With so many ways to invest in real estate today, there’s no definitive answer to the question of how much cash you need to start investing.
Long gone are the days when you needed a 20% down payment plus closing costs to buy a rental property on your own. While rental properties are still a solid investment option, there are now multiple ways to start investing in real estate with far less cash.
In this article, we’ll explain how much cash you need to invest in some of the most common real estate asset classes. You might be surprised to find that you can start today, whether you have a few hundred dollars on hand or tens of thousands.
How Much Cash You Need by Investment Type
Buying a Primary Residence
Buying your own home is typically the most affordable of the direct ownership options. However, depending on your local market conditions, these costs can still be substantial.
In general, you’ll need to cover the following upfront:
- Down payment. With favorable financing terms on primary residences, most well-qualified borrowers can secure home loans with just 3-5% down. However, it’s worth noting that most borrowers who put less than 20% down pay some form of mortgage insurance, which can add hundreds of dollars to the monthly mortgage payment.
- Closing costs. For transaction-related services like loan origination, professional representation by a real estate agent, a property inspection, and a home appraisal, buyers often pay 4-6% in closing costs.
- Any immediate repairs or renovations. You may or may not need to make upgrades right away.
- Moving costs. Since you’ll be living in the home, you’ll need to cover the costs of relocating.
- Cash reserves. While the lender might not require cash reserves, it’s important to maintain an emergency fund to cover unexpected expenses after closing.
Examples of How Much Cash You May Need to Buy a Home
If you’re buying an average home in Los Angeles, where the median sales price is $1,022,500, you may need:
- Down payment (3%): $30,675
- Closing costs (5%): $51,125
- Immediate repairs: $0
- Moving expenses: $2,000
- Cash reserves: $2,000
- TOTAL: $85,800
If you’re buying an average home in Cleveland, Ohio, where the median sales price is $125,000, you may need:
- Down payment (3%): $3,750
- Closing costs (5%): $6,250
- Immediate repairs: $0
- Moving expenses: $1,000
- Cash reserves: $1,000
- TOTAL: $12,000
Ways to Cut Upfront Costs on Buying a Primary Residence
Here are a few ways to reduce the amount of cash needed to buy a primary residence:
- See if you qualify for VA or USDA loans. These programs offer 0% down mortgages to qualified borrowers. VA loans are limited to military service members, veterans, and their spouses. USDA loans are limited to low- to moderate-income buyers in eligible rural areas.
- Ask the seller for concessions. In a buyer’s market, sellers may be willing to offer financial concessions to sweeten the deal. You can ask for cash to help cover your real estate agent’s fees, other closing costs, or home repairs.
- Explore down payment assistance programs. Many state governments, local communities, and non-profits offer assistance programs to help homebuyers cover the down payment through loans or grants.
Buying a Rental Property
Buying a rental property is similar to purchasing a primary residence, but rentals typically require more cash upfront due to stricter lender requirements.
For a rental property, you typically need:
- Down payment. The down payment for an investment property typically ranges between 10% and 40%, depending on factors like property type, use, loan amount, loan type, and the borrower’s financial profile. 20% down is a common requirement for a well-qualified borrower purchasing a long-term rental.
- Closing costs. Closing costs for an investment property are generally in line with the 4-6% for most primary residences.
- Any immediate repairs or renovations. Unless you pay a premium for a turnkey property, you’ll likely need to make minor repairs or upgrades to prepare the unit for market.
- Leasing costs. Unless the property is already occupied with a rent-paying tenant, you’ll need to market the unit for lease, screen applicants, prepare the unit for move-in, and cover holding costs for the vacancy period before occupancy.
- Cash reserves. Lenders may require cash reserves for investment properties due to the vacancy risk.
Examples of How Much Cash You May Need to Buy a Rental Property
- Down payment (20%): $157,000
- Closing costs (5%): $39,250
- Immediate repairs: $5,000
- Leasing costs: $2,000
- Cash reserves (6 months of mortgage payments): $27,600
- TOTAL: $230,850
- Down payment (20%): $57,000
- Closing costs (5%): $14,250
- Immediate repairs: $3,000
- Leasing costs: $1,000
- Cash reserves (6 months of mortgage payments): $12,000
- TOTAL: $87,250
Ways to Cut Upfront Costs on Buying a Rental Property
Here are a few ways to reduce the amount of cash needed to purchase a rental:
- Live on-site. If you purchase a 2- to 4-unit building and live in one unit yourself full-time, you qualify for primary residence financing with low down payments. Using this house hack, you could pay less upfront, even if the value of the property is higher.
- Request seller concessions. Under favorable market conditions, you can ask the seller to cover some of your closing costs to reduce your upfront expense.
- Look for off-market deals. Off-market deals can often be purchased below market prices, reducing the purchase price, down payment, closing costs, and reserves required.
Fix-and-Flip Projects
Fix-and-flip projects involve buying a distressed property, renovating it, and quickly reselling it.
For this type of real estate investment, you typically need:
- Down payment. For a flip project, lenders may require a down payment of 20-30%.
- Closing costs. 4-6% is reasonable for flip closings in most markets.
