As many before have found out, investing in real estate to "hold and rent" may sound like passive income but it rarely is.  You will be getting calls 24/7 for repairs and problems.  An option would be to use a property managment company as a service.  They take care of all of the problems and collect rent, but you still end up paying for the fixes plus their fees for the service.

To answer your main question though about how to acquire real estate with little money down, it is certainly possible but the glory days of purchasing foreclosures and short sales for pennies on the dollar are long gone.  With decent credit you will probably need at least 20% down to purchase a property and maybe more.  Banks look differently at purchasing for investing and purchasing for a primary residence.

May I suggest, if you are wanting to invest in real estate instead of the stock market to either spread your risk, or you just think the stock market is too volatile (you could very well be right) then you should definitely look at a REIT or real estate investment trust.  There are many types on the market and they make real estate a true passive investment.  There are several newer ones such as Fundrise that allow a normal small investor to partake in large real estate investments.

Once you get your feet wet with some investments into REIT's (and you still want to pursue your own purchases) you can start looking around and talking to people about what it takes to do your own investing. Its not for the feint of heart.

Also keep in mind most real estate investments including REIT's are not liquid.  That is, if you need money for an emergency you would have much difficulty tapping this investment.  If you are holding stocks and bonds you can cash out quickly.

That's why its really important to have the following strategy

1) Eliminate all debt you possibly have. Low interest car loan and mortgage should be the only debt you have (and would be nice to not have a car loan at all also depending on your situation)

2) Have a cash reserve of 3-6 months living expenses (not in 401k, IRA etc)

3) Contribute as much as possible to your employer offered plans. Note some 401k and IRA monies can be put into REIT's, they don't all have to be in stocks and mutual funds.

4) Invest any extra monies on a regular basis in the vehicle of your choice.

Good luck to you!



@DipperDave Great tips, thanks for sharing!

I am personally going the route of REIT's for now until I can have a better financial position to be able to invest in my own properties.

I have been using Rich Uncles REIT for a while now but have constantly heard a lot about Fundrise and I intent do try them out in the future.

There are so many ways to invest in real estate these days. It is one of my favorite investment options.

REITs are great and easy to invest in. They are traded on the stock market and can be bought and sold easily. Many of them also pay monthly dividends like ORC or O.

You might think of trying AirBnb. Any extra space you can rent out to people and earn extra cash. I live in Dallas near the Cowboys stadium and whenever there are games I just rent out a room and make off like a bandit. You just have to keep you place looking nice and clean take some good pictures for the website and you are off and running.

If you want to invest in real estate, but you don't have enough to purchase a rental property you can look into a real estate crowdfunding companies. Seems like these are popping up left and right these days. Fundrise, RealtyMogul and Crowdstreet are a few. I have personally tried Fundrise and it is great for real estate investing if you do not want to put down $10,000 or more initially.

Always remember to do your research before investing and investigate what fees they charge.

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