lidsky said renting out rooms in your own home is a form of real estate investing. Doing so can help the owner cover mortgage payments and build equity in the property.
Before you begin investing in any of these three avenues, Lidsky does recommend conducting due diligence.
“It’s important to do your research, require as much financial transparency as possible and understand the risks involved,” said Lidsky.
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