How to Invest 200k in Real Estate for a High ROI (2024)

Investing in real estate is one of the best ways to make a lot of money in 2020. Andrew Carnegie is quoted as saying that 90% of millionaires got their wealth through real estate investments. Besides enjoying a great return on investment, here are a few other benefits of investing in real estate:

Tax breaks and deductions – Property owners are allowed to deduct the costs related to owning, managing, and operating an investment property. The government offers tax breaks for legal fees, property taxes, travel expenses, maintenance and repairs, and even property depreciation.
Real estate appreciation – Generally, property values rise over time. This means that investors can make a good return on investment when they decide to sell.
Build equity – Wondering how to buy multiple rental properties? As you pay off your mortgage on an income property, you build equity. You can then use this equity as leverage to purchase even more properties.

Related: What Is Equity in Real Estate?

Portfolio diversification – Owning real estate allows you to diversify your portfolio of assets, thus lowering your risk.
Hedge against inflation – Rents and property values usually increase in direct proportion to the rate of inflation. This means that as the cost of living goes up, so does the cash flow generated from real estate.

So if you have 200k saved up, investing in real estate is a great move to make. Let’s get into how to invest 200k in real estate.

How to Invest 200k in Real Estate

Let’s say you want to invest 200k in property – it really is the best way to make a high return. Some of the real estate investment strategies you can use to make money include fix-and-flip, house wholesaling, buying REITs, and the BRRRR strategy. However, the best way to invest 200k is by investing in rental properties.

Here is how you can invest in a traditional or Airbnb rental property and make good returns:

Choose the right location

When it comes to how to invest 200k in real estate, location is very crucial. The location of your income property will have a direct impact on property prices, rental income, occupancy rate, rental expenses, and return on investment. Here are some of the things to look out for when choosing a real estate market:

A strong job market – Look for a town or city that has a high employment rate, good average income, and a wide range of employers.
Positive demographic trends – A high population growth rate will ensure long-term demand for rental properties. You should also find a neighborhood experiencing an influx of new residents.
Amenities – Think about amenities that would attract potential tenants. This includes good schools, parks, restaurants, hospitals, and transportation hubs.
Profitability potential – Finally, you need to choose a location that assures a high ROI. You can use Mashvisor’s real estate heatmap to analyze data from multiple neighborhoods in the real estate market. This tool comes with filters such as listing price, cash on cash return, rental income, and Airbnb occupancy rate.

Let us consider where to invest 200k in a property. Here are some of the cities where you can get a good return on investment from a cash flow property. And you’ll be able to pay less than 200k on the purchase price:

#1. Altoona, PA

Median Property Price: $133,952
Price per Square Foot: $78
Price to Rent Ratio: 14
Traditional Rental Income: $812
Traditional Cash on Cash Return: 4.2%
Airbnb Daily Rate: $84
Airbnb Rental Income: $1,268
Airbnb Cash on Cash Return: 4.2%
Airbnb Occupancy Rate: 47%

#2. Redford, MI

Median Property Price: $140,127
Price per Square Foot: $117
Price to Rent Ratio: 9
Traditional Rental Income: $1,300
Traditional Cash on Cash Return: 6.8%
Airbnb Daily Rate: $128
Airbnb Rental Income: $1,393
Airbnb Cash on Cash Return: 4.7%
Airbnb Occupancy Rate: 52%

#3. Youngstown, OH

Median Property Price: $156,283
Price per Square Foot: $91
Price to Rent Ratio: 17
Traditional Rental Income: $789
Traditional Cash on Cash Return: 3.7%
Airbnb Daily Rate: $94
Airbnb Rental Income: $1,752
Airbnb Cash on Cash Return: 6.0%
Airbnb Occupancy Rate: 63%

#4. Peoria, IL

Median Property Price: $157,529
Price per Square Foot: $88
Price to Rent Ratio: 14
Traditional Rental Income: $917
Traditional Cash on Cash Return: 2.5%
Airbnb Daily Rate: $82
Airbnb Rental Income: $1,379
Airbnb Cash on Cash Return: 3.6%
Airbnb Occupancy Rate: 71%

#5. Akron, OH

Median Property Price: $165,498
Price per Square Foot: $96
Price to Rent Ratio: 14
Traditional Rental Income: $958
Traditional Cash on Cash Return: 4.4%
Airbnb Daily Rate: $84
Airbnb Rental Income: $1,724
Airbnb Cash on Cash Return: 4.6%
Airbnb Occupancy Rate: 56%

#6. Lansing, MI

Median Property Price: $167,718
Price per Square Foot: $96
Price to Rent Ratio: 19
Traditional Rental Income: $745
Traditional Cash on Cash Return: 1.8%
Airbnb Daily Rate: $150
Airbnb Rental Income: $1,899
Airbnb Cash on Cash Return: 6.2%
Airbnb Occupancy Rate: 71%

Parts of Ohio, Michigan, and Illinois are called the Rust Belt. Learn more about investing in this region: 4 Best Rust Belt Cities to Invest in Real Estate.

