One of the main benefits of being a new Passive Investors Circle member is the lower initial investment you can make in a deal alongside me.
For instance, last month an orthodontist member wasn’t comfortable investing the minimum amount (75K) in the multifamily deal I invested in.
Why?
This was his first time investing in a real estate syndication and wanted to know if he could get in for a lower amount.
As a new member, I was able to get the minimum investment reduced from $75K to $50K.
He was happy and now well on his way to creating wealth using passive real estate.
But I cautioned him, like I do all those wanting to invest in real estate, to make sure that they had their other ducks in a row before moving forward such as:
- being in control over debt (I prefer to start off investing being consumer debt-free)
- have enough money in an emergency fund to cover 6 months of expenses
I can’t tell you how many people I’ve spoken to that want to start investing yet have over $500,000 in high-interest debt (NOT including their mortgage) and enough savings to cover only one month or less of their expenses.
The way that I teach people is based on what I would do if I was in your shoes if I wanted to get into real estate investing.
At this time I’ve been investing for six years and have amassed a seven figure portfolio but I’ve made (and continue to make) mistakes along the way.
My job with this site and YouTube channel is to teach you the best options for financial freedom using passive real estate so you can focus on what you BEST know how to do (your profession) and enjoy your family along the way.
That’s it.
So if you’re ready to get started, let’s find out how to invest $50K with real estate investments…
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How To Invest 50k In Real Estate
#1. Turnkey Rental Property
Turnkey rentals is an easy way for the beginner real estate investor (especially busy professional) to start passive investing.
These property types are becoming one of the more popular buy-and-hold strategies.
You can get started by contacting one of the companies that seek out and find undervalued property in strong rental markets.
They’ll renovate these properties and sell as “move-in” ready for investors.
This removes investors from having to oversee the repairs and making sure the renovation process is going smoothly.
Most turnkey real estate companies provide other services such as:
- management services
- maintenance
- marketing to keep occupied
Because these properties are professionally managed, you’re able to realize a cash return the day it closes.
On the downside, there’s a potential for a short term negativecash flow while the property is turned from one tenant to the next.
Also, even though companies will “manage and maintain” the properties for you, it’s still a good idea to monitor their performance by reviewing reports and financial statements from the property manager.
#2. REIT Investing
A REIT, or real estate investment trusts, is a company that owns, operates or finances income-producing real estate. They’re either private or public.
An example of a REIT that buys and manages property such as:
- office buildings
- hotels
- apartment buildings
- health care facilities
- self-storage
- retail centers
- commercial properties
In 1960, Congress established REITs as an amendment to the Cigar Excise Tax Extension of 1960. The provision allows individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties.
Investors can purchase these shares through the purchase of individual company stock, mutual funds or exchange traded funds (ETFs).
This made it very easy for people that wanted to invest in real estate without the hassle of dealing with tenants.
Also, REITs must distribute 90% of their profits in the form of dividends. These are typically sent out on a quarterly basis.
Because most REITs trade on public exchanges, they’re very easy to buy and sell similar to buying and selling stocks. And because they’re bought and sold on themajor U.S. stock exchanges every day, they eliminate the illiquidity risk.
REITs also offer attractive risk-adjusted returns and stable cash flow as they are highly diversified with 1000’s of properties to choose from.
There are also some downsides when investing in REITs.
If you’re wanting to invest in REITs for income; you’ll have larger tax consequences to deal with. The federal government taxes dividends at a lower rate than ordinary income but that dividend tax benefit doesn’t apply to REIT holdings.
Regarding dividends, occasionally REITS that pay higher dividend payouts may force their management to increase leverage to expand the real estate holdings. This would result in higher interest going out and also would reduce earnings.
#3. Fix and Flip Properties
The fix and flip industry was made extremely popular by the HGTV hit show, Flip or Flop.
The show highlights two former realtors that turn into professional flippers. In each episode, they instruct viewers on how to execute successful fix and flips.
The good news is if you’re thinking of a creative way of investing $50k in real estate, then this might be of interest to you. Fix and flip is the process where you’d buy a distressed property, fix it up and then flip or sell it.
As a busy professional myself, I stay away from active investing in real estate. Instead, I invest 100% in passive deals (more about that later). But there are some people that get excited about finding great deals that they know can be made profitable with a little TLC.
By finding lower priced deals, your $50k investment will typically cover the down payment (usually 20% of the purchase price) along with some of repair costs and closing costs.
70% Rule
The 70% rule is an easy way house flippers can determine the maximum price they should pay for rental properties in order to turn a profit.
It states that an investor should pay 70% of the After Repair Value (ARV) of a property, minus the cost of repairs and improvements.
Example
Here’s an example of the 70% rule in action.
Dr. B invests in a property with a $150,000 ARV. Let’s assume that he determines it needs $50,000 in repairs.
If we use the 70% rule we find:
- $150,000 (ARV) x 70% = $105,000
- $105,000 – $50,000 (repairs) =$55,000 (suggested offer price)
In this case, the rule suggests that the maximum price Dr. B should pay is $55,000.
Even though fix and flips can be great short-term investment properties, the risks are higher than other real estate investment strategy. Make sure you perform due diligence before getting started.
#4. Real Estate Partnerships
If you’re not an experienced investor, consider finding a mentor to assist you. I can’t tell you how much this initially helped me (and still does to this day).
Having someone (or multiple people) that you can trust to teach you what to do and avoid is PRICELESS.
Proverbs 15:22: “Plans fail for lack of counsel, but with many advisers they succeed.”
If you decide to partner with others, you’re able to invest in larger deals with bigger potential than you would have been able to on your own.
The more partnerships you make then the more deals you can do. And the more you do, the higher the potential for creating wealth.
I understand that starting out, it can be difficult to find people to partner with. The best step you can take is to begin networking with others. This is what I did initially when I started investing. The cool thing is that it doesn’t take long to expand your network.
Most real estate investors start out small, usually with a single-family home. It’s very difficult to scale using this strategy but with a partner or two, you can skip a few steps and begin in the multi-family space right away.
Speaking of multifamily investing, check out my personal take on it in the video below:
By doing this, you can grow your real estate portfolio faster and make more money as soon as you get into the game.
#5. Syndications
I’ve saved the BEST for last. Real estate syndications are my go-to strategy for investing in real estate passively.
No tenants = No headaches
If I was getting started and wanted to invest $50k, then investing in real estate syndications would be my first choice.
What’s a syndication?
Areal estate syndication is the pooling of funds from a group of investors to purchase a property that’s more expensive than any of them could have afforded on their own.
So instead of buying several smaller commercial properties individually, the group of people can come together and buy a larger asset together.
Why are syndications a good option to invest 50k in real estate?
These investments typically require little capital and are a fantastic way for a busy, high-income professional to start developing multiple streams of passive income.
In my opinion, there’s no better way to invest in real estate (with $50k) and not have to be involved with the property.
Your only job as a Limited Partner is to check your account every quarter for your distribution (which is usually tax-free).
One of the potential drawbacks to investing in a syndication is that oftentimes the better deals are open only to accredited investors.
Related Article: 7 Steps To Investing In Your First Apartment Syndication
Bottom Line
Now that you know 5 ways to invest $50k in real estate, this should help jumpstart your journey toward financial freedom in just a few short years.
Everybody is different. Make sure you set specific goals of what you’re trying to accomplish before jumping into any of the above strategies.
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