A sign for sale outside a large white suburban home

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Traditional wisdom has it that investing in real estate is usually a good move – but how do you do that when you don’t have a lot of money? After all, not everyone has huge stacks of money lying around waiting to be spent on an investment property. Fortunately, there are a few ways you can take advantage of the hot real estate market even if you only have a few hundred dollars to spare. Check out your options here.

Invest in real estate with crowdfunding

Crowdfunding allows you to invest directly in ownership of a property or business through platforms with a minimum of $ 500. Since the number of wealthy investors is limited compared to those with less money, the idea is that large sums of money can be raised quickly from a larger pool of individual investors – a kind of Kickstarter. There are a number of platforms that do this including Fundrise, PeerStreet, and RealtyMogul (Investopedia has a good overview of the options here).

Ideally, you could make a lot of money investing in a company that later goes public. But as Nerdwallet points outThis method also has many disadvantages, such as annual fees that can exceed 2.5%, taxes on dividends, and the difficulty of selling real estate quickly. You also need to be good at spotting good investment opportunities on a case-by-case basis.

Invest in a REIT (Real Estate Investment Trust)

REITs allow you to invest in companies that own commercial real estate such as office buildings, apartments, and hotels. Many REITs are publicly traded on major stock exchanges, so investors can buy and sell them like stocks.

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The great thing about REITS is that they have to pay out 90% of their profits to investors in the form of dividends without you having to worry about actually managing a property. The downside is that REITs are prone to market declines, and that impact can be exacerbated by the 90 percent payouts that limit their ability to grow by investing in more real estate. In addition, the dividends are taxed as income.

On the other hand, they are easy to invest in – all you have to do is set up an account with a broker. Depending on Type of REIT you are investing in the minimum investment can be as low as $ 2,500 or less.

REIT Exchange Traded Funds or Real Estate Investment Funds

Both REIT ETFs and Real estate mutual funds allow you to invest in a basket of real estate securities that are traded on an exchange, though ETFs easier to use if you are a more active investor. The cost is relatively low – $ 1,000 can get you started.

This type of investment can be a good option if you prefer to passively track indices for the larger real estate market rather than closely monitoring the performance of a particular property. Of course, as with REITS, this approach also makes you vulnerable to market declines.

Buying property with an FHA loan

This is obviously more expensive than the previous options, however You can buy a property with an FHA mortgage for only 3.5% less (which is $ 10,500 for a $ 300,000 home). And because these government-sponsored loans are designed to help low- to middle-income people buy homes, they are less stringent than other private mortgage lenders.

While you can’t just use an FHA loan to buy investment property, instead of wasting it on renting, you are putting your money in an asset by buying your primary residence, or even freeing up money like you would would have paid a larger deposit to explore any of the options above. There is also no restrictions in renting space in your new home, which can provide you with passive income on top of your initial investment.