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Getting involved in the real estate market is a genius way to make your money go further. Everyone knows the true value of a real estate investment; it’s something that is going to grow over time. You can invest now and see a massive return in many years. Or, you can invest and rent the property out, earning money every month. You can even buy a house, make improvements, and then flip it for a profit a few months later.
The opportunities are endless, but how much money do you need to save to make real estate investments?
As it turns out, the answer is a bit more complicated than you think. Primarily, it depends on which route you are going down.
How much to save for long-term property investments
To squash any arguments, long-term property investments are those that you make with the intention of sitting on them for years. You invest in real estate, sit on it for many years, and then sell it.
Here, you don’t actually need to save as much as you initially expect. In fact, as these DiversyFund reviews show, you could get started with as little as $500. The trick is to find a platform like DiversyFund that lets you pool your money together with other people. This is typically called a REIT, and all of your money is put together to invest in properties. Your funds are tied up in the investment until the property is sold, giving you a portion of the earnings.
So, in short, if you’re investing for long-term goals, you may only need a few hundred dollars to get started. Obviously, the more you invest, the more you will get out of a trust.
How much to save for short-term property investments
Here, short-term investments are those where you want to make money quickly. So, we’re looking at property flipping or rental properties.
Now, this is where things do get very complicated. To make money flipping or renting out properties, you will need to purchase the asset yourself. As such, you need a mortgage to buy the property. To do this, you will require a down payment, which is a percentage of the property’s value.
According to details from Rocket Mortgage, the average down payment in America is around 6% of the total mortgage loan – or the value of the property. However, you could get mortgages with a 3% down payment as well.
Okay, time for some math. The Zillow Home Value Index states that the typical home price right now is around $350,000. A 3% down payment on a home this price would be $10,500, meaning 6% is $21,000. So, you could say this is around what you need to save to afford the average house with the average down payment.
Of course, depending on where you live, you may find homes for much cheaper than the average price, meaning you will need to save less.
Hopefully, this provides some insight into how much money you should save to invest in real estate. If you’re buying the house yourself, you will need to save a few thousand dollars for a down payment. But, you can technically invest for as little as $500 if you opt to go down the real estate investment trust route.