Dear long-term investor, here you will find everything about investing in real estate. We start with an introduction to investing in real estate (for) beginners. We look at the risks and returns. We also compare real estate vs. shares. And finally, you will find many tips on how to invest in real estate with little money. That's the interesting thing about investing in real estate: it is one of the best long-term investments. Both experienced investors with lots of money and small beginners with little money can participate in real estate.
In addition to this content, on this page you will also find 100+ knowledge articles about real estate investing (for mobile, scroll down).
Let's get started!
Real estate investing for beginners
Investing in real estate with a lot of money is not that difficult. Investing in real estate for beginners is more challenging. Basically, there are 5 ways to invest in real estate, namely:
Real estate: homes, apartments, commercial, ...
Unlisted real estate funds
Listed real estate funds called REITs
Real estate shares
Crowdfunding for real estate properties
Investing in real estate is most interesting for the long term. As a beginner, it takes a long time to get a good start, but it is possible.
Investing in real estate funds is best suited for beginners. Unlisted real estate funds, in particular, offer an attractive combination between:
Getting started with little money
Lower risk because of a spread across several properties
Relatively high dividend
No time or knowledge needed (passive)
Listed real estate funds are called REITs. This stands for Real Estate Investment Trust. Basically, they provide the same benefits as unlisted real estate funds. There is one big difference: listing. On the one hand, listing means faster entry and exit (liquidity). On the other hand, it means higher risk, because more knowledge is needed about the financial valuation of REITs (for the right entry moment).
Finally, we can invest in real estate through crowdfunding. This option is in our view the least interesting alternative. The return is significantly lower. Crowdfunding is interesting to use for raising capital. This way we can invest in real estate with little money.
Investing in real estate funds with little money
Real estate funds are the most accessible for investing in real estate with little money. Investing in publicly traded real estate funds (REITs) is for advanced investors. More on that later. As a beginner, however, it is wiser to start with unlisted real estate funds. Over time, as capital, returns and knowledge increase, you become more advanced and can move into REITs and/or real estate investing.
Real estate funds are the best way for beginners to get a start within the world of real estate. When you participate, you book money into the fund. This fund, managed by management, invests the money of all participants in real estate. The strategy of the fund is important because it determines risk and returns.
In exchange for participation, we as early-stage real estate investors receive a dividend payment. Depending on the fund, this is monthly, quarterly or annually. The amount varies per fund and is between approximately 4 - 8.5%.
The disadvantage to this type of investment is that we do not defend ownership of the property. The advantages have been mentioned above. As a beginner, investing in real estate funds is attractive because of the low entry threshold. Most funds can be started with a small deposit of €100 to €1000.
Note: there are big differences between real estate funds on return and risk. Choose the best depending on your personal preference.
Investing in real estate with little money
In our opinion, investing in real estate is best done through buying up real estate. This requires more time and knowledge. Also, we need a higher capital. But if this fits within the financial situation, it offers the most advantages in the long run.
The biggest advantage to investing in real estate is that we gain ownership. When buying house or apartment, we become owners. Not only can we collect rental income from it. We also enjoy potential increases in value over the long term. For example, the value generally increases at least proportionally to the increase in inflation. In other words, it is an inflation hedge with rental income (so it is better than gold).
Real estate also has advantages over shares. There is no price loss. We prefer shares to real estate, precisely because of the potential price increase. But as a beginner, investing in real estate is relatively safer than shares.
Of course, it is not without risk. Two of the biggest risks are: mortgage debt and vacancy. Make sure you only invest as long as the debts can be borne in case of vacancy!
Is it possible to invest in real estate with little money?
Yes, there are possibilities although it is time-intensive. These possibilities come down to acquiring external capital. This can be done with friends and family (not recommended) or, for example, through crowdfunding. We do not opt for such a construction. In our opinion, it is better to start with your own capital. After buying the house you can possibly refinance it at an interest rate lower than the rental income. But beware of the increased risk!
Successful long-term investing is possible with a diversified investment portfolio. Investing in real estate has risks and returns. The higher the desired return, the higher the risk. At least, in most cases. As with shares, it is possible to reduce the risk and increase the return with real estate. Nevertheless, there is always risk, and this is why diversification is a must. Both within real estate and outside it (equities, commodities, loans, ...).
The risks depend on how you want to invest in real estate. Unlisted real estate funds offer lower risk than REITs. And REITs (usually) offer lower risk than real estate.
Generally speaking, when it comes to risk to real estate investing, you can think of:
Debt (mortgage)
Vacancy of tenants
Unforeseen costs in real estate
Potential loss of value
Potential price loss (in the case of REITs)
Bankruptcy of real estate funds
Lack of knowledge and experience
Basically, the lower the risk, the lower the potential return. Yet there are ways to increase returns with lower risk. This always comes down to: knowledge. Knowledge is power. Both when investing in real estate and stocks. Therefore, as a beginner, it is necessary to invest in knowledge first.
These are examples of how to reduce risk in real estate purely on the basis of knowledge:
Buy only the best homes in growing cities
Always buy below market value
Find reliable and loyal tenants
Prepare a full cost and benefit analysis
Only invest in REITs with attractive financial valuation and growth potential
Invest only in the best non-listed real estate funds with reliable management and sustainable risk policies
In short, with more knowledge (which requires commitment) risk can be reduced.
