How to Invest $10,000 in Real Estate in 2024

Published on
 
June 5, 2024
real estate

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2024 might just be the new normal in real estate investing. Of course, predictions for any market are fraught with uncertainty. Still, the prevailing trends today seem to indicate a shift from the unabated frenzy activity of the past few months to more sober opportunities. That said, real estate is one investment option young professionals looking to widen their portfolio must take seriously. Now, the idea that you might be buying complete properties might sound out of your league, but the truth is that you can get started in the real estate market with far smaller sums—even as low as $10,000.

This guide unpacks the many ways to invest in real estate so that you can, over the next year, make informed and tactical decisions.

I. Understanding Your Investment Options

The term 'real estate investor' may traditionally conjure the idea of a landlord who owns an entire property. But times have changed, and so—with this in mind, here are a few other ways one might opt to put their money in real estate. Now, let's consider popular options—beginning with the classic direct ownership approach.

1. Direct Ownership

This involves buying property outright, or (more realistically for smaller sums) putting a down payment toward a mortgage. Think small condos, a house you'll rent out, or land that could be developed.

Pros:

  • Potential for high returns through rental income and property appreciation
  • Significant control over the property (renovations, tenants, etc.)
  • Certain tax benefits related to ownership

Cons:

  • Requires large upfront capital (down payment, closing costs)
  • Can be time-consuming to manage (dealing with tenants, maintenance)
  • Risk of property value decreasing
  • Illiquid asset – can be difficult to sell quickly if you need cash

Even with a $10,000 investment, direct ownership can be challenging without combining it with external funding sources like a mortgage.

2. Real Estate Investment Trusts (REITs)

One example of REIT is a company that owns and, in many cases, operates income-producing real estate, such as apartment buildings or shopping centers. In essence, it allows a person to invest in a set of properties without buying it directly themselves. 

REITs must pay out most of the profit from properties to shareholders and thus become an attractive object for dividend-seeking investors. The benefits of investing in REITs with $10,000 include:

  • Accessibility: Brokerage platforms have made it easy for one to buy shares of a REIT. $10,000 exposes you to diversity in properties that you would not be able to acquire by yourself.
  • Liquidity: There are many publicly traded REITs, which means shares could be sold in case an investor needs cash rather than from real estate owned.
  • Passive income: REITs provide regular dividends, creating passive income without managing a property yourself.
  • Professional management: The properties in a REIT portfolio are managed by real estate experts. 

It's worth noting, though, that publicly traded REITs can experience a fluctuation in value similar to the stock market. It's one more reason to be sure that you are picking ones with a good track record and understand the fees involved with the investment. 

3. Real Estate Crowdfunding and Fractional Ownership

Technology has opened up a revolutionary way to invest in real estate. Crowdfunding platforms pool money from numerous investors allowing you to buy a fraction of a property. Companies like Concreit and others specialize in fractional ownership that vet properties, handle all legal aspects, and sometimes even deal with property management. You become a part-owner alongside other investors.

For example, a platform might list a multi-unit apartment building with a buy-in of $5,000 per share. You become a partial owner and receive a proportional share of rental income. Another example is a platform offering shares in vacation properties, allowing you to own a portion of a luxury location while splitting costs and management.

The benefits of fractional ownership with $10,000 is its lower entry point where you invest in properties you could never afford alone. Another benefit is diversification where you can spread your investment across multiple properties to reduce risk. Additionally, many platforms handle all management tasks themselves. If the property value rises, your share could as well.

When going this route, be sure to research the platforms themselves and the specific properties they offer. Management fees can eat into returns, and it may take longer to sell your fractional shares compared to other investments.

II. Assessing Your Financial Readiness

Having a strong grasp of investment options is exciting, but before going in, it's crucial to honestly assess your overall financial picture. This ensures you're investing wisely and not putting yourself at undue risk.

