If you’re looking to buy a home as an investment these days, $1,000 probably won’t get you very far. Home values are up across the board, and in January, the national median listing price was $346,000, according to Realtor.com. Even if you find a lender that will accept a relatively low down payment, $1,000 most likely isn’t going to cut it (at least not with a conventional mortgage).
But even if you’re limited to $1,000 in funds right now, it doesn’t mean you can’t start to dabble in the world of real estate investing. You may not be able to purchase an income property and start enjoying a steady stream of rent payments. But you can still put that money to work — and profit tremendously in the long run.
Another way to invest in real estate
Investing in real estate extends well beyond the realm of owning physical properties. And if you don’t have the funds to go out and purchase an income property, you can do quite well for yourself by investing in REITs, or real estate investment trusts.
REITs are entities that make money by owning different properties. Like stocks, many REITs are publicly traded. That means you can track a REIT’s share price and know whether you’re buying high, low, or somewhere in between.
Within the world of REITs, there are a number of different sectors you can dabble in. Industrial REITs, for example, own and manage warehouses and distribution centers. In a world where digital sales have recently boomed, it’s a good sector to consider investing in these days.
Hospitality REITs, meanwhile, are companies that own hotels and resorts. These REITs are a bit more precarious nowadays, because the pandemic has caused a major slowdown in business travel that could hurt the travel industry for years. But it’s still possible to make money by dipping into this sector.
Then there are healthcare REITs — companies that own and operate facilities like hospitals and urgent care centers. What makes these REITs a pretty strong buy is that the healthcare industry itself is fairly recession-proof. Even during periods of general economic distress, there’s a perpetual need for healthcare services.
These are just a few examples of REIT sectors you might choose to put money into. But either way, if you’re sitting on $1,000, it pays to consider putting some REITs into your portfolio.
When you own REITs, you can benefit from:
- Larger-than-average dividends: Since REITs are required to pay at least 90% of their taxable income to shareholders as dividends each year, they’re a good source of ongoing income.
- Strong returns over time: Just as stocks can gain value over the course of many years, so too can the value of REITs grow. If you hold REITs for decades, you could conceivably end up with 10 times your initial investment or more without even accounting for dividend income.
- Portfolio diversification: Even though many REITs function like stocks, their value doesn’t always fluctuate in line with stock market movement. Plus, branching out into REITs could give you exposure to industries you’re not already invested in.
Make the most of your money
Although $1,000 may not seem like a large amount of money in the grand scheme of investing, if you’re smart about how you invest it, that sum can grow substantially over time. And while $1,000 clearly isn’t enough to buy you a multiunit home to rent out or a lakeside vacation property, it could allow you to load up on REITs that make you a lot richer through the years.