How Do I Invest in Real Estate if I Have $5,000?

How Do I Invest in Real Estate if I Have $5,000?

Every week I get asked, “How would you invest in real estate if you only had $__________?” Today we’ll explore your options if you have $5,000 in savings that you’re willing to put into real estate. With only $5,000 to use, your options are limited. In my younger days, I bought and sold some properties using none of my own money so I know there are some possibilities.

First, let’s clarify what we’re dealing with here. The assumption is that you have $5,000 in liquid assets, which include cash, cash equivalents, or marketable securities. I’ll assume that we’re talking about residential properties. (Commercial deals are certainly possible, and I’ve done some with less than $5,000. However, today we’ll focus on a residential deal because those are generally simpler to acquire with $5,000 or less.)

Below are some real estate investment options if you have $5,000:

  • Partner with someone who can bring enough money to make the deal happen. I’ve done partnerships in which the partner put up 100% of the money for 50% of the ownership. In that kind of deal, technically you wouldn’t need any of your $5,000! The challenge is that if your funding partner wants to see you have some skin in the game, you don’t have much to show your financial commitment. Some partners won’t like the disparity between how much money they put in and how little you invest.
  • Obtain a loan from a private lender or hard money lender. If you have a rich Uncle Jimmy who wants to loan money to you, or if you have a reputable hard money lending option, you can acquire a property. For example, let’s say you need a total of $200,000 to buy and renovate a property. You could invest $5,000 and have Uncle Jimmy loan you $195,000 at 8% interest or whatever you agree upon. That way Uncle Jimmy sees that you have skin in the game, and he receives a higher interest rate than most other investments out there. When you borrow money instead of partnering with someone, you have more upside since you’re only paying interest instead of a share of the profits. And, you have total control of the project instead of sharing control with a partner. Hard money works well too if you can live with the higher interest rate and points/fees. For instance, a hard money lender might expect you to put 20% down and finance the entire renovation. The hard money lender in this situation would loan you 80% of the purchase price. For many hard money lenders, they won’t care where you get the 20% down payment and renovation money. In theory, Uncle Jimmy could loan you the 20% down AND the renovation money while you use the hard money for the 80% loan. Technically, that would be 100% financing!
  • Obtain a HELOC (Home Equity Line of Credit), term loan, or other type of loan against other real estate or assets that you already own. A lot of people jump-start their real estate investing this way. If you have sufficient equity in your personal residence, why not refinance or set up a HELOC to extract some of that equity? For example, you could pull out $50,000 to cover the down payment and renovation costs of an investment property. If your home’s fixed mortgage loan has a rate around 2.5% to 4.5%, refinancing into a 6.5% rate doesn’t make sense. In that case, keep the mortgage loan in place and set up a HELOC. Many HELOCs are interest-only which makes the monthly payments lower, and you only make payments when you use the money.
  • Obtain a mortgage loan to purchase a home that you live in for at least a year. One scenario if you do not own your personal residence is to use a mortgage loan to buy one. Live in it for at least a year, and then consider renting it out or selling it. (I recommend the renting out option so you can build wealth over time.) Loans for a personal residence almost always offer the lowest interest rate, lowest down payment requirements, longest amortization period, and lowest points and fees. Even so, your options are limited when all you have is $5,000. If you’re a veteran eligible for a VA loan, you could borrow 100% of the purchase price and possibly have the seller pay up to 4% of the closing costs. If everything worked out perfectly, you wouldn’t use up all of your $5,000. If you qualify for an FHA loan, your $5,000 won’t be enough to cover the 3.5% down payment. However, FHA loans allow the borrower to receive the down payment as a gift from someone. In that case, a family member could gift you the down payment. Both VA and FHA loans allow you to buy a 1-4 family residential dwelling.
  • Find a seller who is willing to provide owner financing. Seller financing is much more common in down markets. Regardless of the market, with effort and persistence you may find a seller who is willing to provide owner financing. You could enter into a lease purchase (rent-to-own) deal or a contract for deed (land contract). You could also negotiate to have the seller deed the property to you, and they can hold a mortgage until you pay off the loan. If the seller has a mortgage loan, another option (although there are serious drawbacks) is a “subject-to” transaction. Read our blog on subject-to deals.
  • Act as a wholesaler. A wholesaler goes under contract to buy a property and aims to have another buyer (typically an all-cash investor) take over the contract to buy that property. The wholesaler collects an assignment fee from the buyer for the rights to the contract. For example, a wholesaler could find the seller of a fixer-upper. The seller and wholesaler reach an agreement in which the purchase price will be $100,000, and the earnest money deposit is $250. Once the property is under contract, the wholesaler shows the house to an investor. The investor states that they are willing to pay $110,000 for the property. The wholesaler signs an Assignment Agreement with the investor whereby the investor pays a $10,000 fee to the wholesaler, and the investor purchases the property for $100,000 from the seller. Usually the investor pays the $250 deposit back to the wholesaler. Many years ago I even did wholesale deals where I only put down $1 as the deposit! There can be problems with a wholesale transaction, such as what happens if the wholesaler can’t find an investor to take over the contract? Also, some states expect there to be additional realty transfer tax paid on wholesale transactions. Furthermore, there are wholesalers who operate unscrupulously and prey upon unwitting or unsophisticated sellers by manipulating them into a long-term contract at a purchase price well below fair market value.
  • Invest in a REIT. Buying shares of a Real Estate Investment Trust allow you to receive dividends and possibly share price appreciation. You have no management responsibility and no legal liability.

If all you have is $5,000, be especially careful. Real estate investments generally offer numerous protections, yet there are still ways to lose money. Consult your attorney, tax advisor, and financial advisor prior to making investment decisions. Quite frankly, your best option may be to save your $5,000 and focus on earning more income through your day job. Build up that nest egg and buy real estate when you have deeper pockets. When you have much more in savings, you’ll have more options.

Tai DeSa is a graduate of The Wharton School of the University of Pennsylvania.  He became a full-time real estate investor in 2004 after serving in the U.S. Navy.  Tai has made colossal mistakes in investing (and learned some things along the way).  He has helped hundreds of homeowners avoid foreclosure through successful short sales. Check out Tai’s books on Tai may be available for coaching and speaking engagements on a variety of real estate topics.  Send an email to

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