Buying a $300,000 investment property before you hit your mid-twenties is an ideal way to start building wealth and a retirement portfolio. But it takes smart financial planning to make a purchase that big at so young an age. Here\u2019s how to start building toward that goal.<\/p>\n Real estate is a different ball game compared to other investment opportunities<\/a> which may offer faster returns and more liquidity<\/a> (which is nice if you need cash in a pinch).<\/p>\n When you sink your savings into an investment property, it can take weeks or months to unload it in order to free up your funds \u2014 unless you\u2019ve spent years building up equity that can be pulled out via a home equity line of credit<\/a> (HELOC).<\/p>\n However, when you put your capital into real estate, your wealth grows at a slower, steadier pace than the riskier, more volatile stock market.<\/p>\n With the right strategy and a lot of luck, stock market investing will net you significant, short-term gains. But the right real estate investment could earn you a whole lot more if you\u2019re willing to be patient, according to Dang:<\/p>\n \u201cIf I invested $100,000 in stocks, I\u2019d see a 10% return of $10,000 a year. But if I put that $100,000 into real estate, say 20% down on a $500,000 home. With just a 5% return \u2014 which is conservative in real estate \u2014 I\u2019m making $25,000 every single year on that home. That\u2019s $15,000 more that I\u2019m earning on the same amount of money.\u201d<\/p>\n Think you\u2019re ready to jump into real estate investing? Let\u2019s take a look at four different ways you can get started, from dipping your toes in the water to more hands-on avenues.<\/p>\n Most people are familiar with crowdfunding<\/a> sites like Kickstarter<\/a>, GoFundMe<\/a>, and others<\/a> that let you donate to new businesses in exchange for perks or the chance to help out a great cause. You may even know of investment crowdfunding<\/a> sites (also known as equity crowdfunding) like Kickfurther<\/a> and others<\/a> that let you earn a profit from your investment.<\/p>\n But did you know that you can participate in real estate crowdfunding<\/a>?<\/p>\n Real estate crowdfunding sites let you pool your money with other like-minded investors to fund real estate developer\u2019s purchase of rental properties in exchange for a small percentage of the rental income.<\/p>\n How much you make depends on how much money you invest. And while you won\u2019t be making huge returns, it\u2019s a great gateway into real estate investing and an opportunity to learn the ropes while building your investing r\u00e9sum\u00e9.<\/p>\n Here are the key details you need to know on some of the top sites:<\/p>\n The lowdown<\/b>: Fundrise lets you get started investing in real estate funds rather than individual property investments.<\/p>\n The company offers three alternatives to earn income from your investment:<\/p>\n Minimum investment<\/b>: $500 (current discounted offer)<\/p>\n Average return rate<\/b>: 8.7% to 12.4% (historically)<\/p>\n The lowdown<\/b>: Own a little piece of multimillion-dollar properties without requiring a multimillion-dollar investment.<\/p>\n Crowdstreet also offers three investment options:<\/p>\n Minimum investment<\/b>: $10,000 to $50,000; while the amount varies by project, few offerings are available for less than a $10,000 investment.<\/p>\n Average return rate<\/b>: 29.0% internal rate of return (based on expectations of future cash flow)<\/p>\n The lowdown<\/b>: A diverse platform for both new, small-dollar and experienced, high-dollar investors, including opportunities to invest in REITs.<\/p>\n This company has three primary investment opportunities:<\/p>\n Minimum investment<\/b>: Varies by account and investment type; typically $5,000 or more.<\/p>\n Average return rate<\/b>: Varies by investment type; for example, MogulREIT II has a 4.5% annualized distribution.<\/p>\n Conventional wisdom says that your starter home should be small, affordable, and only as many bedrooms as you need for you and your family.<\/p>\n But for investment-minded first-time homeowners, it may be smarter to buy a bigger, more expensive home with multiple extra bedrooms, a house with a guest cottage on-site, or a multi-unit building.<\/p>\n In Dang\u2019s experience, all that extra space is primed to become a moneymaker:<\/p>\n \u201cA colleague of mine bought a five-bedroom, three-bath property with plenty of parking for $300,000 when he was 25 years old. He lived in one room and sublet the other four rooms on Airbnb for $500 a month \u2014\u00a0 which covered his mortgage and other housing expenses \u2014 so he was able to live for free.\u00a0<\/i><\/p>\n \u201cToday he\u2019s got six of these properties, and he\u2019s making $50,000 to $60,000 a month. That\u2019s around $600,000 to $700,000 a year, just from Airbnb.\u201d<\/i><\/p>\n The beauty of rental properties is that rental rates usually increase every year, but your mortgage payment will stay the same. This lets you make money and build wealth in two ways: first, by increasing your monthly income, and second, by paying down your mortgage principal, which increases your available equity.<\/p>\n While Airbnb is most famously known as a vacation rental site, it\u2019s also a resource for leasing on a month-to-month basis. There are pros and cons to both options. As a vacation rental-owner, you have more flexibility if you want to put your rental status on hold. However, vacation rentals have a higher vacancy rate, which means a less certain passive income each month.<\/p>\n As a month-to-month lease, your income stays relatively steady. However, you have less flexibility to remove an unpleasant roommate \u2014 unless they break your house rules.<\/p>\n It\u2019s simple to list your house for rent on Airbnb<\/a> \u2014 and you\u2019ve got a lot of control over your rental rate, your availability, and your house rules.