How high is the return when investing in real estate (for beginners)? This depends on knowledge, experience and momentum. The average return ranges from 6% (real estate funds) to 10 - 15% (real estate).
Read all about stock investing.
Why invest in real estate as a beginner?
Why invest in real estate is not an isolated question. After all, we invest for capital growth and/or (additional) income. The question is more: why invest in real estate and not in other investment opportunities? Especially when investing for beginners, there are several factors of interest. However, everything depends on how you start.
In essence, this is why invest in real estate:
Cash flow thanks to rental income
Inflation hedge
Low risk of depreciation
Potential increase in value of real estate
The two big advantages of real estate investing are (1) monthly cash flow and (2) inflation hedge. Value appreciation is nice, but we should not count on this in cost-benefit analysis (guard against wishful thinking).
Also beneficial to real estate is that there is a small chance of depreciation. For example, the rule of Warren Buffet, an investor in stocks, is to never lose money. If a stock falls by -50% we need +100% to break even at all!
Still, stocks offer interesting advantages.
Stocks or real estate?
A big advantage of investing in real estate vs. stocks is the lower chance of depreciation. With stocks, the risk of losing money is usually higher. Especially for novice investors. This is because they buy popular (hype) shares in a hurry, without looking at fundamental valuation (strategy + financial ratios).
On the other hand, shares can yield much higher returns than real estate. In particular, advanced investors who invest enough time can achieve high returns. That is why it is worthwhile for novice investors to also immerse themselves in shares.
Imagine: you have been working for a listed company for years. This company is currently featured very poorly in the media. Its share price has plunged by 40%. Yet you are 95% sure that this company will make a lot more profit in the future. In fact, based on calculations, it appears that the share price is now even cheaper than the company is actually worth (intrinsic value).
Investing in this type of company is called Value Investing. It is the way to achieve very high returns. Think about +15% return per year. And in some periods this can even be +50% per year.
Investing in real estate with little money
Now let's go more concretely into how to invest in real estate with little money. As a novice investor investing in real estate with little money is almost impossible to do. If you want to buy a small apartment in a small town, you will spend at least €40,000.
We have already indicated that unlisted real estate funds is the best way beginners with little money.
A real estate fund can be seen as a large basket in which all kinds of different real estate objects are contained. This can be anything: houses, supermarkets, retail properties, etc. Some real estate funds still require a minimum stake of 10,000 euros or higher. But there are also real estate funds where you can start with a small amount. These types of funds make it possible to invest in real estate with little money.
Below I give you practical tips on how to invest more successfully in real estate funds with little money.
Tips for investing in real estate funds with little money
Money investing is all about return, risk and time. That is the beauty of investing in real estate with little money. If you take the time to leave small amounts fixed for 20 or even 30 years, you will become considerably richer.
That's why our focus is on long-term investing. Make use of yield-on-yield or dividend-on-dividend. Each year you generate return on return, which in the long run leads to exponential wealth growth.
Although I am mainly active within the stock market, I also have positive experiences with real estate funds. Below I give you some tips if you want to invest in real estate with little money:
Choose a fund that requires a small monthly fee
Preferably invest in a fund that pays out an advance dividend every month. This way, you can build up dividend-on-dividend faster
Pay attention to the exit fee for real estate funds. This is a % fee that you pay when you want to exit earlier. With some funds this percentage is considerably higher than with others.
Choose a large and diversified real estate portfolio. Even if you want to invest with little money in real estate, it is wise to spread out.
Invest only with money you do not need
Invest for a minimum of 5 years and ideally for 30 years
Use your common sense: do lots of research, compare real estate funds with each other, and control your emotions by looking at the facts
Invest in real estate with little money: REITs
In the context of investing in real estate with little money, REITs are low risk. A Real Estate Investment Trust is the same as an unlisted real estate fund in terms of content. However, there are differences in terms of conditions, risk and returns.
These are the main characteristics of REITs:
Low-threshold: getting in from €5
Liquid: REITs are publicly traded and can be bought and sold quickly on trading days
Volatile: REITs realize price gains and losses. This can lead to higher returns or losses
Given the low entry values, REITs are perfect as a real estate investment with little money. However, it is not just for beginners. This is because the risk is also higher. More knowledge is required regarding, among other things, financial analysis.
An alternative with lower risk are so-called REIT ETFs. An ETF can be seen as a collection of several REITs. This way we do not invest in one real estate fund, but in dozens. And that at the same time.
REIT ETFs offer the lowest risk, relatively speaking, when investing in real estate. Inherent to this is a lower return.
Would you like more information? Read all about investing in REITs here.
How can I buy REITs?
You can buy REITs via an investment platform. For this you need to open an investment account. Buying a REIT is fairly simple. Search for the desired REIT and buy X number of shares. This works the same as with shares. Therefore, getting in is very easy, even for beginners.
Note, however, that this is only the beginning. Real estate always goes through a cycle of good and bad economic times. Buying in a dip can lead to very high returns. Are you buying at the highest peak? Then -40% loss is just as much a possibility.
However, timing the market (buy low, sell high) is not that easy.
Therefore, learn how to invest in REITs and stocks. This is a profession all its own.
