Best Way to Invest $10K — High Returns on Moderate Risk

The Big Picture On The Best Way to Invest $10K with High Returns and w/Moderate Risks:

• • The best real estate investment options are house hacking, syndications, crowdfunding, rental properties, BRRRR method, and REITs.
  • Maximize employer 401(k) match, contribute to IRAs, invest in stock index funds, and consider I-Bonds during high inflation.
  • Avoid high-risk speculations like cryptocurrency and individual stock picking; focus on diversified portfolios.

Do you think you need to be rich to invest in real estate or stocks and start building passive income streams?

Think again.

You can do a lot with a $10,000 investment, especially if you know how to combine it with other financing. Beyond real estate investments for $10K, we’ll also break down an easy way to invest $10K in paper assets like stocks and bonds, particularly in tax-sheltered retirement accounts.

Exploring the best way to invest $10k, we’ve outlined several top strategies that can be effective even for smaller amounts.

Best Real Estate Investments for $10K

While it’s harder than investing $10,000 in stocks, you still have plenty of options for real estate investments with $10K.

Just take care not to over-leverage or overextend yourself. You need an emergency fund as a property owner because “unexpected” expenses like repairs, maintenance, and vacancy rates can strike at any time.

Buy a Home by House Hacking

If you’re new to real estate investing, house hacking is one of the easiest ways to start.

Hell, even if you’re an old pro, everyone could stand to ditch their housing payment, right?

House hacking involves using your home to generate income, which offsets your housing costs, such as rent or mortgage payments. In the classic model, you buy a small multifamily property such as a duplex or triplex, move into one unit, and rent out the others. You can take out a conventional mortgage for up to four-unit properties. After living in the property for at least one year, you can move out and repeat the process, keeping your old home as a straight investment property.

But that’s not the only way to house hack. Other house hacking ideas include renting out rooms to housemates, renting out an accessory dwelling unit (ADU), renting out part of your home on Airbnb, or renting out storage space. You can also rent out your entire home on Airbnb when you’re not using it.

With a traditional mortgage loan, you can put down as little as 0% with VA loans or USDA loans, 3% on Fannie Mae loans, or 3.5% on FHA loans. Combine that with a seller concession to cover closing costs, and $10,000 might cover your down payment.

Additional House Hacking Strategies and Considerations

For a better picture, here are some more useful strategies for house hacking.

Real Estate Syndications

While unfamiliar to most middle-class Americans, real estate syndications offer high returns without any headaches of being a landlord.

You invest passively as a “limited partner,” buying fractional ownership in a commercial property like an apartment complex. As a fractional owner, you enjoy full tax benefits, including real estate depreciation, and all property deductions come from your taxable income.

Annual returns typically range from 12–50% or higher, but a few catches exist. First, many real estate syndications are only available to accredited investors. However, even syndications that allow non-accredited investors still require $25–100K as a minimum investment.

“Whoa there — I only have $10,000 to invest, remember?”

The good news is that there’s a loophole in these private equity investments. You can pool funds with other investors to invest as a single entity. That’s exactly what we do in our Co-Investing Club, which gets together once a month to collectively vet and invest in real estate deals.

Real Estate Crowdfunding

If you’re not quite ready for real estate syndications, consider real estate crowdfunding as a baby step. You can get your feet wet in real estate investing with as little as $10.

Like syndications, real estate crowdfunding lets you passively buy fractional ownership in properties or portfolios of properties. Alternatively, some let you invest in loans secured by real estate.

For instance, Fundrise owns apartment buildings, single-family rental properties, and loans secured by properties. Streitwise owns a portfolio of commercial office buildings. Groundfloor and Concreit own short-term hard money loans secured by real estate. Arrived Homes lets you buy fractional shares of rental properties with as little as $100.

On the plus side, it’s easy to vet real estate crowdfunding platforms since there are only a handful of big-name platforms, and you can find plenty of independent reviews online. Even better, you can spread your $10,000 among many of these investment vehicles for easy diversification.

Just don’t expect returns as high as real estate syndications.

Rental Properties

“Don’t I need more than $10,000 for a down payment on a rental property?”

In most cases, yes. But sometimes, you can get creative to devise a down payment on a rental property.

For example, you can borrow some or all of the down payment from unsecured business credit lines. Yes, as a real estate investor, you can open business credit lines and cards. Check out Fund&Grow as a business credit service that helps you open $100–250K in unsecured credit as a real estate investor.

You can also tap into HELOCs and other equity sources to help cover some of the down payment.

It’s entirely possible to buy a rental property for $10,000 — but it does take some creativity on your part.

BRRRR Method

Expanding on that point, the BRRRR method of real estate investing lets you take it a step further and repeatedly invest with the same down payment.

The acronym stands for buy, renovate, rent, refinance, and repeat. The core premise is to pull your down payment back from the property when you refinance. You can do that because lenders base the refinance amount on the property’s after-repair value, not the original purchase price.

