Investing in real estate doesn’t have to be in multiples of millions. Here, a few seasoned professionals in very different areas of the industry share how they would invest $10,000.
REITs as a macrocosm of the individual deal
Andy Bolton is an investor, developer, and property manager who has led the revival of commercial and multifamily properties in Kansas City, Missouri, and New Orleans.
"Well, all of my interests in real estate investments are in limited partnerships, and with, for example, a $27 million deal, $10,000 is not enough to purchase a stake in what we do. So, I would look at using that money to balance out a portfolio.
"In that case, it seems to me your options are to partner with something as down payment on an investment property, perhaps, where your choices could be anything from raw land to a value-add fixer upper to something in turnkey shape or ready to go.
"Then again, I might take that $10,000 and put it in a REIT. I would look at them much like I do as a direct investment in real estate. I’d ask questions like 'Is the net outflow greater than the inflow and at other fundamentals of the REIT itself, and then the market factors, such as whether the jobs moving into their markets, are people moving in and out?'
"To me, investing in a REIT, in that sense, is like buying a single piece of property on a macro level."
Leverage what you have, minimize the impact of what you don’t have
Jeff Holzmann is CEO of IRR Management Services, a crowdfunded real investment management firm that manages investors’ positions across hundreds of real estate properties and currently manages a combined asset value of more than $1.5 billion.
"$10,000 is not enough to buy an investment property directly. It's certainly not enough to get you anywhere near an investment in commercial property that's managed by professionals. But it is enough to allow you to be part of a bigger group of ‘pooled’ funds that are invented in commercial grade properties and give you the same terms that heavy hitters get.
"The idea is to leverage what you have and minimize the impact of what you don't have. Since you don't want a huge percentage of your investment to go towards lawyers, accountants, fees, and regulator-imposed limits, your best bet with a $10,000 investment is to invest in a debt or equity position in a large multifamily complex or even a portfolio of multifamily complexes.
"Multifamily housing solutions are widespread across the country and are proving to be fairly resilient during the COVID pandemic. While hotels, shopping malls, and office buildings are getting hit hard, recent data from the National Multifamily Housing Council shows that collections in the multifamily sector remain high and only declined single digits percentages during the pandemic, making them very attractive to investments.
"The federal housing enterprises have offered forbearances, and Congress is debating further assistance to private residences, further backing the theory that this real estate category will have something to lean on while hotels, malls, and office buildings may not. It should be noted, however, that some hotels, like in the Florida Panhandle and other areas in the Sunbelt, are actually riding high.
"Since any smart investor knows that spreading your risk is rule number one, think of investing in a portfolio of real estate, such as the Sunbelt12 portfolio currently being offered by RREAF Holdings, to diversify your funds across multiple states and assets."
Crowdfunding is an option, including through opportunity zones
Jim White is chairman and CEO of Post Harvest Technologies and founder of the PHT Opportunity Fund in Scottsdale, Arizona. He also is the author of Opportunity Investing: How to Revitalize Urban and Rural Communities With Opportunity Funds.
"Today there are dozens of crowdfunding companies and websites through which individual investors can buy in. Many of them have done all the research on the projects and sponsors in advance, making it even easier for individuals, especially newbie real estate investors, to participate. Potential investors can converse in online forums about the merits of any given project.
"I’m also thrilled to announce the launch of my own qualified opportunity fund: PHT Opportunity Fund, a traditional QOF that will channel investor capital to a qualified opportunity zone in Salinas, California.
"We’ll be introducing future funds that will allow people to invest small amounts, such as $10,000 or even less, in a variety of established projects alongside high-net-worth individuals, institutional investors, and private equity firms."
Buy a house, or refinance the one you have
Dava Davin is founder and principal of Portside Real Estate Group in Falmouth, Maine.
"It’s estimated that the average American has about $30,000 to $40,000 in savings across all accounts. With that being said, I would recommend that $10,000 be spent to invest in a home as a down payment or to pay down the current debt and refinance if the homeowner hasn't already in the last nine months (rates continue to be at epoch-making lows). Homeowners should also consider refinancing to a 15-year mortgage.
"With Americans having so little savings for an emergency fund, college savings, and retirement, having equity in their home will be a saving grace."
Low rates and high interest in real estate investing
Low interest rates are great for financing homes and investments, not so much for savings. Investors interested in putting some cash to work have plenty of options. Along with the options listed above, make sure to check out Millionacres’ ongoing coverage of REITs and other real estate stocks to help you do the requisite research for your next move.