How to Invest $100,000 in Real Estate

$100,000 is no small sum. An investor with $100,000 has countless options for where to put their money. 

If you have $100,000 to invest, chances are good that you have a robust portfolio diversified across a few asset classes. You don’t need $1M to invest in real estate, $100K or even as little as $50K is plenty to begin. 

In this article, we’ll show you how to invest $100,000 in real estate and what your best options are.

Real Estate Investing Basics

There are trillions of dollars in global real estate, ranging from homes to factories and land. According to Savills World Research, the real estate market totaled $36T in 2020, and it’s only risen since. 

Despite the turbulent economy in 2024 and the current period of high interest rates, it’s still a fantastic time to invest in real estate and use it to diversify your portfolio.

Why Invest in Real Estate?

So why is real estate so attractive?

For one, real estate can help you generate passive income through rental payments. Real estate also appreciates over time and provides tax benefits such as deductions for mortgage interest and property taxes. 

Unlike stocks, real estate gives you more control through property improvements and management decisions, and it's a tangible asset that you may find reassuring compared to the theoretical value of stocks and ETFs.

The Benefits of Investing in Real Estate

Those benefits are just the beginning though. 

Here are our three favorite benefits that come with investing in real estate.

• Passive income and cash flow: Thanks to rental payments from tenants, real estate can generate passive income to provide consistent cash flow for your portfolio. This makes real estate especially attractive for investors looking for another source of regular income. 
• Profit on the sale of the property: Real estate appreciates over time, and targeted enhancements can increase its value faster. You can hold a property for as little as five years and make a profit when selling. This is what makes value-add real estate so attractive to investors. 
• Numerous tax benefits: Thanks to depreciation and other tax benefits, an investment in real estate can minimize your tax burden and reduce your tax bill come April.

Now that we’ve walked through the “why,” let’s look at the “how” of investing in real estate.

The 4 Best Ways to Invest $100K in Real Estate

As mentioned above, real estate could be commercial, residential, or even empty land. To keep it simple, we’ll focus on four of the most common ways you can add real estate to your portfolio:

• Purchase a second home
• Invest in REITs
• Invest in a Mutual Fund
• Invest in a Syndication/Private Deal/Crowdfund

Purchase a second home

One of the most common ways to invest in real estate is to purchase a second one to rent out. 

Whether it’s a vacation home, a single-family home, or an apartment, there are many options available if you have the time and funds. 

Purchasing a second home gives you the dual benefits of passive income and the ability to let the property appreciate and profit off of the sale. 

Be warned, while purchasing a second home sounds simple, it is the most expensive option on our list. You’ll need to make the upfront investment of a down payment and may need to improve the property before tenants move in. You’ll also be exposed to tenant demands unless you hire a property management company, which can eat into your cash flow. 

Invest in REITs

If you want to remove yourself from the day-to-day management of real estate, then a Real Estate Investment Trust (REIT) is an excellent choice.

REITs are companies that own, operate, or finance income-producing real estate across various sectors. By purchasing shares in a REIT, you can gain exposure to real estate markets with relatively low capital and enjoy the benefits of regular dividend payments. 

REITs are required to distribute at least 90% of their taxable income to shareholders annually, making them an attractive option for income-focused investors. They also offer the advantage of liquidity, as REIT shares can be bought and sold on major stock exchanges.

REITs typically have a minimum investment of $1,000 - $2,500 and can be purchased for as little as $12 per share, which means your $100,000 investment can go a long way toward adding real estate to your portfolio.

Invest in a Mutual Fund

Want a lower minimum investment and more diversification? 

A mutual fund made up of REITs and real estate stocks could be a good option.

By investing in a mutual fund, you gain exposure to a broad range of real estate assets and benefit from professional management. This offers diversification across different types of properties and geographic regions, potentially reducing risk. Real estate mutual funds can be a good option for investors who want real estate exposure in their portfolio but prefer a more hands-off approach compared to direct property ownership.

Like a REIT, real estate mutual funds will have a low minimum investment. REITs and mutual funds limit the downsides that come with owning and managing a property, but they limit the upsides as well when it comes to profiting on the sale. 