The advantages and disadvantages of REITs compared to real estate funds
In my opinion, the biggest advantage to a REIT for those who want to invest in real estate with little money is the higher returns. Real estate funds are less risky and provide more stable dividends of around 6 to 8%. With a REIT, however, you get a higher annual dividend of 7 to 10%. And that can be added to share price gains. The latter, however, also entails more risk, because a price can also fall, causing you to lose money. This is the consideration that you will have to make yourself.
Do you want to invest little money in real estate and get higher returns? Then a REIT is a potentially better choice. But beware: thanks to a REIT, you can also lose or lose your stake faster. So if you do this, do it only with money you can spare.
Here are the advantages of REITs compared to real estate funds:
More flexible: buy and sell at any time
Higher annual dividend
Possible capital gains
No exit costs
Low fee / commission
And these are the disadvantages of REITs compared to real estate funds:
Higher risk: chance of losing money through price loss
How do I find the best REITs?
A good source of inspiration are knowledge platforms and investment platforms. If we look at knowledge platforms I have some personal tips for you. For example, I personally read articles from Forbes.com almost every day. You can use the search function on Forbes.com to look for articles about REITs. Besides this knowledge platform you also have other websites like Investing.com and Investopedia.com. Of course, you can also just search through Google yourself.
The trick to finding the best REITs is by simply doing a lot of research. It's better to invest dozens of hours of your time in advance to research the best REITs. By doing so, you will increase your own chances of success. Also, if you are going to invest in real estate with little money, I can imagine that you want to make nice returns.
Investing in real estate with little money: crowdfunding
Crowdfunding is a fairly new development that can also benefit investors. For example, crowdfunding lends itself to investing in real estate with little money. The principle is that together with other individuals you can invest money in real estate projects. Think of a housing development, a new commercial building, restaurants, et cetera. There are always developers and real estate projects that can use money for their investment. You as a private individual can also invest in this through a crowdfunding platform. An example is Crowdfundmarkt, but there are some other platforms as well. On these you will find not only investment projects in real estate, but also for other projects such as those of entrepreneurs.
Personally, I have no experience with crowdfunding. I also find it less interesting than real estate funds and REITs. Therefore, it is not part of our list of the best investments. There are better ways to get higher returns.
Nevertheless, it is fun and cool to invest in entrepreneurial projects through crowdfunding. Not for real estate, but for these other projects.
Investing in real estate with other people's money
A fourth, more risky, way for investing in real estate with little money is to use money from others. In this case, you don't need money yourself, but you can invest real estate. To do this successfully, though, you need a little more explanation than these few rules. The essentials come down to:
Find unique, up-and-coming locations that are suitable for real estate investing
Make a pitch and presentation with the idea
Start looking for lenders
Administration and accountability to lenders
The latter can be done through platforms such as crowdfunding, with banks or with investment companies.
Another option is to buy property with the surplus value of your own home. For this, however, you need a mortgage. It is also extra risky if you cannot pay the rent when the property is vacant.
Real estate experts do the following: they buy several properties and try to sell them directly to an investment company. In exchange, you give, say, a 6% return. You yourself can then keep about 2 - 4%. Of course this is not enough, so you need many properties at the same time. And that means high risk.
Creative option: buying property in a developing country
For all the adventurers and travelers among us, I have a final creative tip for investing in real estate with little money. I'm talking about buying up real estate in developing countries. Example:
Suppose you have 10,000 euros available to invest. In developing countries like the Philippines or an African country, 10,000 euros is worth much more. Sometimes up to a factor of 10 or 20. So with the same 10,000 euros, you might have 100,000 "euros" of value in a developing country. In the Netherlands you cannot buy a house with 10,000 euros, but with this amount you can buy a house in a developing country.
If you travel a lot and you know a few "gems" in the world which are not yet tourist attractions, then it can become very lucrative to develop these areas. In this case, you can even attract larger investors for when you want to start a large real estate project. Well, for many of us this is "far from our bed", but the real entrepreneurs will see the opportunities in this. And it's needed. Because anyone who wants to start investing with little money will have to get creative. Whether that is in the real estate market or in other investments, it doesn't matter.
Why real estate Investing?
Why invest in real estate with little money? There are many opportunities, so why real estate. Ask yourself this question. Investing in real estate is a long-term wealth-building strategy.
There are three reasons why start investing in real estate with little money:
- Realize inflation-proof cash flow and capital gains
- Passive income
- You have found real estate fun and interesting
This is the very best thing about starting with real estate: you can start with a small capital. In the long run, this capital will grow into a large capital. Becoming a millionaire with real estate is realistic, even if you start with small amounts.
Real estate does not offer the very highest returns. Nevertheless, an average of 8 - 11% per year would be realistic. Based on the return and term, you can calculate future wealth.
Tip: download our free real estate tools. With those tools you can calculate returns and find inspiration to successfully invest in real estate with little money, or with a lot of money.
How much to invest in real estate?
You want to invest in real estate with little money. In doing so, it is interesting to know how much. For example, you can invest in real estate monthly. Each month a small amount. As an alternative or complement to saving.
In this section we look at various scenarios for how much to invest in real estate.
The starting point is for you to think about your risk profile. With our scenarios, we assume an average risk profile, which amounts to an average annual return. This average return in real estate is about 8% per year.
Good to know: with buying real estate yourself, this can increase from about 6% to 11%. Above 11% average return is possible, but not common. This return is then a composite of cash flow and capital gains. Capital gains are realized only if actual sales are made at a capital gain. Therefore, the actual return, until sale, amounts to about 8%.
