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5 Ways to Invest in Real Estate Without Much Money

Real estate can help diversify a portfolio.

One way to grow your wealth over time is to invest in real estate. A lot of investors like the idea of using property as a way to generate cash flow and invest for the future, but it can be discouraging when you realize how much money you need. Property purchases can cost hundreds of thousands -- or even millions -- of dollars. Buying something like that outright can be out of reach for most would-be investors. The good news, though, is that there are options. Here are five ways to invest in real estate without a huge chunk of capital.

Real estate investment trusts

One way to add real estate exposure to your portfolio is with the help of real estate investment trusts, referred to as REITs. A REIT is basically a collection of real estate companies or property notes. It operates similarly to a fund and you can even find REITs traded on stock exchanges. These investments have a fairly low barrier to entry and you might be able to start investing with less than $100. While you might not own the real estate directly, you are gaining some exposure to real estate investments, and it can be a way to add diversity to your portfolio.

Online crowdfunding

In recent years, crowdfunding has become a major part of real estate investing, providing a way for you to invest in various projects, REITs and other property-related assets with a relatively small amount of capital. You join other investors and receive earnings in proportion to how much you've put in. Depending on the crowdfunding website, you might be able to start investing with as little as $500. However, it's important to pay attention to what you're getting because some sites only offer direct investment in property projects to accredited investors.

Companies with real estate exposure

Rather than trying to invest directly in real estate, you can use an indirect approach with the help of companies that have a real estate connection. Companies that manage storage units or build apartment buildings can be solid choices for investment. Think about the types of companies that are involved in various aspects of the real estate industry, analyze the fundamentals and then make a choice about where to put your money. Depending on the situation and your broker, you might be able to invest as little as $25 and buy fractional shares. This can be a way to ensure diversity in your portfolio while adding some exposure to real estate.

A real estate investing partner

Maybe you're short on capital, but you know someone who has a lot of cash to invest. You might be able to form a partnership with them on a project. There are numerous ways to structure such a partnership, so it's a good idea to consult with a knowledgeable attorney as you move forward. If you can bring something to the partnership, such as knowledge, management skills or anything else, you might be able to partner with a financial backer who believes in you. It's important to come up with an equitable way to split the profits at the beginning and get the terms of the partnership in writing.

A government loan

Another option is to use a government lending program to purchase property. While you don't receive the funds from the government, the feds do guarantee the loan so others will take a chance on you. There are three main programs you can use to purchase a property with a small amount of money down. With FHA, you can put as little as 3.5% down, making buying a property more affordable. Plus, you can buy a duplex or fourplex and rent out the units you're not living in. If you live in a rural area and meet income requirements, you might be able to buy a home with as little as 0% down with USDA. For veterans and qualifying family members, it might be possible to buy a home without a down payment.

Ways to invest in real estate without a a lot of money:

-- Real estate investment trusts

-- Online crowdfunding

-- Companies with real estate exposure

-- A real estate investing partner

-- A government loan

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