Can You Truly Make Cash Investing $100 In Actual Property? I Tried It And Here is What Occurred

With the rising recognition of other investments and, extra particularly, fractional actual property investing, there’s little doubt that you just’ve come throughout no less than one funding platform that permits you to spend money on actual property with $100 or much less.

The thought of investing solely $100 in actual property could appear pointless at greatest or a great way to lose $100 at worst. Actual property has historically been an advanced asset class to spend money on, contemplating that the majority Individuals have a tough sufficient time buying a house to reside in — not to mention a property to carry as an funding.

Actual property funding trusts (REITs) have provided people a easy solution to spend money on income-producing actual property since Congress created the construction for REITs in 1960. Nonetheless, most REITs are publicly traded, which suggests they’re delicate to the identical volatility as every other traded fairness and produce returns that observe fairly carefully with the general inventory market.

As a result of one of many issues that make actual property a sexy funding is that it may well present a hedge towards inventory market volatility, publicly traded REITs might not be a great substitute for investing in bodily properties.

Is a $100 funding via an actual property investing platform the answer?

A yr in the past I invested $100 on three completely different platforms to seek out out. The three I selected have been Goundfloor, Arrived Houses and Fundrise. Right here’s what has occurred to my $100 thus far on every.

Groundfloor

Groundfloor works a bit otherwise than most different actual property investing platforms. As a substitute of shopping for fairness shares in a property, traders purchase shares of short-term loans which can be backed by residential properties. Most of those loans are made to traders who plan to flip the house or to homebuilders for ground-up development. The loans have increased rates of interest than conventional financial institution loans, and most have phrases starting from six to 12 months.

As an investor, you possibly can browse the obtainable loans on the platform and select which of them you wish to spend money on. Every mortgage has a $10 minimal funding so it’s simple to create a diversified portfolio. I selected to unfold my $100 throughout six loans, placing a bigger share of the funding into the higher-risk, higher-reward choices.

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To this point, 5 of these loans have been repaid. These 5 accounted for $70 of my funding and I used to be paid again $74.33. One of many loans was repaid in solely two months, so the curiosity obtained was minimal. The opposite 4 have been paid again between 4 and 9 months after my funding.

The sixth mortgage, which hasn’t but been repaid, accounted for $30 of my authentic funding and is in default. This really isn’t as dangerous because it sounds, and it’s not unusual for a lot of these short-term loans to enter default. Within the overwhelming majority of instances, the mortgage ultimately will get paid and sometimes generates the next return than anticipated. Groundfloor has a loss ratio of lower than 1%.

In response to the updates that Groundfloor posts on the dashboard, the borrower has recognized a purchaser for the home. If all goes nicely from this level ahead, the borrower will promote the home and I’ll get my $30 again plus curiosity. If not, Groundfloor will likely be pressured to foreclose on the property and I’ll ultimately obtain my professional rata share of the proceeds.

I selected the automated investing possibility, so my repayments could be reinvested in different loans based mostly on the standards I set. The primary 4 loans that have been paid again have been reinvested, repaid once more and have not too long ago been invested in different loans. This implies the whole curiosity I’ve obtained thus far on my authentic $100 funding is $6.26.

Assuming I get repaid on the opposite $30 with the anticipated 12% return, I’ll have one other $3.60 so as to add to that complete and can have obtained $9.96 in curiosity for a one-year return of 9.96%. The worst-case situation is I study my lesson on placing 30% of my Groundfloor portfolio on one mortgage.

See additionally: Benzinga’s Overview of Groundfloor

Arrived Houses

Arrived Houses is the latest platform on this record. It launched in 2021, turning into the primary Regulation A funding platform to promote shares of particular person rental properties. You possibly can browse the obtainable properties on the platform and develop into an investor in whichever ones you want with a couple of clicks of your mouse or faucets in your cellphone.

The minimal funding for every property is $100, which buys you 10 fairness shares. Not like with Groundfloor, you really develop into an proprietor of the property. Arrived Houses offers with discovering tenants, gathering hire, taking upkeep requests and all the different property administration complications. As an investor, your job is to easily accumulate your quarterly dividends and hope the property will increase in worth through the holding interval.

I selected to take a position $100 in The Westchester, a rental property in Elgin, South Carolina. I purchased 10 of the 18,213 complete shares. The property was bought for $340,000, and there was one other $41,030 allotted to enhancements, upkeep reserves, closing prices and a sourcing charge.

The property has a tenant who’s paying $2,495 per 30 days in hire. After bills and debt service, my share of the rental revenue thus far has been $3.90. I’ve solely obtained three dividend funds thus far, however that’s solely due to how the timing lined up. On the present fee, my annual dividend yield is predicted to be 5.2%.

The property has since elevated in worth, so the shares I bought for $10 every at the moment are price $12.15 for a complete worth of $121.50. I gained’t be stunned to see the share worth dip within the brief time period for the reason that housing market is cooling off, however I’m assured that the appreciation fee will common out over the following 5 years.

The whole return on my funding thus far is $25.40, or 25.4%. The $3.90 in dividends have been deposited in my checking account, however I’ve to attend till the property is ultimately bought to comprehend the appreciation returns.

See additionally: Benzinga’s Overview of Arrived Houses

Fundrise

Fundrise is without doubt one of the oldest and largest actual property funding platforms round. It really works a bit otherwise than Groundfloor and Arrived Houses in that you just spend money on giant portfolios of actual property as an alternative of particular person properties. Whereas it’s enjoyable to have the ability to select particular properties to spend money on, there’s one thing a bit of extra comforting in figuring out that skilled funding managers are dealing with the choices (like not investing 30% on one high-risk deal).

Every fund on the platform has a unique technique and goal. Most require a bigger funding than $100, so I used to be restricted to one of many latest funds — the Flagship Actual Property Fund. This fund was launched in January and owns a number of single-family rental communities, multifamily properties and industrial properties. The fund has acquired a number of new properties since I invested, together with 15 rental-home communities.

One yr after investing, my account worth is now $111.67. This consists of $10.24 from appreciation, $1.55 in dividends and 12 cents paid to Fundrise in advisory charges.

This fund doesn’t have a set maintain interval so I can submit a redemption request to liquidate my shares after I’m able to money out. That course of can take a few months, which might be irritating for some traders however may save them from making an impulsive choice to liquidate every part to go all-in on a meme inventory.

See additionally: Benzinga’s Overview of Fundrise

So, Can You Truly Make Cash Investing Solely $100 In Actual Property?

Primarily based on my expertise over the previous yr, you may make cash investing solely $100 in actual property. However the query is: Is it price investing solely $100 in actual property?

As you possibly can see from the returns I’ve earned on my investments, it’s unlikely that $100 goes to develop into an enormous portfolio by itself. However that’s not the thought right here and never why these platforms set such low minimal investments.

These three platforms are designed so to develop your actual property portfolio over time by investing what you’re in a position if you’re in a position. Making a one-time funding of $100 in all probability isn’t price it. Investing $100 per 30 days, alternatively, in all probability is price it — particularly as compounding returns come into play. That is my plan anyway.

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