Can You Actually Make Money Investing $100 In Real Estate? I Tried It And Here's What Happened

Can You Actually Make Money Investing $100 In Real Estate? I Tried It And Here's What Happened

With the growing popularity of alternative investments and, more specifically, fractional real estate investing, there’s no doubt that you’ve come across at least one investment platform that allows you to invest in real estate with $100 or less. 

The idea of investing only $100 in real estate may seem pointless at best or a good way to lose $100 at worst. Real estate has traditionally been a complicated asset class to invest in, considering that most Americans have a hard enough time purchasing a home to live in — let alone a property to hold as an investment.

Real estate investment trusts (REITs) have offered individuals a simple way to invest in income-producing real estate since Congress created the structure for REITs in 1960. However, most REITs are publicly traded, which means they’re sensitive to the same volatility as any other traded equity and produce returns that track pretty closely with the overall stock market.

Because one of the things that make real estate an attractive investment is that it can provide a hedge against stock market volatility, publicly traded REITs may not be an ideal substitute for investing in physical properties. 

Is a $100 investment through a real estate investing platform the solution?

A year ago I invested $100 on three different platforms to find out. The three I chose were Goundfloor, Arrived Homes and Fundrise. Here’s what has happened to my $100 so far on each. 

Groundfloor

Groundfloor works a bit differently than most other real estate investing platforms. Instead of buying equity shares in a property, investors buy shares of short-term loans that are backed by residential properties. Most of these loans are made to investors who plan to flip the home or to homebuilders for ground-up construction. The loans have higher interest rates than traditional bank loans, and most have terms ranging from six to 12 months. 

As an investor, you can browse the available loans on the platform and choose which ones you want to invest in. Each loan has a $10 minimum investment so it’s easy to create a diversified portfolio. I chose to spread my $100 across six loans, putting a larger share of the investment into the higher-risk, higher-reward options. 

To date, five of those loans have been repaid. Those five accounted for $70 of my investment and I was paid back $74.33. One of the loans was repaid in only two months, so the interest received was minimal. The other four were paid back between four and nine months after my investment. 

The sixth loan, which hasn’t yet been repaid, accounted for $30 of my original investment and is in default. This actually isn’t as bad as it sounds, and it’s not uncommon for these types of short-term loans to go into default. In the vast majority of cases, the loan eventually gets paid and often generates a higher return than expected. Groundfloor has a loss ratio of less than 1%.

According to the updates that Groundfloor posts on the dashboard, the borrower has identified a buyer for the house. If all goes well from this point forward, the borrower will sell the house and I’ll get my $30 back plus interest. If not, Groundfloor will be forced to foreclose on the property and I’ll eventually receive my pro rata share of the proceeds.

I chose the automated investing option, so my repayments would be reinvested in other loans based on the criteria I set. The first four loans that were paid back were reinvested, repaid again and have recently been invested in other loans. This means the total interest I’ve received so far on my original $100 investment is $6.26. 

Assuming I get repaid on the other $30 with the expected 12% return, I’ll have another $3.60 to add to that total and will have received $9.96 in interest for a one-year return of 9.96%. The worst-case scenario is I learn my lesson on putting 30% of my Groundfloor portfolio on one loan. 

See also: Benzinga’s Review of Groundfloor

Arrived Homes

Arrived Homes is the newest platform on this list. It launched in 2021, becoming the first Regulation A investment platform to sell shares of individual rental properties. You can browse the available properties on the platform and become an investor in whichever ones you like with a few clicks of your mouse or taps on your phone. 

The minimum investment for each property is $100, which buys you 10 equity shares. Unlike with Groundfloor, you actually become an owner of the property. Arrived Homes deals with finding tenants, collecting rent, taking maintenance requests and all of the other property management headaches. As an investor, your job is to simply collect your quarterly dividends and hope the property increases in value during the holding period. 

I chose to invest $100 in The Westchester, a rental property in Elgin, South Carolina. I bought 10 of the 18,213 total shares. The property was purchased for $340,000, and there was another $41,030 allocated to improvements, maintenance reserves, closing costs and a sourcing fee. 

The property has a tenant who’s paying $2,495 per month in rent. After expenses and debt service, my share of the rental income so far has been $3.90. I’ve only received three dividend payments so far, but that’s only because of how the timing lined up. At the current rate, my annual dividend yield is expected to be 5.2%. 

The property has since increased in value, so the shares I purchased for $10 each are now worth $12.15 for a total value of $121.50. I won’t be surprised to see the share price dip in the short term since the housing market is cooling off, but I’m confident that the appreciation rate will average out over the next five years. 

The total return on my investment so far is $25.40, or 25.4%. The $3.90 in dividends were deposited in my checking account, but I have to wait until the property is eventually sold to realize the appreciation returns. 

See also: Benzinga’s Review of Arrived Homes

Fundrise

Fundrise is one of the oldest and largest real estate investment platforms around. It works a bit differently than Groundfloor and Arrived Homes in that you invest in large portfolios of real estate instead of individual properties. While it’s fun to be able to choose specific properties to invest in, there’s something a little more comforting in knowing that professional investment managers are handling the decisions (like not investing 30% on one high-risk deal).

Each fund on the platform has a different strategy and objective. Most require a larger investment than $100, so I was limited to one of the newest funds — the Flagship Real Estate Fund. This fund was launched in January and owns several single-family rental communities, multifamily properties and industrial properties. The fund has acquired several new properties since I invested, including 15 rental-home communities

One year after investing, my account value is now $111.67. This includes $10.24 from appreciation, $1.55 in dividends and 12 cents paid to Fundrise in advisory fees. 

This fund doesn’t have a set hold period so I can submit a redemption request to liquidate my shares when I’m ready to cash out. That process can take a couple of months, which is probably frustrating for some investors but can also save them from making an impulsive decision to liquidate everything to go all-in on a meme stock. 

See also: Benzinga’s Review of Fundrise

So, Can You Actually Make Money Investing Only $100 In Real Estate?

Based on my experience over the past year, you can make money investing only $100 in real estate. But the question is: Is it worth investing only $100 in real estate?

As you can see from the returns I’ve earned on my investments, it’s unlikely that $100 is going to grow into a massive portfolio on its own. But that’s not the idea here and not why these platforms set such low minimum investments. 

These three platforms are designed so that you can grow your real estate portfolio over time by investing what you’re able when you’re able. Making a one-time investment of $100 probably isn’t worth it. Investing $100 per month, on the other hand, probably is worth it — especially as compounding returns come into play. That's my plan anyway. 

Posted In: Alternative investmentsArrived HomesFundriseGroundfloorreal estate investingReal Estate
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