Scenario: 200 euros monthly investment in real estate
Suppose we want to start investing in real estate with little money. We can spare 200 euros per month. Should we lose this amount, we will not run into financial problems. This is an excellent starting point, since investing has risks of losing money.
How much does 200 euros monthly investment in real estate yield?
As indicated, we assume an 8% return. For a realistic scenario, we use 2% annual inflation (which is higher or lower now and then).
What do we learn from this?
We see that monthly investment in real estate is particularly interesting in the long run. Even with small amounts or little money, you can build a nice wealth. All you need is patience and discipline.
How much monthly investment in real estate for getting rich?
With a small monthly deposit, we can build up a nice amount of money. But what if we want to become rich. How much should we invest monthly in real estate for getting rich?
Below we use our calculation tool (which you can download from the menu). We assume the same assumptions. This time, however, we invest not 200, but 500 or even 750 euros per month.
At an investment starting at 500 euros, things get interesting. At a monthly deposit of 750 euros you can get rich with real estate. Note: We assume an average return. Perhaps you become more advanced, and you can achieve a higher return.
At a monthly deposit of 750 euros, any disciplined investor will be able to accumulate €574,062 in wealth after 30 years. This is not a guarantee, but it is possible based on average returns. Also keep in mind that inflation is off. If we do not include inflation, the total wealth comes to €889,170.
Buying real estate without money
In this article, we have situated ways in which we invest in real estate with little money. In doing so, we count on not doing crazy things. Like buying real estate with no money.
Yes, buying real estate yourself may be the best way for getting rich with real estate. But buying real estate yourself also has increased risk. Like mortgage debt. When you have tenants, real estate generates income (cash flow). But can you pay off the mortgage debt when the property is vacant? When you can't find a tenant for a while?
Dutch real estate courses swear by it: buy real estate without money. Everything is possible! Never work again and invest other people's money. And yes, this is possible by offering real estate projects on crowdfunding yourself. Or other creative constructions are possible.
But be honest.
Do you think at this moment you have no money. Then do you think it is wise to buy real estate without your own money?
Perhaps you would do well to create a healthy financial base first. Not to take irresponsible risks. After all, those who want to get rich quick often run into the wall....
Alternatives to investing with small amounts
We have seen that investing in real estate with little money is perfectly possible. Buying real estate with no money is less wise, although not impossible. Finally, we end this article with alternatives to investing with small amounts of money. There is, of course, more to real estate than real estate.
Indeed, a diversified investment portfolio offers spread to various assets. Therefore, in addition to real estate, we want risk diversification into stocks, bonds and miscellaneous.
1. Equities
Equities are most easy way to start investing with little money. Shares can be bought cheaply and quickly. Selling them is also easy and fast. This is called liquidity.
A challenge with real estate is that it is usually not liquid. You cannot simply sell your real estate property. Investment in real estate funds is also less liquid. And with crowdfund, the investment is fixed for years anyway.
There are several ways to get started with stocks. For beginners, it is not wise to start with individual shares. For that, gain the necessary knowledge first. Learn to invest in stocks.
A source of inspiration is the Weekly Insider, a weekly newsletter with insights to stocks.
Why stocks at all? The answer is simple: advanced investors can realize annual returns of 15 - 30% per year. This is typically higher than experienced real estate investors. But remember, those who want higher returns typically also take more risk.
2. Equity funds
Equities are attractive. But risky for beginners. If you are just starting out, you may be better off investing with small amounts in stock funds. There are three types of stock funds:
- Exchange Traded Fund (ETF)
- Closed-end Fund (CEF).
- Unlisted equity funds.
ETFs and CEFs are publicly traded and therefore offer more liquidity. You can purchase these through a regular stock broker. The difference between the two is that a CEF is usually actively managed. Annual fees are therefore higher, but a CEF can offer specialized customization. Still, an ETF is usually the better, simpler choice. In particular, diversified ETFs that include thousands of stocks spread across various sectors and continents.
Why bother when you can also piggyback on the average?
Finally, unlisted funds. Basically, these are funds that trade listed assets but are themselves unlisted. Are you still following? Examples are bank equity funds, such as the ASN and Robeco funds. Brand New Day is also interesting.
3. P2P Lending
P2P Lending stands for Peer-2-Peer Lending. It is similar to crowdfunding. On a P2P platform, you can invest money in private loans. This can be done with small amounts. For example, you can invest 25 euros in loan A, B, ..., Z. You can also invest in business loans.
An interesting feature of P2P Lending is the "AutoInvest" function. At the touch of a button, your capital is spread over ten, hundreds or thousands of loans. Each loan gets 25 euros. This gives a lot of spread. But P2P Lending is still relatively new and not yet fully proven.
4. Bonds
Investing with little money and low risk? In this case, bonds are worth considering. Bonds offer lower-risk than stocks. Bonds are also less risky than real estate investments. Although there are also such things as real estate bonds.
The disadvantage is that bonds offer low returns. Therefore, this investment is particularly interesting for those approaching retirement. But in that situation, you may be able to invest with a lot of money, rather than little money....
5. Crypto
Oh yes, then we have crypto. Crypto currencies are a way to invest with little money. Is it desirable? We don't think so. Crypto coins are too risky. Highly speculative. No intrinsic value. 98% are hot air. Of the remaining 2%, half don't keep their promises. So that leaves a handful of potential crypto projects.
