{"id":18014,"date":"2020-07-31T11:34:23","date_gmt":"2020-07-31T18:34:23","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=18014"},"modified":"2026-04-06T07:35:17","modified_gmt":"2026-04-06T14:35:17","slug":"buyer-how-to-invest-5000-dollars-in-real-estate","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-how-to-invest-5000-dollars-in-real-estate\/","title":{"rendered":"10 Ideas on How to Invest 5,000 Dollars in Real Estate"},"content":{"rendered":"

Real estate investing<\/a> may sound like a pursuit limited to the ultra-wealthy, but anyone can invest in real estate. Investing in real estate is for those pursuing wealth, but also for anyone who wants financial stability or to start planning for retirement. According to multiple surveys, as many as 90% of millionaires became wealthy, at least in part, due to real estate investments<\/a>. And modern investors maintain that real estate is a solid investment<\/a>.<\/p>\n

While real estate as an investment is relatively stable, it\u2019s important to note its weaknesses as well. Most investors agree that real estate is most effective as a long-term investment. As any real estate agent will tell you, it can be hard to predict when property might sell, which makes it hard to liquidate assets at short notice.<\/p>\n

On the other hand, other weaknesses have been overstated. You don\u2019t necessarily need a lot of cash to invest in real estate. If you\u2019ve got $5,000 in your pocket, you\u2019ve got more than enough to get started. These are 10 ways you can invest $5,000 in real estate right now.<\/p>\n

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1. A down payment on your home<\/h2>\n

If you haven\u2019t already bought a house, one of the best real estate investments is to own your own home. Most people\u2019s primary goal with buying a home is to access shelter and save rent money \u2014 and if you\u2019re planning on staying in the house for more than five years and you buy wisely, you should recoup what you\u2019ve spent to buy \u2014 but depending on how you approach homeownership, it can also be a great investment.<\/p>\n

The key to using your house as an investment asset in addition to shelter is earning equity<\/a>. To do this, you\u2019ll want to make sure you pay it off in 30 years or less. If you plan your renovations and upgrades well, you can add extra value to your home<\/a>.<\/p>\n

Many people think they need to hold off on buying a home till they have 20% down, but down payments come in a lot of sizes<\/a>. Some mortgage options require considerably less than 20%, or no down payment at all.<\/p>\n

These mortgage types come with other restrictions; for example, FHA mortgage loans<\/a> are typically restricted to first-time buyers. Talking to a local real estate agent is a good way to find out what loan types you may qualify for and how to get your $5,000 to work as a down payment.<\/p>\n

2. Rent to own<\/h2>\n

If you want to buy a home but are dealing with barriers such as a low credit score<\/a> or high debt, then rent-to-own options may be right for you. There are several different types of rent-to-own contracts<\/a>, and you should know a bit about each.<\/p>\n

The bare bones of it is that in some contracts you could be legally obligated to buy the home at the end of the lease (a lease purchase agreement). Others will give you the option, but no obligation (a lease option agreement).<\/p>\n

Rent-to-own contracts typically require an upfront payment, and then they operate more or less like renting. If you use your $5,000 to fund your upfront payment for a rent-to-own home, at the end of the rental period, all or part of that $5,000 may be turned into the equivalent of a partial down payment. There are definitely situations where rent-to-own homes come with some pretty big catches<\/a>. But there\u2019s no denying they\u2019ve been a great deal for some buyers.<\/p>\n

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3. A partial down payment on a rental property<\/h2>\n

Buying and maintaining rental properties<\/a> is one of the top ways to invest in real estate. This is especially true if you\u2019re looking for long-term, low-risk investments. There\u2019s a lot to consider when buying your first rental property<\/a>, especially if you\u2019re worried about being someone\u2019s landlord, but it\u2019s easy to see the upsides.<\/p>\n

Investment homes typically require at least a 20% down payment, so $5,000 doesn\u2019t stretch very far, but if you have three or more friends who also have $5,000 to contribute toward a down payment on a rental house, then you\u2019ll be spreading some of the risk, too. (Don\u2019t forget to formalize any financial agreements with a legal contract!)<\/p>\n