In budgeting for initial investment, you need to understand the total cost. Rarely is the $10,000 price tag all you'll spend. Consider closing costs, potential renovations, platform fees (for REITs or crowdfunding), and any due diligence costs (inspection, appraisal, etc.).

Then, prepare for ongoing expenses. Real estate, sadly, isn't a "set it and forget it" investment. Factor in the following, depending on your chosen investment path:

  • Property taxes
  • Insurance
  • Maintenance (even if managed by a company, those fees pass to you)
  • HOA fees (if applicable)
  • Vacancy periods (lost rental income)

It's wise to have an emergency fund in place separate from your investment money. Unexpected life events shouldn't force you to liquidate your real estate holdings at an inopportune time.

What are your financial goals and timeline?

Are you hoping to make a quick profit by "flipping" a property, or interested in steady income and long-term growth? Your goal dictates which real estate investment options are most suitable. Real estate can be less volatile than the stock market, BUT it's not risk-free. Can you stomach seeing your investment value decrease (even temporarily) if the market dips?

Your age and overall financial picture also play a role. Younger investors might have more time to recover from losses, allowing for slightly riskier choices.

It’s important to be honest about how much risk would cause you excessive stress. Don't chase high potential returns if sleepless nights will be the result. Align your real estate investments with your overall financial plan. Are you saving for a down payment on a house? Is early retirement the dream? This helps determine how your $10,000 should be allocated.

III. Market Analysis

Market analysis is the process of gathering and evaluating information about specific geographic areas to identify potentially profitable real estate investment opportunities. Even if you're investing passively (REITs, crowdfunding), understanding your target market is key to making informed decisions.

In researching locations, you should look for:

  • Population growth: Areas with increasing populations generally see rising demand for housing
  • Job growth: A strong job market attracts renters and buyers
  • Amenities: Parks, restaurants, good schools, and public transport enhance the desirability of a location.
  • Infrastructure development: New roads, hospitals, etc., can boost property values.
  • Affordability: Assess the current price of properties compared to average incomes in the area.

Emerging markets often offer lower entry prices and higher potential growth, but come with more risk (less proven track record). On the other hand, established areas are typically more stable but with higher prices and potentially less dramatic gains. 

Be sure to not rely on national trends only. Real estate markets can be extremely localized. Zoom in on specific neighborhoods and cities when analyzing potential investments.

IV. Making the Investment

Once you've decided your options, prepared your finances, and analyzed the market, it's time to make your move! Let's focus on the steps involved in buying a property directly.

Steps to Invest in Direct Real Estate

1. Finding properties:

  • Real estate agents: They have access to listings but remember they're paid by the seller.
  • Online platforms (Zillow, etc.): Offer greater search control but be wary of scams.
  • Government auctions: Foreclosed properties, potential for bargains but often need upfront cash.

2. The importance of inspections and appraisals:

  • Inspections: Even with a smaller investment, don't skip this! A professional inspector identifies potential costly problems (roof, foundation, etc.).
  • Appraisals: Lenders require this, but it's valuable even for cash buyers. Ensure the property is actually worth what you're paying.

3. Legal Considerations

  • Real estate attorney: Helps with contracts, title searches, and closing. It may sound like another cost to incur, but one can prevent a very costly mistake.
  • Understanding local laws: Landlord-tenant laws, zoning restrictions, and taxes vary by location.

With a rental property also comes the responsibility of screening tenants, setting up lease agreements, and possibly hiring a property management company for remote property ownership.

Steps to Invest in REITs or Crowdfunding

1. Choose the right platform or REIT by knowing their:

  • Focus: Do they specialize in residential, commercial, specific locations, etc.? Align this with your investment goals.
  • Reputation: Research their track record, read reviews from other investors.
  • Fees: Management fees and transaction fees vary. These eat into your returns.
  • Public vs. private REITs: Public REITs trade on exchanges (easier to buy/sell) while private REITs may have different rules and investor requirements.

