3 Steps to Invest 30k in Real Estate
Got 30K and you're wondering how you can invest it into real estate? Here are 3 steps to start investing.
Investing in the real estate market is never going to be a bad idea. But getting started can be one of the bigger challenges you can face in life. There are many ways to enter the real estate market, but one thing is certain. It requires starting capital in the form of a down payment. No matter what real estate investment strategy you choose, you are going to need some starting money. Saving money is an important step in setting yourself up for your future. You will want to ensure that your hard-earned money is invested wisely and will benefit you in the long run.
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How much do you need to invest in real estate?
Depending on who you ask, you will get a different figure for what the recommended starting amount is. Some will say that you can start with under $500, while others will recommend a minimum of $100,000. Generally, as a rule, experts will advise around $30,000 to be a good starting amount to begin the real estate investment adventure. So now that you have the $30k in hand, what is the next step? These are the steps to properly invest 30k in real estate.
Steps to investing in real estate
No matter how much you choose to invest, the steps will remain similar. Deciding how much and when to invest is the most important step. As mentioned previously, $30,000 is a good starting point, so will base these steps on this amount.
Find an investment you can afford
Finding an investment, you can afford is the most important piece of advice. While it can be tempting to purchase the greatest and shiniest property, if it is going to cost you more than you will get as a return in the long run, then it is not worth it. Secondly, especially if you are new to the investment game, there will be limitations as to what types of loans and financial help you will be able to get. Many banks and major lenders will require 20% deposit, so if you were to spend your entire 30k on the down payment, the most expensive property you could afford is $150,000.
The down payment is also just one piece of the pie. Chances are a house under $150,000 will need work, and investments require ongoing maintenance and upkeep. So, you will need to consider this in the final purchase pie. The Mortgage Reports mention that while a 20% deposit is not always necessary, it is advised as the less you owe a lander, the less interest you will pay over time. So, staying at 20% is a good investment strategy.
Establish a strategy
Unfortunately, there is no universally accepted handbook entitled ‘how to invest in real estate’, and this is because there is no one best way. There are many different investment routes you could go down, and this choice can mean the difference between your 30k becoming a lifelong investment, or a costly mistake. Roofstock lists the main investment strategies that suit a 30k investment as being the following.
- House hack. Use the 30k to purchase a property that you yourself will live in and rent out a room or part of the house as the investment.
- Rather than use the 30k on a single property, invest in a real estate investment trust (REIT). This way a professional managed the investment side and you have your money working for you. This method is good for first time investors as it is the most simple and low in risk.
- Become a landlord. This is the traditional way to have an investment property. Purchase a property you can afford, find a reliable tenant and have them pay you rent. This will require an ongoing cost as you will want a good real estate agent, and you will need to consider ongoing maintenance and insurance costs.
- Invest in construction. Mashvisor recommends looking past the purchase of established properties and to consider investing in home builders. In recent times there has been a substantial increase in construction, and so investing your money in a profitable builder can bring in large returns.
Seek a professional
In theory, purchasing an investment sounds simple, but so much can go wrong if you do not know what you are doing. If you are planning on investing a large amount like 30k, you will want to seek professional advice. This way you can ensure that the investment strategy you choose will be beneficial and will avoid any costly mistakes. Entering the world of real estate investing can be daunting for even the experienced. There is no reason you must do it alone and unguided.
You will require professional assistance all through the process. From managing the transaction of money, ensuring that all paperwork and legalities are met, and ensuring that your investment is legitimate.
Is investing 30k enough?
It is important to realize that just because we are talking about investing 30k, does not mean that you should have exactly this amount in your bank account. All the investment strategies involve ongoing costs, so it is imperative that this is factored in. Your investment costs do not end with the signing of a mortgage or investment agreement. 30k is definitely enough to make a mark on the investing world as long as you keep managing it and have realistic expectations of the ongoing requirements of your investment.
If done properly, investing 30k in real estate is a good way to set yourself up financially for the long haul. And the best way to invest this money really depends on many things. Such as how you best want to manage your investment. Even external factors like economic stability can influence your investment. If you are smart with your investment and manage your money properly, there is no reason that following these steps will not lead you to success as an investor.
Charles is the founder of infoSpike.com. His real estate investing experience started in 2004 and he is currently focused on rental property projects. He enjoys learning about real estate investing, personal finance, and marketing. Read more about Charles here.