Blockchain, DeFi, NFT, all revolutionary technologies we believe in. But crypto currencies do not currently offer the right exposure to profit from them. The market is still too premature. Let it develop more. And in that case, it can become a more reliable investment.
On the other hand: high risk can also lead to high returns. And when you invest with little money, small amount can become 0 euros but also go x10 or x100.
Conclusion about investing in real estate
In this knowledge article, we have discussed ways and means of investing in real estate. From real estate to (un)listed real estate funds / REITs. We have discussed the risk and return when investing in real estate. And finally, we went into detail on how to invest with little money.
Investing in real estate for beginners is more than realistic. It is an excellent long-term investment for capital growth. Start small: choose real estate funds with attractive dividends and lower risk. In time, expand into real estate, such as houses and apartments. And, years later, you can add additional risk diversification through stocks and alternative investments.
Investing in Real Estate
Dear long-term investor, here you will find everything about investing in real estate. We start with an introduction to investing in real estate (for) beginners. We look at the risks and returns. We also compare real estate vs. shares. And finally, you will find many tips on how to invest in real estate with little money. That's the interesting thing about investing in real estate: it is one of the best long-term investments. Both experienced investors with lots of money and small beginners with little money can participate in real estate.
In addition to this content, on this page you will also find 100+ knowledge articles about real estate investing (for mobile, scroll down).
Let's get started!
Real estate investing for beginners
Investing in real estate with a lot of money is not that difficult. Investing in real estate for beginners is more challenging. Basically, there are 5 ways to invest in real estate, namely:
Investing in real estate is most interesting for the long term. As a beginner, it takes a long time to get a good start, but it is possible.
Investing in real estate funds is best suited for beginners. Unlisted real estate funds, in particular, offer an attractive combination between:
Listed real estate funds are called REITs. This stands for Real Estate Investment Trust. Basically, they provide the same benefits as unlisted real estate funds. There is one big difference: listing. On the one hand, listing means faster entry and exit (liquidity). On the other hand, it means higher risk, because more knowledge is needed about the financial valuation of REITs (for the right entry moment).
Finally, we can invest in real estate through crowdfunding. This option is in our view the least interesting alternative. The return is significantly lower. Crowdfunding is interesting to use for raising capital. This way we can invest in real estate with little money.
Investing in real estate funds with little money
Real estate funds are the most accessible for investing in real estate with little money. Investing in publicly traded real estate funds (REITs) is for advanced investors. More on that later. As a beginner, however, it is wiser to start with unlisted real estate funds. Over time, as capital, returns and knowledge increase, you become more advanced and can move into REITs and/or real estate investing.
Real estate funds are the best way for beginners to get a start within the world of real estate. When you participate, you book money into the fund. This fund, managed by management, invests the money of all participants in real estate. The strategy of the fund is important because it determines risk and returns.
In exchange for participation, we as early-stage real estate investors receive a dividend payment. Depending on the fund, this is monthly, quarterly or annually. The amount varies per fund and is between approximately 4 - 8.5%.
The disadvantage to this type of investment is that we do not defend ownership of the property. The advantages have been mentioned above. As a beginner, investing in real estate funds is attractive because of the low entry threshold. Most funds can be started with a small deposit of €100 to €1000.
Note: there are big differences between real estate funds on return and risk. Choose the best depending on your personal preference.
Investing in real estate with little money
In our opinion, investing in real estate is best done through buying up real estate. This requires more time and knowledge. Also, we need a higher capital. But if this fits within the financial situation, it offers the most advantages in the long run.
The biggest advantage to investing in real estate is that we gain ownership. When buying house or apartment, we become owners. Not only can we collect rental income from it. We also enjoy potential increases in value over the long term. For example, the value generally increases at least proportionally to the increase in inflation. In other words, it is an inflation hedge with rental income (so it is better than gold).
Real estate also has advantages over shares. There is no price loss. We prefer shares to real estate, precisely because of the potential price increase. But as a beginner, investing in real estate is relatively safer than shares.
Of course, it is not without risk. Two of the biggest risks are: mortgage debt and vacancy. Make sure you only invest as long as the debts can be borne in case of vacancy!
Is it possible to invest in real estate with little money?
Yes, there are possibilities although it is time-intensive. These possibilities come down to acquiring external capital. This can be done with friends and family (not recommended) or, for example, through crowdfunding. We do not opt for such a construction. In our opinion, it is better to start with your own capital. After buying the house you can possibly refinance it at an interest rate lower than the rental income. But beware of the increased risk!
Read more about how to start with real estate investing.
Risks and returns when investing in real estate
Successful long-term investing is possible with a diversified investment portfolio. Investing in real estate has risks and returns. The higher the desired return, the higher the risk. At least, in most cases. As with shares, it is possible to reduce the risk and increase the return with real estate. Nevertheless, there is always risk, and this is why diversification is a must. Both within real estate and outside it (equities, commodities, loans, ...).
The risks depend on how you want to invest in real estate. Unlisted real estate funds offer lower risk than REITs. And REITs (usually) offer lower risk than real estate.
Generally speaking, when it comes to risk to real estate investing, you can think of:
Basically, the lower the risk, the lower the potential return. Yet there are ways to increase returns with lower risk. This always comes down to: knowledge. Knowledge is power. Both when investing in real estate and stocks. Therefore, as a beginner, it is necessary to invest in knowledge first.