2. Understand their fees and returns by:

  • Thoroughly reading all disclosures: Understand exactly how your money will be used and how the company makes money.
  • Look for historical returns: BUT, past performance is not a guarantee of future results.

3. Learn the diversification strategies within real estate portfolios.

  • Property types: Mix residential and commercial REITs or crowdfunding projects if possible.
  • Geographic locations: Spread your investment across different regions to mitigate risk.
  • Investment strategies: Some platforms focus on rentals, others on property development – consider a blend.

Even if the platform handles most of the work, it's still YOUR money. Actively monitor your investments, read quarterly reports, and stay informed about the company's direction.

V. Managing Your Investment

The level of hands-on management required will depend heavily on your chosen investment strategy. 

Active Management vs. Passive Management

Active management in real estate investing involves hands-on involvement in decision-making and the day-to-day operations of your investment property. This typically applies to direct ownership of properties. Key activities of an active real estate investor include:

  • Selecting and acquiring properties
  • Finding and screening tenants
  • Setting rental rates
  • Handling maintenance and repairs
  • Marketing the property to attract new tenants
  • Managing legal and financial aspects of the property

Passive management in real estate investing takes a more hands-off approach. You outsource the majority of the property's management and operations to professionals. This is common for investments like REITs and real estate crowdfunding platforms. As a passive investor, your primary responsibilities include:

  • Selecting the REIT or crowdfunding platform
  • Monitoring the investment's performance through reports and updates
  • Reinvesting dividends or distributions (if desired)

Passive real estate investing through REITs and crowdfunding platforms offers significant advantages for those seeking income generation and portfolio diversification without the demands of traditional property management. 

Firstly, these options eliminate the time-consuming tasks associated with being a landlord. From the very process of finding tenants and rent collection to maintenance issues and legal quagmires. Moreover, passive real estate investing strategies come with a much more accessible entry barrier. 

Through REITs and crowdfunding, an individual can also invest in many properties across a varied portfolio while exposing a reasonably more minuscule amount of capital to risk. The diversification spreads your risk and gives you access to potentially higher-quality properties than you could afford. It makes real estate investing more accessible to people who otherwise did not have the resources or knowledge to hold properties themselves.

Technology and Real Estate Management

Technology has become an imperative part of the modern real estate industry, management, and even investment. Various firms and systems today provide platforms and toolmaking efficiency, data analysis, and access possible. 

For a hands-on landlord, softwares and technology are going to automate the process of screening tenants, rent collection, tracking maintenance, and even accounting. These are time-saving tools that also reduce errors. Technology-driven platforms do not leave even passive investors.  

Market analysis websites also provide valuable data to help make informed investment decisions, while crowdfunding platforms democratize access to fractional ownership opportunities. Across the board, automation features within many tools handle repetitive tasks and provide valuable insights into investment performance. 

While technology should never fully replace careful decision-making, it undoubtedly augments the savvy real estate investor's toolkit.

The Bottom Line

This guide has explored the diverse ways you can invest $10,000 in real estate in 2024. You can match the path with your financial goals and risk tolerance, ranging from the possibility of control in direct ownership of property to accessibility through REITs and even innovative crowdfunding.

Remember, this is just the beginning! Please make sure that you carry out detailed research through all the platforms, specific property listings, market trends before making any investments. Your professional financial advisor will give you custom-made advice to your complete financial picture.

Ready to move on to the next step? Sign up for a webinar or seminar on real estate investing and gain in-depth knowledge from experts. Or you can download an investment guide or checklist to guide your investment journey. 

Disclaimer

This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security which can only be made through official documents such as a private placement memorandum or a prospectus. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Neither Concreit nor any of its affiliates provides tax advice or investment recommendations and do not represent in any manner that the outcomes described herein or on the Site will result in any particular investment or tax consequence.Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Concreit does not guarantee its accuracy.

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