Publicly Traded REITs

Blurring the line between real estate investments and paper assets, you can buy shares in publicly traded real estate investment trusts (REITs).

These real estate-oriented companies trade on public stock exchanges, so you can buy and sell shares anytime. By law, they must pass at least 90% of profits back to investors as dividends.

On the plus side, you can invest for as little as a single share price, making it easy to diversify and spread your money. And the liquidity makes it easy to invest without worrying about locking your money up for years on end.

But that liquidity comes with a downside: volatility. Share prices bounce around just like stock prices do. Indeed, REITs correlate uncomfortably closely with financial markets, which largely defeats the purpose of diversifying into real estate in the first place.

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Real estate investments? Awesome. Being a landlord? Less fun.

Learn how to earn 15-30% on passive real estate investments in one free class.

Best Paper Asset Investments for $10K

Real estate is far from your only option among investments for $10K. In fact, it’s easier to invest in paper assets like stocks and bonds.

The following are some of the best ways to invest $10,000 for a roaring rate of return.

Employer Match on Retirement Accounts

If your employer offers to match your contributions to a 401(k) or other workplace retirement account, take them up on it. You get an instant 100% return on your investment before even earning a cent of normal returns or tax benefits.

Think of it as free money that you leave on the table by not maxing it out.

IRA Contributions

When you contribute to a traditional IRA, you can write it off as a tax deduction. That means you earn a return equivalent to your tax rate in the first year due to your tax savings.

However, if you’re younger, consider investing in a Roth IRA instead. Your money compounds tax-free, and you pay no taxes on either contributions or returns in retirement.

But what do you invest in once you contribute money to a traditional or Roth IRA?

Stock Index Funds

Consider investing in index funds that mirror major stock indexes, such as the S&P 500 or Russell 2000. These funds have low expense ratios (fees) and give you broad exposure to the stock market.

While you can technically invest in index mutual funds, most index funds are exchange-traded funds (ETFs). Don’t get bogged down in the technicalities; look for reputable funds with low fees.

You can even automate your fund investments with a robo-advisor. Some robo-advisors are even accessible — I use Charles Schwab, which is free but requires a minimum investment of $5,000. It takes all investment decisions out of your hands, which prevents emotions from ruining your returns. However, not all robo-advisors are created equal, so do your homework before choosing a brokerage firm.

I-Bonds

During periods of high inflation, one guaranteed way to hedge against inflation is to buy Series I bonds.

These U.S. government bonds pay interest over and above the rate of inflation and are, of course fully backed by Uncle Sam. The interest rate adjusts every six months.

There are two caveats, however. First, you can only invest up to $10,000 per year, per adult. Second, you have to hold them for at least five years to avoid an early withdrawal penalty. You can’t sell them at all within the first year.

And let’s be honest — inflation is rarely a problem in the U.S. Still when it rears its ugly head (like it was in 2021–2023), I-bonds offer great protection with guaranteed returns.

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Should You Invest All Your $10K In Paper Assets?

When considering the best way to invest $10K, you’ll face whether to invest it all at once or gradually. This decision requires careful consideration of market conditions and personal risk tolerance.

It’s mostly recommended to do dollar-cost averaging, which involves spreading investments over time to mitigate market volatility risks. However, research shows that lump-sum investing (or investing your money all at once) historically outperforms in two-thirds of cases due to potentially higher returns.

That said, gradual investing can provide psychological comfort and reduce the impact of poorly timed market entry. And diversification becomes easier with a phased approach as it lets you adjust your portfolio allocation during uncertain market conditions.

Gradual investing also provides flexibility to capitalize on unexpected market dips or emerging opportunities, which could improve overall returns.

How To NOT Invest Your $10K?

If you’re new to investing, avoid high-risk speculations like cryptocurrency. Sure, a handful of people made a fortune in gambling on them — and ten other people lost money for every one of those.

Likewise, avoid picking individual stocks. You’re not an expert stock investor, or else you wouldn’t be reading this article. Stick with a diversified portfolio of stocks as a simple investment strategy that always wins long-term, and leave single stock picking to pros and traders.

On the other end, you should avoid overly defensive assets like precious metals and commodities. As a novice (presumably younger) investor, you should also avoid fixed-income investment options like bonds. Leave bonds for retirees and older adults approaching retirement and leave gold and silver to wealthy speculators and hedge funds.

And no, savings and money market accounts don’t count as investing. Those savings vehicles work great for your emergency fund, but they deliver negligible rates of return.

What Is The Best Way To Invest $10K?

Whether you plan on investing $10K in real estate, stocks, bonds, or other assets, you have plenty of options on the table.

For that matter, if you still have any high-interest debt, knock it out before investing. Paying off debts such as credit card debt delivers a return equal to the interest rate, making it the ultimate safe investment.

Most of all, just get started building your investment portfolio. Whether you invest $10,000 in real estate, stocks, or other asset classes entirely, focus more on learning what you need to know to succeed in the long run.

Happy investing!♦

What do you think is the best way to invest $10K? What $10K investments appeal to you the most?

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