These are examples of how to reduce risk in real estate purely on the basis of knowledge:
In short, with more knowledge (which requires commitment) risk can be reduced.
How high is the return when investing in real estate (for beginners)? This depends on knowledge, experience and momentum. The average return ranges from 6% (real estate funds) to 10 - 15% (real estate).
Read all about stock investing.
Why invest in real estate as a beginner?
Why invest in real estate is not an isolated question. After all, we invest for capital growth and/or (additional) income. The question is more: why invest in real estate and not in other investment opportunities? Especially when investing for beginners, there are several factors of interest. However, everything depends on how you start.
In essence, this is why invest in real estate:
The two big advantages of real estate investing are (1) monthly cash flow and (2) inflation hedge. Value appreciation is nice, but we should not count on this in cost-benefit analysis (guard against wishful thinking).
Also beneficial to real estate is that there is a small chance of depreciation. For example, the rule of Warren Buffet, an investor in stocks, is to never lose money. If a stock falls by -50% we need +100% to break even at all!
Still, stocks offer interesting advantages.
Stocks or real estate?
A big advantage of investing in real estate vs. stocks is the lower chance of depreciation. With stocks, the risk of losing money is usually higher. Especially for novice investors. This is because they buy popular (hype) shares in a hurry, without looking at fundamental valuation (strategy + financial ratios).
On the other hand, shares can yield much higher returns than real estate. In particular, advanced investors who invest enough time can achieve high returns. That is why it is worthwhile for novice investors to also immerse themselves in shares.
Imagine: you have been working for a listed company for years. This company is currently featured very poorly in the media. Its share price has plunged by 40%. Yet you are 95% sure that this company will make a lot more profit in the future. In fact, based on calculations, it appears that the share price is now even cheaper than the company is actually worth (intrinsic value).
Investing in this type of company is called Value Investing. It is the way to achieve very high returns. Think about +15% return per year. And in some periods this can even be +50% per year.
Investing in real estate with little money
Now let's go more concretely into how to invest in real estate with little money. As a novice investor investing in real estate with little money is almost impossible to do. If you want to buy a small apartment in a small town, you will spend at least €40,000.
We have already indicated that unlisted real estate funds is the best way beginners with little money.
A real estate fund can be seen as a large basket in which all kinds of different real estate objects are contained. This can be anything: houses, supermarkets, retail properties, etc. Some real estate funds still require a minimum stake of 10,000 euros or higher. But there are also real estate funds where you can start with a small amount. These types of funds make it possible to invest in real estate with little money.
Below I give you practical tips on how to invest more successfully in real estate funds with little money.
Tips for investing in real estate funds with little money
Money investing is all about return, risk and time. That is the beauty of investing in real estate with little money. If you take the time to leave small amounts fixed for 20 or even 30 years, you will become considerably richer.
That's why our focus is on long-term investing. Make use of yield-on-yield or dividend-on-dividend. Each year you generate return on return, which in the long run leads to exponential wealth growth.
Although I am mainly active within the stock market, I also have positive experiences with real estate funds. Below I give you some tips if you want to invest in real estate with little money:
Invest in real estate with little money: REITs
In the context of investing in real estate with little money, REITs are low risk. A Real Estate Investment Trust is the same as an unlisted real estate fund in terms of content. However, there are differences in terms of conditions, risk and returns.
These are the main characteristics of REITs:
Given the low entry values, REITs are perfect as a real estate investment with little money. However, it is not just for beginners. This is because the risk is also higher. More knowledge is required regarding, among other things, financial analysis.
An alternative with lower risk are so-called REIT ETFs. An ETF can be seen as a collection of several REITs. This way we do not invest in one real estate fund, but in dozens. And that at the same time.
REIT ETFs offer the lowest risk, relatively speaking, when investing in real estate. Inherent to this is a lower return.
Would you like more information? Read all about investing in REITs here.
How can I buy REITs?
You can buy REITs via an investment platform. For this you need to open an investment account. Buying a REIT is fairly simple. Search for the desired REIT and buy X number of shares. This works the same as with shares. Therefore, getting in is very easy, even for beginners.
Note, however, that this is only the beginning. Real estate always goes through a cycle of good and bad economic times. Buying in a dip can lead to very high returns. Are you buying at the highest peak? Then -40% loss is just as much a possibility.
However, timing the market (buy low, sell high) is not that easy.
Therefore, learn how to invest in REITs and stocks. This is a profession all its own.
The advantages and disadvantages of REITs compared to real estate funds
In my opinion, the biggest advantage to a REIT for those who want to invest in real estate with little money is the higher returns. Real estate funds are less risky and provide more stable dividends of around 6 to 8%. With a REIT, however, you get a higher annual dividend of 7 to 10%. And that can be added to share price gains. The latter, however, also entails more risk, because a price can also fall, causing you to lose money. This is the consideration that you will have to make yourself.
Do you want to invest little money in real estate and get higher returns? Then a REIT is a potentially better choice. But beware: thanks to a REIT, you can also lose or lose your stake faster. So if you do this, do it only with money you can spare.
Here are the advantages of REITs compared to real estate funds:
And these are the disadvantages of REITs compared to real estate funds:
How do I find the best REITs?
