How to invest in real estate with little money

There are two ways to earn money in your life. The first is receiving a salary, the money you earn by working. The second way is to make your earned money work for you by investing it, so you gradually grow your wealth. Relying solely on the first way won’t get you far, because the money you save in your account earns nothing. Investing is the way to make it grow!

Real estate is one of the most popular ways to invest money because it gives you the chance to generate passive income. You can then reinvest that income and gradually build towards financial independence. Yet, many people think that investing in real estate is only for the very wealthy or only possible later in life. In this article, we explain how it can be accessible to everyone and how you can start, even with a very small deposit. If you want to learn more about why investing in real estate is a good investment, check our blog investing in real estate for beginners.

Can you invest in real estate with little money?

Very simply, YES! It is certainly possible to invest in real estate with a small amount.

This is exactly why we started BRXS; our mission is to make real estate investing accessible so you can invest directly in investment properties of your choice starting from €100, earn rental income, benefit from potential long-term appreciation, and thus build a (dream) portfolio. In this blog, we focus on the different ways to invest with little money, including how to start with BRXS. Ultimately, it’s up to you to choose what suits you best.

What is little money?

It’s important to pause here because this differs for everyone and certainly impacts the options available to you. For some, it’s €100 monthly, while others might have several thousand euros available. Regardless of which category you fall into, or perhaps somewhere in between, there are possibilities for everyone.

Try to stay within your budget and only invest what you can afford to lose. Even if you start small, if you remain consistent and determined, you will gradually see your wealth increase and gain more opportunities to diversify.

6 ways to invest in real estate with little money.

There are both direct and indirect ways to invest in real estate. Direct means you purchase the investment property yourself, giving you full control over your investment. With indirect investing, you are not the one buying, managing, or selling, but you invest as a participant in a fund, loan, or investment.

Each method is different and has its pros and cons, so it’s important to read up well and choose the method that best suits you. You don’t necessarily have to stick to one option; it’s always possible to try a few different options and see what works best for you.

The various options listed:

Investing in investment properties

Buying an investment property is simply buying a house to rent out. The rent provides you with passive income each month, and hopefully, you also benefit from an increase in house prices in the long term, making the equity in your property worth more. In our blog, you can read more about the return from rent and value appreciation.

This is the most traditional method of investing in real estate and still very popular for people with more wealth because it still works very well and has proven effective in generating passive income. You probably know people in your circle or family who do this and have one or several properties in their portfolio. A well-known example is Prince Bernhard, who owns and rents out more than 100 houses in Amsterdam ;).

Here, of course, you have complete control over where you invest and how you manage your investment, but there are also some disadvantages:

Putting your entire investment into one property can be quite risky.
Finding, buying, maintaining, and managing an investment property can take up a lot of time and is not without hurdles.

How much personal capital do you need for an investment property?

This heavily depends on how much you can borrow from the bank. For example, if you want to purchase a property for €400K and get a mortgage for 80% of the value, you will still need to contribute €80K from your own equity, excluding transfer tax (8%), notary fees, and potential costs for the real estate agent, inspection, etc… So, you quickly reach a personal contribution of at least €100K.

Of all the methods, this is certainly not the most accessible, but if this direct way of investing appeals to you most, there are a few alternatives to reduce the required personal contribution.

Investing in an investment property using the equity from your home

If you already own your own home, you can use the equity in your house to finance your investment property.

What is home equity?

With the rise in house prices over the last few years, there’s a good chance the value of your home has also increased. Equity is the difference between what your home is worth today and the outstanding mortgage debt. Example: Suppose you bought your home in the past for €300K with a €200K mortgage, and today it’s worth €400K with €150K remaining mortgage debt, then your equity is €250K.

You can use that equity as collateral with your bank to take out a loan to further finance your investment in an investment property (in addition to the mortgage on your investment property). Depending on your situation, you might not even need any other contribution. But there are limits, of course, and financiers will often not lend more than 80% of the equity. So, it’s best to sit down with your bank or financial advisor to see what the options are. And beware: house prices have risen in recent years, but this can also change, so make sure you are well-informed before attempting to buy something using your equity.

Private loan

If you don’t have enough money for the personal contribution, you can look for alternative financing or raise the money within your personal circles (family, friends, business partners). Here too, inform yourself well, don’t take unnecessary risks: the more you borrow, the higher your monthly costs will be, and you need to ensure you have enough monthly rental income to cover those costs. So this is only an option if the interest rate is attractive and the math works out; make a good financial analysis before you start and get good advice.

