Investing in real estate is a great way to generate passive income and build capital appreciation while providing a natural hedge against inflation.
1. Invest In Real Estate Crowdfunding
Real estate crowdfunding can be a great way for people who want to invest 10k in real estate but aren't ready to put it all into a rental property.
Crowdfunding can provide many of the same benefits as publicly traded REITs, but offers higher dividend distributions than publicly traded REITs and lower volatility than traditional stock market investments.
In addition, private real estate can be a natural hedge against inflation and provide returns unmatched by the stock market.
Reasons to invest $10K in Real Estate Crowdfunding
- Higher dividends than publicly traded REITs.
- Passive cash flows.
- Lower volatility than the stock market.
- Unrestricted returns on shares.
- Natural inflation hedge.
A real estate crowdfunding platform like Fundrise helps a sponsor (a company or team that manages an investment property) raise capital from individual investors. With the help of the crowdfunding platform, the money collected is combined to finance part or all of the real estate project.
Crowdfunding investments are commercial real estate that can be invested in a wide range of strategies, from apartment complexes to mixed-use buildings.
The main disadvantage of real estate crowdfunding platforms is that investments usually require your money for 3-5 years with limited liquidity options if you want to exit your investment early.
2. Invest in Short-Term Real Estate Debt Notes
If you like the benefits of real estate crowdfunding rather than the idea of tying up your cash for a long time, short-term real estate notes are another way to invest $10,000 in real estate.
These short-term debt notes are typically designed for small real estate investors who often buy distressed properties, renovate them, and then sell the properties for a nice profit.
Depending on certain factors, short-term real estate debt securities can earn returns of 7% to 15% or more for riskier investments.
Unlike many real estate crowdfunding platforms, investments are guaranteed. In case of default, the loan is secured by the property itself, which can be sold to recover the investor's money.
Benefits of investing in short-term debt notes
- Secured by physical real estate.
- Short-term. Average loan duration is less than 1 year.
- 10% return on average.
- Diversification. Invest in multiple loans.
With Groundfloor, you can invest in secured real estate bonds that offer an average yield of around 10% and a loan term of 10 months.
Note: Groundfloor is technically a real estate crowdfunding platform, but its business model differs from most other platforms in that its investments are debt investments, not equity investments like many real estate crowdfunding platforms.
3. Invest in Publicly Traded REITs
REITs (Real Estate Investment Trusts) can be a good way for novice investors to invest 10k in real estate due to their liquidity, wide range of investment options, affordability and transparency.
You can invest in publicly traded REITs through traditional brokerages like TD Ameritrade or Fidelity.
A REIT is a company that owns, invests in, or finances residential or commercial real estate.
The most common type is the equity REIT. Equity REITs typically own and operate income-producing real estate, such as an apartment complex or commercial space.
Another type of REIT is a mortgage REIT. They provide financing to real estate owners and operators through mortgage loans, real estate loans, or the purchase of mortgage-backed securities.
Benefits of investing in publicly-traded REITs
- Liquidity. Buy and sell stocks easily.
- Availability. Buy and sell through most traditional brokerage houses.
- competitive market performance.
4. Convert Existing Space Into An Airbnb
I must say that the Airbnb market for real estate investments is relatively saturated at the time of writing.
However, you can still take advantage if you are in a desirable location, such as a metropolitan area like New York, Los Angeles, or a vacation destination.
According to Earnest's study, Airbnb hosts earn an average of $924 per month.
That's roughly what it costs, but considering it only costs $1,000 to $2,000 to set up a single room, plus $2,000 to $3,000 to set up common areas, according to a CNBC article.
If you have $10K to invest in real estate, Airbnb might be a good option as long as you have some money left over.
There are two primary drawbacks to Airbnb rentals:
- Consistent turnover. Individuals could stay for 1 – 2 nights, which still requires you to prep the room. This could be time-consuming
for the busy individual.
- Competition from other hosts. Most potential Airbnb’ers browse multiple properties, so you could faceintense competition from a pricing perspective, which could eat into your margins.
5. Purchase A Single Family Rental
Conventional wisdom says that investing in duplexes and triplexes is the way to go.
However, as millennials and Gen Z entered the workforce, their housing preferences began to shift demand for real estate.
As many young households struggle with mortgage affordability in desirable suburbs, demand for single-family rental properties is increasing. ”
With single-family rentals, you're likely to have long-term tenants who can ease the burden of marketing the property, managing tenants,
Benefits of Investing $10K in a Single Family Rental
- Low tenant turnover = less stress
- SFR's tend to be families or couples = less chance of dealing with unruly tenants
Other Ways To Invest in Real Estate $10K.
- Real estate wholesale trade. It is when an individual agrees to buy a property for a certain price, often in distress, and then contracts with the property owner to resell the property within a certain period of time, with a difference between who bought it. the property and what it was for.
While real estate wholesaling can be quite profitable, with profits averaging 5% to 10% of the purchase price, wholesaling requires extensive knowledge of the local real estate market and a connected network to find potential business.
I do not recommend that beginning real estate investors try their hand at wholesale real estate.
- Real estate syndicate. It's when a group of investors pool money to buy an investment property.
Is it a lot like real estate crowdfunding? This is because Real Estate Syndication is crowdfunding, but before that crowdfunding became popular after the 2012 JOBS Act.
Through syndication, you can invest in private real estate deals that you wouldn't have access to otherwise.
How Much Money Can You Make Investing In Real Estate?
Unfortunately, the answer is not so simple. In a sense, it depends on many factors, such as how much money you have to invest and how much risk you are willing to take.
A typical investor can earn more than 10% annually through REIT investments. For some investments, such as real estate crowdfunding, you can expect a return on investment of up to 15%. However, in general, market conditions can dictate multiple returns and may be beyond individual control.
5 Best Ways To Invest $10K in Real Estate
- Real estate crowdfunding
- Real estate short-term debt notes
- Publicly Traded REITs
- Convert an existing space to an Airbnb
- Buying a rental property for a single family