A good source of inspiration are knowledge platforms and investment platforms. If we look at knowledge platforms I have some personal tips for you. For example, I personally read articles from Forbes.com almost every day. You can use the search function on Forbes.com to look for articles about REITs. Besides this knowledge platform you also have other websites like Investing.com and Investopedia.com. Of course, you can also just search through Google yourself.
The trick to finding the best REITs is by simply doing a lot of research. It's better to invest dozens of hours of your time in advance to research the best REITs. By doing so, you will increase your own chances of success. Also, if you are going to invest in real estate with little money, I can imagine that you want to make nice returns.
Investing in real estate with little money: crowdfunding
Crowdfunding is a fairly new development that can also benefit investors. For example, crowdfunding lends itself to investing in real estate with little money. The principle is that together with other individuals you can invest money in real estate projects. Think of a housing development, a new commercial building, restaurants, et cetera. There are always developers and real estate projects that can use money for their investment. You as a private individual can also invest in this through a crowdfunding platform. An example is Crowdfundmarkt, but there are some other platforms as well. On these you will find not only investment projects in real estate, but also for other projects such as those of entrepreneurs.
Personally, I have no experience with crowdfunding. I also find it less interesting than real estate funds and REITs. Therefore, it is not part of our list of the best investments. There are better ways to get higher returns.
Nevertheless, it is fun and cool to invest in entrepreneurial projects through crowdfunding. Not for real estate, but for these other projects.
Investing in real estate with other people's money
A fourth, more risky, way for investing in real estate with little money is to use money from others. In this case, you don't need money yourself, but you can invest real estate. To do this successfully, though, you need a little more explanation than these few rules. The essentials come down to:
The latter can be done through platforms such as crowdfunding, with banks or with investment companies.
Another option is to buy property with the surplus value of your own home. For this, however, you need a mortgage. It is also extra risky if you cannot pay the rent when the property is vacant.
Real estate experts do the following: they buy several properties and try to sell them directly to an investment company. In exchange, you give, say, a 6% return. You yourself can then keep about 2 - 4%. Of course this is not enough, so you need many properties at the same time. And that means high risk.
Creative option: buying property in a developing country
For all the adventurers and travelers among us, I have a final creative tip for investing in real estate with little money. I'm talking about buying up real estate in developing countries. Example:
Suppose you have 10,000 euros available to invest. In developing countries like the Philippines or an African country, 10,000 euros is worth much more. Sometimes up to a factor of 10 or 20. So with the same 10,000 euros, you might have 100,000 "euros" of value in a developing country. In the Netherlands you cannot buy a house with 10,000 euros, but with this amount you can buy a house in a developing country.
If you travel a lot and you know a few "gems" in the world which are not yet tourist attractions, then it can become very lucrative to develop these areas. In this case, you can even attract larger investors for when you want to start a large real estate project. Well, for many of us this is "far from our bed", but the real entrepreneurs will see the opportunities in this. And it's needed. Because anyone who wants to start investing with little money will have to get creative. Whether that is in the real estate market or in other investments, it doesn't matter.
Why real estate Investing?
Why invest in real estate with little money? There are many opportunities, so why real estate. Ask yourself this question. Investing in real estate is a long-term wealth-building strategy.
There are three reasons why start investing in real estate with little money:
- Realize inflation-proof cash flow and capital gains
- Passive income
- You have found real estate fun and interesting
This is the very best thing about starting with real estate: you can start with a small capital. In the long run, this capital will grow into a large capital. Becoming a millionaire with real estate is realistic, even if you start with small amounts.
Real estate does not offer the very highest returns. Nevertheless, an average of 8 - 11% per year would be realistic. Based on the return and term, you can calculate future wealth.
Tip: download our free real estate tools. With those tools you can calculate returns and find inspiration to successfully invest in real estate with little money, or with a lot of money.
How much to invest in real estate?
You want to invest in real estate with little money. In doing so, it is interesting to know how much. For example, you can invest in real estate monthly. Each month a small amount. As an alternative or complement to saving.
In this section we look at various scenarios for how much to invest in real estate.
The starting point is for you to think about your risk profile. With our scenarios, we assume an average risk profile, which amounts to an average annual return. This average return in real estate is about 8% per year.
Good to know: with buying real estate yourself, this can increase from about 6% to 11%. Above 11% average return is possible, but not common. This return is then a composite of cash flow and capital gains. Capital gains are realized only if actual sales are made at a capital gain. Therefore, the actual return, until sale, amounts to about 8%.
Scenario: 200 euros monthly investment in real estate
Suppose we want to start investing in real estate with little money. We can spare 200 euros per month. Should we lose this amount, we will not run into financial problems. This is an excellent starting point, since investing has risks of losing money.
How much does 200 euros monthly investment in real estate yield?
As indicated, we assume an 8% return. For a realistic scenario, we use 2% annual inflation (which is higher or lower now and then).
What do we learn from this?
We see that monthly investment in real estate is particularly interesting in the long run. Even with small amounts or little money, you can build a nice wealth. All you need is patience and discipline.
How much monthly investment in real estate for getting rich?
With a small monthly deposit, we can build up a nice amount of money. But what if we want to become rich. How much should we invest monthly in real estate for getting rich?
Below we use our calculation tool (which you can download from the menu). We assume the same assumptions. This time, however, we invest not 200, but 500 or even 750 euros per month.
