Investing in property is a great way to diversify your assets and create wealth for your family over time. While you may dream of one day buying a second home or investment property, to the average American, this idea may seem out of reach.
If you are looking to explore growing your family’s wealth through property investment but don’t have the chunk of change needed for a large downpayment, you’re not alone. Many Americans have seen a dip in their savings due to the pandemic and subsequent economic recession, and in 2020, real estate investment dipped globally by over 30%, with overall homeownership statistics hovering stubbornly around 65% as they have for the past few years.
The good news is, there are money-savvy avenues to begin your investment journey today, no matter what your pocketbook may look like. Let’s explore a few frugal ideas to begin investing in real estate on a budget.
1. Partner With A Professional Lender For A Smooth Purchase
Your first step in your frugal investment journey is to assess your finances. Ask yourself how much you are willing to spend, and don’t budge from that amount. Partnering with a professional lender and obtaining a property investment loan can help bring peace of mind and lighten the financial burden while you grow your rental property portfolio.
2. Live In Your Investment Property Before Renting It Out
A great way to begin investing in property is to purchase a home, live in it initially for a few years, and then keep it on as a rental property when you’re ready to move on. Many young couples find that this is an effective way to invest in real estate early in life without breaking the bank. Additionally, downpayment costs and credit score requirements tend to be lower for primary residence purchases than they do for an investment property.
3. Buy A Foreclosed Home Or Fixer-Upper To Save On Upfront Costs
Do you love DIY? Save thousands upfront on the cost of an investment home when you buy a foreclosed property at an auction or a “fixer-upper” and increase property value with DIY home improvement. While the initial cost will be lower, don’t forget to factor in the cost of repairs and upkeep on an older flip home or foreclosed property purchased in disrepair.
4. Buy A Duplex + Live In One Side Of Your Rental Property
It’s been especially difficult in the past decade for Millennials to make the leap from renting to owning. A frugal idea for a young family building their real estate portfolio is to purchase a duplex and live in one half while renting out the other unit. You can stay in the property for as long as you’d like and eventually rent out both units when you’re ready to graduate to a larger home.
5. Invest With A Partner To Cut Costs
If you simply don’t have the funds for a downpayment, consider going in on a real estate investment with a parent, partner, sibling, or friend. You can both contribute to closing costs and upkeep, and split the earnings from the investment monthly. With the responsibilities divided, exploring property investment may be a more achievable option.
6. Forego Working With A Real Estate Agent
A real estate agent can be indispensable in the search for your forever home. When you’re looking for an investment property, however, the cost of a real estate agent can really drain your finances. If you’re looking to invest on a budget, consider searching online for your first property and skip the fees associated with a real estate agent.
Every American dreams of creating a secure financial future for their family, and asset diversification through property investment can help you achieve that. Whether this is your first or fourth investment property purchase, consider these ideas to save money and start your real estate investment journey the frugal way.
This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.