Real Estate Investing

How to Invest in Real Estate with Little Money: The Starter Menu

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Last reviewed: October 2026 · By the MortgageCompass Editorial Team · How we research

You do not need a large deposit to start investing in real estate. You can buy shares in real estate investment trusts for the price of a single share, rent out a room in the home you already live in, or buy a small multi-unit property with as little as 3.5% down through an FHA loan, 5% with a conventional loan, or nothing with a VA loan, as long as you live in one of the units. Each route costs a different amount of money, time and risk, so we have laid them out like a menu. Prices are what it takes to start; the dots show how much effort and risk to expect.

THE STARTER MENU
Real estate on a small budget
REIT fundsFrom one share
Real estate investment trusts own offices, apartments, warehouses and more. A REIT fund spreads your money across many of them. Most brokers let you buy a single share, and some allow fractions of a share.
EFFORT RISK CASH OUT Any trading day
Renting out a roomLittle or no cash
Your existing home becomes the investment. A lodger’s rent can cover a real share of your housing costs. Check your lease or mortgage terms, local rules and your insurance first.
EFFORT RISK CASH OUT When you choose
Online crowdfundingVaries by platform
Platforms pool money from many investors into property loans or buildings. Some accept small amounts, but many deals are open only to accredited investors, money is often locked up for years, and platforms can fail.
EFFORT RISK CASH OUT Often years
House hackingFrom 0% to 5% down
Buy a 2 to 4 unit home, live in one unit and rent out the others. You use a low down payment home loan and the tenants help pay the mortgage. The most powerful option for many first-time investors, and the most work.
EFFORT RISK CASH OUT Selling the property
Partnering upYour share of the deal
Pool money with family or friends to buy a property together. It can work well, but only with a written agreement covering who pays what, who decides, and how anyone can exit.
EFFORT RISK CASH OUT Depends on the agreement

The house hack, in numbers

House hacking is the main way to own rental property with little money, because lenders treat it as buying your own home. The key rules:

  • FHA: 3.5% down on a 2 to 4 unit property with a credit score of 580 or more, as long as you move in, usually within 60 days, and plan to live there for at least a year. For 3 and 4 unit properties, the rent must also pass a self-sufficiency test. See our FHA requirements.
  • Conventional: since November 2023, Fannie Mae has allowed 5% down on 2 to 4 unit homes you live in, down from 15% to 25%.
  • VA: eligible veterans and service members can buy up to four units with no down payment. See our VA loan guide.
  • Rental income: lenders often count about 75% of the expected rent from the other units toward your income, which can help you qualify.

Use the waterfall below to see what living in one unit would really cost you each month, compared with your rent today.

House hack waterfall

Buy a 2 to 4 unit home, live in one unit and rent the others. The waterfall shows how the rent you collect pulls your own housing cost down, compared with what you pay in rent today.

30-year fixed loan. FHA: 1.75% upfront premium added to the loan and 0.55% a year. Conventional: private mortgage insurance estimated at 0.6% of the loan a year. VA: 2.15% first-use funding fee added to the loan, no monthly insurance; not every buyer is eligible. Cash to close assumes closing costs of about 3% of the price. Excludes utilities, HOA fees and income tax. Default rate is Freddie Mac’s 30-year average for October 15, 2026. Not financial advice.

With today’s mortgage rates above 7%, the default example costs more each month than renting, but around $385 a month of the payment goes into paying off the loan, which you keep. In cheaper markets, or with three or four units, the numbers often work better. Check rents carefully before you buy: our guides to rental yield and cap rate show how, and our ranking of the best cities to invest in real estate compares yields across the US.

What to steer clear of

  • “No money down” courses and seminars that charge thousands for strategies you can learn free. If someone is selling a system, the course is usually their real business.
  • Using high-interest debt, such as credit cards or personal loans, for a down payment. Lenders usually do not allow borrowed down payments anyway, and the cost can wipe out any return.
  • Investments you cannot exit. Crowdfunding and partnerships can lock up your money for years. Never invest money you may need for emergencies.
  • Skipping the paperwork. Landlord rules, licenses, insurance and tax all apply to small landlords too.

Start here

If you have less than a few thousand dollars, a diversified REIT fund lets you learn how property income works without becoming a landlord. If you are ready to buy a home anyway, compare a single-family home with a small multi-unit property: the second may cost a little more but bring in rent from day one. If you want to rent short-term instead, run the numbers with our short-term rental calculator first.

Sources

This guide is for informational purposes only and is not investment, tax or financial advice. All investments carry risk, including the loss of money you invest. Property values and rents can fall. Consider speaking to a licensed financial adviser before investing.

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