Gone are the days of being shut out of the real estate market because you’re cash strapped. The rules have changed and now it’s possible for even the smallest investor to reap the short- and long-term rewards investment properties offer.

Although lenders now require a 20 percent down payment to fund a loan for a rental home, banks are more willing than ever to consider multiple sources for that money. You can invest with the help of others even when you’re broke.

Here are just a few ways how to invest when you’re broke:

• Crowd funding. A number of websites allow crowd funding for real estate ventures, thanks to the JOBS (Jumpstart Our Business Startups) Act of 2012. Under its provisions, individuals can contribute small amounts to real estate investments that would otherwise shut them out because of high capital requirements.
• Home equity lines of credit (HELOC). If you have enough equity in your home, you can borrow against it using a HELOC. As a general rule, this type of loan will carry the lowest interest rate compared to personal loans or credit card advances. Lenders have low risks with HELOCs since the homes provide collateral. Missed HELOC payments can trigger a foreclosure.
• 401k withdrawl. Some types of 401k plans let you borrow against them without incurring a withdrawal penalty. Most plans let you borrow up to 50 percent of your balance, but the loan must be paid back within five years. If you have adequate funds in your 401k, using that money for a secure investment will be the fastest way to fund your project, since it doesn’t require a credit check or bank approval. See also Can I Invest My 401k in Real Estate?

The fastest way to find opportunities for real estate investing may be through a turnkey property management company. They offer complete services from acquisition to maintenance and may have a list of serious money partners.

Initiating Your Own Investing Project

If you want to spearhead an investment project yourself, you’ll have to articulate what you have in mind for the venture. Think through it carefully and prepare a package for potential investors that covers these elements:

• How you’ll structure it. Partnerships are an ideal way to use seed money from others and insulate them from any liability in the venture when set up as either a limited liability partnership (LLP) or a limited liability limited partnership (LLLP). Both are allowable in Florida and are operationally and administratively easier to manage than corporations. A good business lawyer will be able to advise you on how to form the partnership and set it up.
• Locations. Identify where you want to have rental housing. You may be more comfortable or knowledgeable about specific areas within a city.
• How much funding you need. Real estate prices vary by neighborhoods. Learn the prices of homes in the areas you’re considering and base your budgets accordingly.
• The timing. When you plan to start looking for a suitable property depends on your circumstances, but as a general rule, home sellers are more likely to drop their asking prices in July and August, and from December through February.
• Returns on the investment (ROI). Estimate as best you can the budgeting for the property and how much you expect in monthly rent. Subtract the monthly costs (PITI, HOA fees and upkeep costs) from the expected rent to calculate your return on investment.
• The risks. Rental housing is one of the most secure kinds of real estate investments there are. People will always rent, and the barriers to entry are lower than buying a home. Physical losses from weather, fire, or accidents are covered by insurance. Short, temporary vacancies will occur from tenant turnover that you can address in the financials.

See also How to Minimize Risks of Turnkey Properties

JWB has more than 10 years experience managing turnkey rental property investments. We have a consistent approach that delivers steady cash flow from our clients investment properties. Curious what your cash flow could be from one of our rental properties? Try our cash flow calculator or contact us to learn more.