Vadmarie/Getty Images/iStockphoto
Commitment to readers
The GOBankingRates editorial team is committed to delivering unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services. Our reviews and ratings are not influenced by advertisers. Learn more about our editorial guidelines and how we review products and services.
20 years
Helping you live a richer life
trusted
millions of readers
Redfin reports that the typical down payment for a U.S. home buyer reached a record high of $67,500 in June, an increase of 14.8% from a year ago. This is a significant amount of money that you must save before purchasing a property.
Many people want to enter the real estate market, but the recent difficult barriers caused by rising house prices and rising interest rates cannot be ignored. This combination of high mortgage payments and large down payments makes real estate investing difficult. Fortunately, there are still ways to invest in real estate to build wealth on an average income.
Real estate investment trust (REIT)
“REITs are publicly traded, closed-end investment funds that invest in real estate either directly or through mortgages on real estate,” said Robert R. Johnson, professor of finance at Creighton University's Heider College of Business. said. “REITs trade like stocks on major stock exchanges.”
REITs also offer liquidity and diversification not available through ownership of physical real estate. REIT stocks can be bought and sold like any other stock, so you can start with any salary you have to invest.
Owning physical real estate also requires a great deal of time and expertise.
Johnson says, “Furthermore, when investing in physical real estate, the property must be managed, so owners either manage it themselves or hire a property manager. Holders of REIT stock… , you won't get a call in the middle of the night because your property needs a new furnace or your pipes are clogged.”
REIT ETF
“Probably the most liquid and convenient way to invest in real estate is through real estate investment trusts and exchange-traded funds (ETFs),” said Michael Martin, vice president of market strategy at Trading Block. . “If you buy these listed products, you can sell them whenever the market is open.”
REIT ETFs combine a variety of REITs into one investment, so you don't have to bet your money on one company. Some investors prefer to diversify their REIT investments to reduce risk. Investing in REITs offers similar benefits, but with added diversification, you can start with any salary.
Martin added, “Popular products in this space include the Real Estate Select Sector SPDR Fund (XLRE) for ETFs and the iShares Core US REIT ETF (USRT) for REITs.”
thank you!
house hacking
Ryan Barone, co-founder and CEO of RentRedi, said, “House hacking is a great way to invest in real estate for people who make an average salary or don't have enough money to buy real estate.'' “It's a great way to enter the market.” “This is a place where you rent out part of the house you live in.''
The best thing about house hacking is that you can get creative. You can maximize the income you get from your home by renting out your extra bedroom to a roommate or other spaces like your basement, garage, or driveway. You can also turn your home space into a gym or yoga studio and rent it out.
Barone said house hacking can help people afford to buy a home, pay off their mortgage and build equity faster. He added: “Once you save enough money from house hacking, you can reinvest it in additional rental properties and keep investing in real estate until it replaces or exceeds the income you get from your 9-to-5 job. Expand your portfolio,” he added.
This strategy will help you invest in real estate with an average salary and eventually get a decent side job to replace your main job.
Real estate crowdfunding platform
With real estate crowdfunding, you can start with a small amount. Here, you pool your money with other investors and invest in different types of real estate, from REITs to farmland across the country.
Platforms like Fundrise allow you to start with as little as $10. To test your real estate potential, you can find the best crowdfunding platform for your income and savings.
Government support programs
“Many first-time buyers are finding that their initial cash needs can be significantly reduced or eliminated through local or state government agencies,” said Derrick Barker, co-founder and CEO of Nectar. “I don't know that there are many down payment assistance programs that can help.” “These programs often come in several forms: full grants that don’t need to be repaid, forgivable loans that are forgiven after you live in the home for a period of time, and interest-free loans that make down payments much more manageable. Loans, etc.”
Even if you don't qualify for assistance programs, there are government-backed loan options that make homeownership more accessible to people with average incomes.
Barker added, “FHA loans require only 3.5% down, VA loans offer 100% financing to veterans, and USDA loans offer zero-down options in eligible rural areas.” added.
An experienced mortgage broker can tell you more about the programs available to you so you can get started on your home loan, even if your income and savings aren't where you want them to be yet.
