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You don’t need $10,000 on hand to start your real estate investing journey.
You don’t even need $1000 on hand right now.
Buying a share of stock can be as easy as buying a pair of shoes. And it might be cheaper!
Thanks to legislation signed by President Dwight D. Eisenhower in 1960, the average American has access to the real estate markets by investing in REITs (real estate investment trusts). These are real estate investment trusts that own or finance portfolios of income-producing real estate. A REIT can own shopping malls, office space, hotels, and other commercial properties. The real estate assets are pooled together like mutual funds and sold as stocks to investors.
So if you have $100 on hand, you can head to the REIT market and see which assets you should add to your shopping list.
On a tight budget? Here are some shopping tips that won’t drain your pockets:
Don’t Buy in Bulk
This isn’t Costco or Sam’s Club. Don’t be tempted to buy in bulk just because an asset appears to be on “sale”.
When you use apps like Robinhood, you can purchase one share at a time without paying a commission fee. Use this link and you’ll qualify for a free stock.
If you bought one share a week, you would have over 50 shares at the end of the year. And you didn’t have to put a dent in your bank account in order to do it.
Look for Quality Over Quantity
Do your research. Just because an asset is under $10 doesn’t mean it’s a deal.
There are more than a handful of REITs that you can buy for under $20 but you want to make sure it isn’t a tarnished asset.
Here are some questions you should consider to evaluate the quality of an asset:
- What geographic locations does the REIT invest in?
- What type of tenants does the property have?
- What is the economic outlook for that specific industry and property type?
Examine the Net Asset Value
Many investors use NAV (net asset value) to analyze REITs. NAV is a net worth term for REITs. Don’t worry; it’s not a complicated equation that will require a TI-83 calculator.
All you have to do is find the current market value of the funds’ assets minus any mortgage liabilities. Divide this by the number of shares outstanding and you’ll get the per-share NAV. Thus, if a REIT has total assets of $110 million and mortgage liabilities of $10 million, that equals total net assets of $100 million. If there are 10 million shares of the fund, then the NAV is $10 per share.
NAV is a good number to use to compare real estate value in the public market versus the private market as REITS can trade at a premium or discount. It’s similar to comparing the regular price to the clearance price of a pair of shoes.
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Disclaimer: Wealthy Women Daily is solely educational and informational, and is not intended to give investment or trading advice of any kind. Not all asset classes are suitable for all investors. Wealthy Women Daily is a research academy that provides you with the data and analysis you need to make an informed investment decision. It is your responsibility to talk to an expert to understand how specific investments will impact you during tax time.