Owning a paid-off rental property is a great way to generate passive income coming in on a monthly basis. Josh McGrath<\/a>, a top agent in Charleston, West Virginia<\/a>, knows how great an investment opportunity rentals can be. McGrath owns 150 rental properties and helps others invest in them. Even though hiring a property management company can cost about 10% of your profits, McGrath recommends it highly.<\/p>\n

McGrath also recommends purchasing rental properties on a 10-year mortgage term if you can. \u201cAs long as the monthly rent covers my mortgage payment, taxes, and insurance, in 10 years, it\u2019ll be paying me $1,000 a month and I\u2019ll have more than $150,000 in equity.\u201d With returns like that, it\u2019s easy to see how rentals could become a perfect retirement plan.<\/p>\n

4. Rent your extra space<\/h2>\n

If you have an extra bedroom or a basement that doesn\u2019t get much use, then renting out your excess space is a good way to invest. You can make $5,000 go a long way in terms of renovations. Finishing a basement into an in-law suite can add rental value now, but also can add even more value<\/a> if you choose to sell your home in the future.<\/p>\n

Short-term rentals (renting a room to people on a nightly basis) often have the potential to generate the highest month-to-month returns. There are a number of apps for this, like Airbnb and VRBO, that make it easy to get started and find renters.<\/p>\n

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5. Roofstock<\/h2>\n

Roofstock<\/a> has gotten a lot of publicity for being a great \u201cstarting\u201d real estate investment<\/a>. Instead of starting up your own rental property from scratch, Roofstock sells rentals that have already been leased. This means that from day one, you already have renters in the home!<\/p>\n

You also already know that it\u2019s a property that renters like. Some rental property factors are hard to account for, but having attracted at least one set of occupants takes a little of the guesswork out.<\/p>\n

If you love the idea of rent as a passive income but aren\u2019t sold on being a landlord, then Roofstock also gives you the option of paying for a property manager.<\/p>\n

6. Wholesaling<\/h2>\n

If you\u2019re not afraid of the hustle, then wholesaling is a great way to invest in real estate. Though the word \u201cwholesale\u201d may make you think of bulk purchasing, that\u2019s not what you\u2019ll be doing with properties.<\/p>\n

Being a wholesaler is a bit like being a house flipper \u2014 just without the actual flipping part. If you\u2019ve got a gift for seeing the potential in properties but shouldn\u2019t be trusted with a chainsaw, then wholesaling might be your calling.<\/p>\n

Wholesalers contract properties that are bargain-priced and then find a final buyer for them. Like a matchmaker, knowing a lot of people and being a great communicator is crucial here. A potential buyer who is the perfect fit for a property, then buys the contract from the wholesaler. The difference between what the wholesaler paid for the contract and what the buyer paid is pure profit.<\/p>\n

Though $5,000 isn\u2019t enough to buy a property, it\u2019s enough to put down an earnest money deposit<\/a>. Ultimately, the goal of wholesalers is to never actually end up in a contract themselves. To that end, most wholesalers add a condition to the contract that releases them from it if they\u2019re unable to find a final buyer.<\/p>\n

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7. Partner up<\/h2>\n

If there\u2019s a friend who shares your real estate mogul goals, then combining your investments lets you go further than either of you could go separately.<\/p>\n

You\u2019ll want to partner with someone with the same vision of success as you. If you\u2019re planning on a long-term investment but they want a quick flip, then you\u2019ll both be disappointed.<\/p>\n

Ultimately, who hasn\u2019t dreamed about owning a cute vacation cottage they can share with friends? In friendships with complementary strengths, one person can handle the challenges of qualifying renters and negotiating rent while the other manages the property.<\/p>\n

Though it may sound strange to formalize your partnership legally, many professionals agree that\u2019s the secret to keeping your money and your friends<\/a>.<\/p>\n

8. Real estate investment trusts<\/h2>\n

Real estate investment trusts, or REITS, are like partnering up, but with a larger network. REITs create a low-risk investment but have the potential to show large profits. Think of it this way: with $5,000, you can do a lot. With a friend who also has money to invest, you can do even more. With a large network of people who are all investing? You have the highest chance of rewards.<\/p>\n

Many REITs are publicly traded, but there are also private REITs.<\/p>\n

Anyone can invest in a public REIT, but typically only accredited investors can invest in private REITs.<\/p>\n

To be an accredited investor:<\/p>\n