How to invest $20,000 in real estate?

Question

How can someone invest $20,000 in the real estate market?

Answer 1

You could buy a 100k dollar rental property, if there are houses in that price range where you live. Put $15k down payment, $3k (give or take) for closing cost, and save $2k in a checking account to pay bills until the house is rented and bringing in money.

Try to rent it for $1,000 per month, but you should have a little flexibility (up or down) on the rent.

Your note should be around $660 per month (7% interest, 20 years) and taxes and insurance should be another $150 (unless you live in TX or FL, then taxes will be much higher)...

Assume you maintenance will be $100 per month and you have an extra $100 dollars a month cash flow (or you could put it with a management company and they would take the last $100).

I know it doesn't seem like a lot of money, but think about this... you will be depreciating that house, which you can deduct from your taxes, you can also deduct your interest expense every year... the depreciation will be around $3,000 (per year for 27.5 years) and the interest expense will be another $5,000 (the first year and go down slowly every year after) and you can deduct the insurance and taxes of $1800 per year...

HERE IS THE BIG PAYOFF... in 20 years the house will be paid for, IT will have appreciated in value and you can sell it for $175,000 (with a 3% appreciation per year).

Thats a pretty solid investment... you invested $20,000 and 20 years later it be $175,000.

Answer 2

The best way for the small investor to invest in real estate is through REITs (real estate investment trusts). These are companies that own real estate, but their stock trades on the stock exchanges like any other company. They also generally pay very good dividends. Here is a portfolio of my favorite REITs:

http://www.top10traders.com/ViewPortfolio.aspx?userID=565

This portfolio is from http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can also read posts on investing from the best traders, as well as share your own investing ideas. There is also a charting feature , so you can see how your portfolio performs compared to the S&P 500.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck.

Answer 3

You will have to be in " small town America" to find a good investment at a $13,000.-$15,000 down payment , or maybe the fringes of a " college town" BUT..it can be done...look for a small multi-unit ( 2-5 apts) ...so that even when one is empty or needs work, you still have income.
Almost all your income for the first few years is going to be " written-off" in your tax forms...repairs, insurance, taxes, the interest on your loan.... So even though you ARE making money, this is one area where most governments ( fed, state, local) don't go after you like hungry jackals !! Probably the reason most zillionaires have most of their investments in real estate.
The property will appreciate in value faster than you can imagine,taxes will go up, but so will your ability to borrow against the building ( equity) and buy another!
If you find you can't get into anything quite yet...invest in REIT's, through E-trade or another broker ... go to yahoo/finance or msn/moneycentral and research REIT's...find out what they are invested in.(.you're looking for income or commercial )
In a couple of years your 20K will be 30....look around again...or wait..you've learned to make the money grow , so there's no big hurry.
Building? or REIT's? up to you, BUT REAL ESTATE is the THING!!
P.S. Fidelity has two funds in REIT's ..FRESX and FIREX (global)
ALSO: www.investorvillage.com go there put REITS in the "symbol box" the site is loaded with people who really know there stuff.

Answer 4

you could by some cheap land in Canada or South America.or put your money into a REIT.a real estate investement trust.