Invest in a syndication with other investors

REITs and mutual funds remove you from the management of the property, which is great if you want to save time but it cuts into the upside as well. 

There is a “happy medium” between these two: a real estate syndication/crowdfund. 

A real estate syndication involves pooling money with other investors to purchase properties that would be difficult or impossible to acquire individually. In a syndication, a sponsor identifies the investment opportunity, manages the property, and handles day-to-day operations. As a passive investor, you contribute capital and receive a share of the profits without being involved in property management. 

The best part? This allows you to invest in multifamily real estate which would otherwise be untaintable. And you get to invest 100% passive. Here are three more benefits to investing in a real estate syndication:

• Access to larger, potentially more profitable deals: Syndications allow you to pool resources with other investors, giving you access to larger and often more lucrative real estate investments that would be out of reach for most individual investors. These might include apartment complexes, commercial properties, or large-scale development projects.
• Passive income and management: As a syndication investor, you're typically a passive partner. You provide capital but aren't involved in the day-to-day management of the property. This allows you to benefit from real estate investment without the time commitment and stress of being a landlord or property manager.
• Expertise and risk distribution: Syndications are usually led by experienced real estate professionals who handle property selection, due diligence, and ongoing management. This gives you the advantage of their expertise. Additionally, by investing alongside others, you're spreading the risk, which can help mitigate potential losses compared to sole ownership of a property.

Learn more about how a real estate syndication compares to a REIT in our guide.

Why You Should Invest in Multifamily Real Estate over Single-family Real Estate

Whether you invest in a REIT or a syndication, you’ll have the option to invest in single or multifamily real estate. Between the two, we strongly recommend you invest in the latter. We’ve got four reasons why:

• Diversified income streams: With multiple units under one roof, the impact of a single vacancy is significantly reduced compared to a single-family property. This diversification can lead to more stable and predictable cash flow, a crucial factor for many real estate investors.
• Stronger potential for scale: Multifamily properties allow investors to spread costs across multiple units, leading to more efficient operations. For example, maintenance expenses, property management fees, and even marketing costs can be shared across units, potentially increasing overall profitability.
• Higher cash flow: The cash flow potential of multifamily properties is often higher and more stable than single-family investments. This is particularly attractive for investors seeking passive income. Additionally, the value of multifamily properties is typically based on the income they generate, offering savvy investors the opportunity for forced appreciation through improved management and increased rents.
• Significant tax benefits: Real estate offers numerous tax benefits, however multifamily real estate especially entices savvy investors with cost segregation and depreciation deductions.

How to Evaluate a Multifamily Real Estate Deal

If you’re going to invest in a real estate syndication, then we recommend asking the following five questions to help you evaluate the firm and deal’s potential:

1. What is the going-in cap rate?: Knowing the going-in cap rate is essential because it tells you how healthy the cash flow is, how the deal compares to other opportunities, and whether the property is a good “buy.”
2. What is the price per unit?: The price per unit gives you an idea of whether or not the syndicator is overpaying or getting a great deal. Higher prices per unit (especially compared to properties in the area) signify it may not be a good deal.
3. What about debt?: The more leveraged the property, the higher your potential return but also the higher the risk. It’s important to understand the debt behind the deal to assess its risk.
4. Loss to lease, or rental growth?: Loss to lease is a comparison between the current average rent at the property versus the average rent in the subject market. If the current average rent is lower than the average market rent, there’s an opportunity to raise rents either through proper management or through strategic renovations (often both).
5. What is the exit cap rate?: This is the cap rate that the syndicator is assuming for the future sale of the property. If the syndicator is assuming a significant reduction in the cap rate (i.e. they buy it for a 6 cap and sell it for a 4 cap) then the model is also overly optimistic.

We go deeper into each of these in our complete guide to evaluating a multifamily real estate deal.

Ready to Invest in Multifamily Real Estate? Download our Free Guide

If you have $100,000 to invest and a sizable portfolio already, then multifamily real estate could be a great way to diversify your investments, generate passive income, and reap numerous tax benefits. 

To help you on your way, we created a free guide to investing in multifamily real estate that you can download to learn more about your options to invest, how to choose the best markets, and more. Fill out the form below to get your free guide. 

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