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Investing in real estate with little cash

Abiodun Doherty

There are many myths that people have in their minds when it comes to property investment. One of such myths is that you need a lot of cash before you can become a property investor. This belief has robbed several people of the opportunity to enter into the real estate investment arena while waiting for a sudden financial windfall that will launch them into the real estate field. The sad truth is that the more they wait, the harder it seems and the more frustrated many become about the prospect. There is a better way. You can start with the cash that you have.

Cash is important for almost any transaction. However, it is the size and the quantity that most prospective investors do not get right. Knowledge of your options and what you can do with what you have are more important. In addition, you need to set aside all the money you possibly can in order to create a seed capital to work with. You can do this alone or in partnership with other people through mediums such as co-operatives. You can achieve this through mini-savings club that contributes and then distributes to members in turns. The idea is to save as much as you can or pool the funds together to create a fund that provides more options.

Many cooperative societies invest in the acquisition of land for their members and they sell this to members using instalment payment plan. The idea is to make land acquisition easier for members. If you are working in an organisation that has a co-operative society already, you should consider joining. Explore any real estate investment opportunity that they may have. Cooperative societies also lend money at very low-interest rates. You can leverage this to get money that you can invest in real estate. You can then proceed to pay back the interest in instalment.

Furthermore, there are private property developers who make provision for buying off plan or in instalment. Buying off plan is one of the means of acquiring a property without having to fully pay for it because it is in the developmental stage. There is also the option of buying land in instalment. The overall cost of buying a parcel of land using this model may be higher but it is relatively easier for many to bear because it does not place an immediate burden on the purchaser to pay in full.

Another interesting option for you to consider is to invest with family and friends. While this carries an inherent risk, it also has a lot of possibilities. This reminds me of an incident a retiree shared with me several years ago. A group of four families decided to jointly invest in real estate, picking an area where they could not afford individually. One of them was an architect who came up with a concept of four terrace houses. They broke the project into manageable phases with reasonable financial commitments. Within a few years, they had completed the project. Those who sold theirs made a significant profit and at least one decided to lease out the property and earn an annual income.

Another important consideration for prospective real estate investors is to carefully select a location that is within their financial capacity but has all the indices of a growth area. One of the reasons for value is scarcity. When you consider the price of real estate in the city centres with the amount in several suburbs within a radius of five to 10 kilometres, you may be surprised that there are major differences. If you also consider the demographic projections in those areas, you may be surprised about the positive growth in a few years to come. Keeping this fact in mind should encourage you to look beyond areas that are over your budget and consider other upcoming neighbourhoods.

Many prospective real estate investors have missed very good opportunities because they were fixated on areas beyond their means. You can start small and then grow big which is better than not starting at all. Many areas that have appreciated in the past 10 years were not areas of choice then. You too can research and discover the possible growth areas that are still reasonably priced and within your budget. You can also explore financing methods that allow you to leverage your cash at hand to borrow. Using leverage to acquire an asset is a wise choice. It is a way of increasing the possibilities you can explore using the little cash that you have at present.

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