<\/p>\n You\u2019ll also need to do some work prepping your home for renters before you start hosting:<\/p>\n Airbnb may have the name recognition, but it\u2019s far from the only rental site around.<\/p>\n All of the alternative home rental sites<\/a> have minor variations in their setup, rules, fees, payment structure \u2014 so it\u2019ll take a bit of research to find the one that works best for you.<\/p>\n Just be wary of listing your house on multiple sites at once. Juggling rental schedules across several sites is a hassle \u2014 especially if you\u2019re taking the short-term vacation rental route.<\/p>\n Crowdfunding may be the latest buzzword in investing, but a group of small-money investors pooling their funds into a larger real estate investment isn\u2019t a new concept.<\/p>\n The traditional way for neophytes to diversify their investment portfolios with property investment is through a real estate investment trust<\/a>, more commonly known as a REIT.<\/p>\n By putting your money into a REIT, you\u2019re actually investing in a property development company that owns, operates, or finances income-producing real estate, such as commercial office buildings or residential apartment complexes<\/a>.<\/p>\n A REIT eliminates a lot of the risk of investing directly in a property that could potentially decrease in value, or turn into a money pit. However, as a shareholder, you have little input on when the REIT buys or sells properties at a profit or a loss.<\/p>\n REITs are a low-risk way to get into real estate investing, but don\u2019t expect to make a fortune from your dividends. Recent data puts the profit you\u2019ll see right around 4%<\/a>.<\/p>\n One final warning \u2014 REITs are not all created equal.<\/p>\n Some are backed by the Securities and Exchange Commission<\/a> (SEC), and some aren\u2019t. And some are publicly traded while others are not. Each type comes with its own potential benefits and risks<\/a>.<\/p>\n \u201cI would only invest with a REIT that\u2019s been in business for 20-plus years because they\u2019ve already survived through two recessions, in 2001 and 2008,\u201d advises Dang.<\/p>\n Private REITS are especially ripe for scams and fraud<\/a>, so do extensive research before investing.<\/p>\n Fix-and-flip is the trendiest of the traditional real estate investment options \u2014 one that reached a nine-year high in the first quarter of 2019.<\/p>\n It\u2019s easy to see the appeal of flipping<\/a>.<\/p>\n You buy an ugly house in as-is condition, invest a little time, money, and elbow grease in fixing the place up, then sell it for an average $60,000 profit<\/a>.<\/p>\n But it\u2019s not as simple as it sounds.<\/p>\n Flipping requires buying and selling houses at the fast pace of around 180 days<\/a> (the nationwide average time for a flip, according to data firm Attom Data Solutions). That kind of turn around requires a lot of cash on hand.<\/p>\n The popularity of flipping has also drawn a lot more competitors into the game \u2014 including flippers with big-money backers who refurbish and sell multiple properties at once, and up to hundreds of properties a year.<\/p>\n Stiff competition for fixer-upper listings drives up the price, which cuts into your potential profit. And if you\u2019re buying property at a bank auction<\/a> (where many flippers find their inventory), you\u2019ll need enough capital to outbid other flippers.<\/p>\n Plus, if you don\u2019t have the home improvement skills to do the rehab yourself<\/a>, you\u2019ll pay top dollar for a quality construction crew \u2014 as competing flippers book up the best home-repair experts in your area.<\/p>\n Then there\u2019s the fact that flipping is one of the riskiest traditional investment<\/a> options.<\/p>\n Every missed construction deadline, every unexpected repair, every rookie installation mistake will cost you cash upfront, and additional months of mortgage payments.<\/p>\n If you don\u2019t have extensive flipping experience, soon that dream of $60,000 in profit will shrink away to nothing \u2014 or even put you in a financial hole.<\/p>\n The good news is that you own this tangible asset, so if you can\u2019t make a profit with an immediate flip, you can always hold onto it as a rental property until you build up enough equity to sell at a profit.<\/p>\n Whether you\u2019ve got a huge bankroll or just a few thousand dollars to invest, real estate is a winning investment because it\u2019s an appreciating asset<\/a>. It also has a better long-term success<\/a> track record over other riskier investment options, like the volatile stock market.<\/p>\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/real-estate-investing-for-beginners-soul-666x381.png\")
<\/a>Do some soul-searching<\/h2>\n
10-year stock market chart<\/h3>\n
![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/Screen-Shot-2019-12-23-at-5.39.59-PM-1-775x511.png\")
<\/a>10-year housing market chart<\/h3>\n
![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/Screen-Shot-2019-12-23-at-5.52.37-PM-775x387.png\")
<\/a>![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/real-estate-investing-for-beginners-computer-666x381.png\")
<\/a>1. Invest in real estate via investment crowdfunding<\/h2>\n
![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/real-estate-crowdfunding-process-666x303.png\")
<\/a>Fundrise<\/a><\/h4>\n
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Crowdstreet<\/a><\/h4>\n
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RealtyMogul<\/a><\/h4>\n
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![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/real-estate-investing-for-beginners-rental-666x381.png\")
<\/a>2. Turn part of your primary residence into a rental<\/h2>\n
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3. Invest in a REIT<\/h2>\n
4. Fix-and-flip<\/h2>\n
![\"An](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/Q1-2019-Flipping-Rate-775x564.png\")
<\/a>![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/12\/real-estate-investing-for-beginners-computer-1-666x381.png\")
<\/a>Winning with real estate investments<\/h3>\n