At an investment starting at 500 euros, things get interesting. At a monthly deposit of 750 euros you can get rich with real estate. Note: We assume an average return. Perhaps you become more advanced, and you can achieve a higher return.
At a monthly deposit of 750 euros, any disciplined investor will be able to accumulate €574,062 in wealth after 30 years. This is not a guarantee, but it is possible based on average returns. Also keep in mind that inflation is off. If we do not include inflation, the total wealth comes to €889,170.
Buying real estate without money
In this article, we have situated ways in which we invest in real estate with little money. In doing so, we count on not doing crazy things. Like buying real estate with no money.
Yes, buying real estate yourself may be the best way for getting rich with real estate. But buying real estate yourself also has increased risk. Like mortgage debt. When you have tenants, real estate generates income (cash flow). But can you pay off the mortgage debt when the property is vacant? When you can't find a tenant for a while?
Dutch real estate courses swear by it: buy real estate without money. Everything is possible! Never work again and invest other people's money. And yes, this is possible by offering real estate projects on crowdfunding yourself. Or other creative constructions are possible.
But be honest.
Do you think at this moment you have no money. Then do you think it is wise to buy real estate without your own money?
Perhaps you would do well to create a healthy financial base first. Not to take irresponsible risks. After all, those who want to get rich quick often run into the wall....
Alternatives to investing with small amounts
We have seen that investing in real estate with little money is perfectly possible. Buying real estate with no money is less wise, although not impossible. Finally, we end this article with alternatives to investing with small amounts of money. There is, of course, more to real estate than real estate.
Indeed, a diversified investment portfolio offers spread to various assets. Therefore, in addition to real estate, we want risk diversification into stocks, bonds and miscellaneous.
1. Equities
Equities are most easy way to start investing with little money. Shares can be bought cheaply and quickly. Selling them is also easy and fast. This is called liquidity.
A challenge with real estate is that it is usually not liquid. You cannot simply sell your real estate property. Investment in real estate funds is also less liquid. And with crowdfund, the investment is fixed for years anyway.
There are several ways to get started with stocks. For beginners, it is not wise to start with individual shares. For that, gain the necessary knowledge first. Learn to invest in stocks.
A source of inspiration is the Weekly Insider, a weekly newsletter with insights to stocks.
Why stocks at all? The answer is simple: advanced investors can realize annual returns of 15 - 30% per year. This is typically higher than experienced real estate investors. But remember, those who want higher returns typically also take more risk.
2. Equity funds
Equities are attractive. But risky for beginners. If you are just starting out, you may be better off investing with small amounts in stock funds. There are three types of stock funds:
- Exchange Traded Fund (ETF)
- Closed-end Fund (CEF).
- Unlisted equity funds.
ETFs and CEFs are publicly traded and therefore offer more liquidity. You can purchase these through a regular stock broker. The difference between the two is that a CEF is usually actively managed. Annual fees are therefore higher, but a CEF can offer specialized customization. Still, an ETF is usually the better, simpler choice. In particular, diversified ETFs that include thousands of stocks spread across various sectors and continents.
Why bother when you can also piggyback on the average?
Finally, unlisted funds. Basically, these are funds that trade listed assets but are themselves unlisted. Are you still following? Examples are bank equity funds, such as the ASN and Robeco funds. Brand New Day is also interesting.
3. P2P Lending
P2P Lending stands for Peer-2-Peer Lending. It is similar to crowdfunding. On a P2P platform, you can invest money in private loans. This can be done with small amounts. For example, you can invest 25 euros in loan A, B, ..., Z. You can also invest in business loans.
An interesting feature of P2P Lending is the "AutoInvest" function. At the touch of a button, your capital is spread over ten, hundreds or thousands of loans. Each loan gets 25 euros. This gives a lot of spread. But P2P Lending is still relatively new and not yet fully proven.
4. Bonds
Investing with little money and low risk? In this case, bonds are worth considering. Bonds offer lower-risk than stocks. Bonds are also less risky than real estate investments. Although there are also such things as real estate bonds.
The disadvantage is that bonds offer low returns. Therefore, this investment is particularly interesting for those approaching retirement. But in that situation, you may be able to invest with a lot of money, rather than little money....
5. Crypto
Oh yes, then we have crypto. Crypto currencies are a way to invest with little money. Is it desirable? We don't think so. Crypto coins are too risky. Highly speculative. No intrinsic value. 98% are hot air. Of the remaining 2%, half don't keep their promises. So that leaves a handful of potential crypto projects.
Blockchain, DeFi, NFT, all revolutionary technologies we believe in. But crypto currencies do not currently offer the right exposure to profit from them. The market is still too premature. Let it develop more. And in that case, it can become a more reliable investment.
On the other hand: high risk can also lead to high returns. And when you invest with little money, small amount can become 0 euros but also go x10 or x100.
Conclusion about investing in real estate
In this knowledge article, we have discussed ways and means of investing in real estate. From real estate to (un)listed real estate funds / REITs. We have discussed the risk and return when investing in real estate. And finally, we went into detail on how to invest with little money.
Investing in real estate for beginners is more than realistic. It is an excellent long-term investment for capital growth. Start small: choose real estate funds with attractive dividends and lower risk. In time, expand into real estate, such as houses and apartments. And, years later, you can add additional risk diversification through stocks and alternative investments.
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