- Renovations. The renovation budget depends on the scope of your rehab plans, as well as local labor and materials costs.
- Holding costs. You’ll need to carry the mortgage, including insurance and property taxes, for the duration of the project.
- Cash reserves. Even if lenders don’t require cash reserves, they’re critical since flips often run overbudget due to unexpected issues, materials shortages, etc.
Examples of How Much Cash You May Need to Fix and Flip a House
In Chicago, where the median sales price is $365,000, you may be able to find a distressed property with a $200,000 purchase price. In this case, you may need:
- Down payment (25%): $50,000
- Closing costs (5%): $10,000
- Renovations: $100,000
- Holding costs (6 months): $9,000
- Cash reserves (3 months of mortgage payments): $4,500
- TOTAL: $173,500
In Raleigh, where the median sales price is $425,000, you may be able to find a distressed property with a $275,000 purchase price. In this case, you may need:
- Down payment (25%): $68,750
- Closing costs (5%): $13,750
- Renovations: $100,000
- Holding costs (6 months): $11,100
- Cash reserves (3 months of mortgage payments): $5,550
- TOTAL: $199,150
Ways to Cut Upfront Costs on Fix and Flips
Here are a few ways to reduce the amount of cash needed to fund a house flip:
- Consider tax deed auctions. If you live (or invest) in a tax deed state, you may be able to purchase distressed properties with back taxes for as little as the amount of taxes due. Note, these are higher-risk acquisitions as they typically come as-is with deferred maintenance and no opportunity for a formal inspection before bidding. However, there is substantial upside for flippers with the resources to complete substantial rehabilitation.
- Consider hard money loans. The interest rate may be higher on short-term hard money loans, but these lenders may base the loan amount on after-repair value (ARV), which could reduce the out-of-pocket down payment requirement.
- Tackle a live-in flip. You can essentially flip your primary residence, securing low-down-payment primary residence funding, rehabbing the property while living onsite, and selling when you move. This is well-suited to investors who move every few years for work and regularly sell one primary residence to purchase another.
Real Estate-Backed Securities
Real estate-backed securities are financial instruments whose value or cash flow is supported by real estate assets (or real estate debt) rather than an ownership stake in a property. This category of investments includes assets like:
- REITs (real estate investment trusts)
- Real estate ETFs (exchange-traded funds)
- Mortgage notes
With this investment model, you’re investing in real estate-related stocks, bonds, and funds, rather than owning real estate directly.
To invest in real estate-backed securities, you typically only need enough cash to purchase at least one share of your chosen security.
Examples of How Much Cash You May Need to Buy Real Estate-Backed Securities
If you were to purchase one share of the Vanguard Real Estate ETF (VNQ), you would need around $90 as of the date of this publication.*
If you were to purchase one share of Simeon Property Group (SPG), a large retail REIT, you would need around $190 as of the date of this publication.*
*These are examples, not recommendations.
Real Estate Crowdfunding and Syndication
Real estate crowdfunding and syndication allow you to invest in real estate more directly than with securities, but without the hassle, risk, or financial burden of direct ownership.
With these two models, multiple investors pool funds to finance a specific real estate project (which could be a fix-and-flip, a rental property, or even a ground-up multi-family development, which is out of reach for most individual investors). The project is professionally managed by a real estate sponsor whose goal is to maximize return potential for the investors.
Note: There are a few technical differences between crowdfunding and syndication (notably that syndication represents a more stable legal ownership structure in which investors become limited partners in the LLC that owns the underlying real estate). But the models are so similar that the terms are often used interchangeably.
The amount of cash you need to invest in real estate crowdfunding and syndication depends on the minimum investment amounts allowed by the platform. The top crowdfunding platforms have minimums ranging from $5,000 to $50,000+ (although some platforms also offer securitized shares for as little as $10 as well).
Examples of How Much Cash You May Need to Buy into a Crowdfunded or Syndicated Deal
With EquityMultiple’s Grow Plan, you can buy into a deal-by-deal investment for as little as $10,000-$20,000 (depending on the specific projects available). From 2015 to 2025, those investments returned an average annual rate of 15.24%
With Gatsby Investment, you can buy into a deal-by-deal investment for as little as $25,000. From 2016 to 2025, those investments returned an average annualized rate of 22.3%.
Gatsby also offers an innovative model called Multi-Family Build-to-Rent (BTR), which allows you to invest in a ground-up multi-family development, which is then carried into a rental holding of at least one year. This gives you the instant equity from the forced appreciation of development, plus the cash flow, tax breaks, and higher eventual sales price of the stabilized rental holding.
The Power of Starting Today, with Whatever You Have
You don’t have to put off real estate investing while you save up tens of thousands of dollars to buy a property directly.
You can start investing in real estate today on any budget. By starting now with whatever cash you have, you can take advantage of the magic of compounding to build value over time. Earnings from real estate-backed securities can eventually earn enough money for you to start buying into crowdfunding and syndication. Then you can decide if you want to continue passive growth or if you want the additional responsibility of direct ownership.
Real estate isn’t all or nothing anymore. With today’s options, you can start small, start now, and scale up when you’re ready.