Investing together with friends

You can also purchase the investment property together with friends or family to share the investment, and then you also share the costs, rental income, and profits together. It’s important here to make clear agreements, because what seems like a good idea today might turn out very differently if everyone has different goals in a few years.

Garage boxes

Garage boxes are also a popular alternative because the entry prices are much lower than all other types of real estate. You can find a garage box starting from €15,000. Do your research thoroughly because the location is crucial. This will determine your rental income and your return. Also, carefully check the rental market for parking spaces and whether there is demand in that area because the last thing you want is long-term vacancy.

Real estate funds

A real estate fund is an investment fund that invests in various forms of real estate. As an investor, you invest an amount in the fund and essentially buy a share of the fund. With the capital raised from you and other investors, the fund acquires and manages various properties. The rental and sale of this real estate generate income for the fund, which is paid out to investors as dividends.

These funds come in all shapes and sizes:

Public vs Private: There are publicly traded real estate funds that can be easily bought and sold through a broker. Then there are also non-listed funds, which are less accessible because the minimum required investment is considerably higher than for public funds.
Sector-specific funds: You have funds focusing on specific sectors such as healthcare, residential care centers, shopping centers, logistics centers, hotels, offices, wind turbines. And other funds that are very broad and focus on multiple sectors simultaneously. The geographic focus also varies from fund to fund.

The advantages of funds (especially the listed ones) are clear: They are very accessible, require no effort, and are very liquid - you can buy and trade whenever you want. But you give up a lot of control, have little transparency about what you’re actually investing in, aren’t really involved, and these funds tend to closely follow stock market fluctuations. You might ask yourself if investing in stocks isn’t more interesting then.

Real Estate Crowdfunding

Crowdfunding brings a group of investors together to provide capital or a loan for a real estate project. It gives real estate developers the financing they still lack for building or renovating their project. In return, investors receive interest payments over a certain period, and in some projects, they can also share in the profits (or losses). The crowdfunding platform is often just an intermediary and receives a fee for facilitating payments between investors and developers.

Crowdfunding gives you easy access as an investor to interesting projects where you have the choice to decide what you want to invest in. Often, you can invest starting from small amounts, and the “promised” returns are attractive (sometimes even well above 10% per year) because developers cannot obtain traditional financing.

This last point is something to watch out for: there is a high risk associated with many of these investments. Real estate projects like new developments or renovations can run into many problems: think of delays, the project not being completed or sold, which can ultimately be negative for your investment. Additionally, not all developers are equally reliable. So be vigilant and do thorough research because the crowdfunding platforms themselves take little responsibility, and it’s not always clear what your rights are if something goes wrong.

BRXS

We started BRXS because none of the above options worked for us: funds were too distant and offered little to no transparency, crowdfunding websites felt very risky and uncertain, and buying investment properties seemed ideal, but we just didn’t have the capital and time for it.

With BRXS, we lower the barriers to investing in rental properties yourself. This way, our users can:

View all properties on our platform and conduct brief research into the details: estimated rental income, location, historical house prices, etc….
Invest very easily starting from €100 to add the investment property to their portfolio.
Track their investments with full transparency in their BRXS portfolio and receive their share of rental payments quarterly. In the long term, they also share in the property’s value appreciation.

→ Read more about how to start in real estate with BRXS

Advantages with BRXS

Earn: Every three months, net rental income is paid out to all investors, and investors can participate in potential future long-term appreciation.
Accessible: You can start with little effort and don’t have to worry about managing the investment property. BRXS takes care of management.
Start with little money from €100 and gradually build your (dream) portfolio.
Learn by doing by closely following your investment and its results. As the owner of a BRXS note in a property, you receive a complete overview of all income and an update on the status of your investment every three months.
Spread your investment across multiple properties so you don’t put everything into one property.

Risks with BRXS

As with all investments, investments on the BRXS platform also carry risks. These are comparable to investing in an investment property yourself: your actual return is variable and can be higher or lower than expected. This depends on various factors such as the housing market or property-specific events like tenant non-payment or unexpected maintenance.

Conclusion

Real estate is a great way to make your money work for you and generate passive income. Unfortunately, it is often still wrongly considered something for the “rich and connected”.

Hopefully, this blog has given you more information about the possibilities and you now know that you can start investing with little money, and that being well-informed and knowing what suits you is important. Hope this is the beginning of a long journey where you can gradually build a (dream) portfolio (and the accompanying passive income).