#7. Waterbury, CT

Median Property Price: $169,929
Price per Square Foot: $110
Price to Rent Ratio: 11
Traditional Rental Income: $1,279
Traditional Cash on Cash Return: 3.8%
Airbnb Daily Rate: $203
Airbnb Rental Income: $2,249
Airbnb Cash on Cash Return: 4.7%
Airbnb Occupancy Rate: 42%

Remember: Always research Airbnb regulations before making a purchase for this rental strategy!

Use leverage and buy multiple rental properties

Leverage is one way to invest your 200k in real estate. This will allow you to buy multiple rental properties for sale.

You are one of the lucky ones who has the funds to invest in real estate. So you may not have ever considered using leverage to buy real estate. But taking out loans and using your 200k as down payments for a few rental properties is a great strategy for generating a high ROI. Rather than owning one expensive investment property, you can own a couple, more affordable ones. With them, you can generate more rental income, diversify your portfolio across a few different markets or property types, and spread your risk as well.

Find off market properties

Off market property refers to homes that have not been listed on the MLS. This includes short sales, bank owned homes, foreclosures, and REOs. Such properties have less competition, a better sales price, and a higher return on investment. Using your 200k, you can purchase a few of these properties, likely without turning to debt.

Strategies you can use to find off market properties include checking public records, bank websites, attending real estate auctions, networking with agents, driving for dollars, and direct mail marketing. Alternatively, you could visit Mashboard for homeowner information or the Mashvisor Property Marketplace to find a wide range of off market properties.

Analyze the rental property

Rental property analysis involves collecting data and doing calculations to determine if buying rental property makes financial sense. This is an important step that you cannot skip if you’re investing your 200k in real estate. You don’t want to lose all of your hard-earned cash on a lemon investment property. Analysis will ensure you avoid that.

Mashvisor’s rental property calculator will provide you with the numbers required to estimate the potential rental income, expenses, and rate of return on rental property. The most important metrics generated will be cash flow, cash on cash return, and cap rate. The calculator will also help you establish the optimal rental strategy for an investment property.

Related: How to Do Rental Property Analysis in 2020

Conclusion

Want to get rich with 200k? The best way to invest money for a high ROI is to buy a rental property.

Final Tip: When thinking of how to invest 200k in real estate, it would be advisable to work with an experienced real estate agent. A good agent will provide valuable advice that will help you avoid mistakes and make a wise investment decision. Find a great agent here.

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FAQs

How to Invest 200k in Real Estate for a High ROI? ›

Use leverage and buy multiple rental properties

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Is 200K enough to invest in real estate? ›

Investing $200,000 in real estate can be a good way to generate extra income while preserving investment capital. With the right investments, a $200K nest egg could significantly increase when real estate is held for the long term.

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How do you maximize ROI in real estate? ›

Maximizing ROI in real estate demands strategic planning and informed decision-making. Key strategies include thorough market research to identify high-growth areas, selecting undervalued properties, and adding value through renovations and upgrades.

Do most millionaires invest in real estate? ›

Conclusion. The claim that 90% of millionaires are made through real estate is a myth. While real estate can certainly contribute to wealth creation, it is not the primary wealth source for most millionaires.

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How to make 200K passive income? ›

What's The Best Way To Invest 200K For Passive Income? Investing in securities like dividend-paying stocks and ETFs is one method to invest 200k to earn passive income. Real estate investing companies like Fundrise are also very passive options.

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How much income will $200,000 generate? ›

According to Blueprint Income, the average monthly payouts for men aged 60 to 75 investing in a $200,000 annuity could range from about $14,000 to $20,000 per year — $1,167 to $1,667 per month. For women, however, those rates drop to a range of $13,710 to $19,076, or $1,143 to $1,590 monthly.

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How much monthly income will 250K generate? ›

McClanahan noted that even combined with an average Social Security benefit, $250,000 in savings is only likely to produce $2,632 a month over 25 years, when inflation and other factors are considered. That would mean a difficult struggle for many Americans.

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How to turn $500K into $1 million? ›

How to turn $500,000 into $1,000,000? To turn $500,000 into $1,000,000, you need a sound investment strategy. Diversifying your investments across a mix of asset classes like stocks, bonds, and real estate can help.

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How long does it take to double 200k? ›

Following the same math, 12% gains double your money in six years. If your investments earn 8%, you'll have twice as much in nine years. Presuming the stock market's approximate historical return of 10%, $200,000 becomes $400,000 in 7.2 years, then $800,000 in 14.4 years and finally, $1.6 million in 21.6 years.

How to turn 100K into $1 million in 5 years? ›

The simplest path from $100,000 to $1 million

The simplest way to invest your money is by using a simple broad-market index fund. An index fund that tracks the S&P 500 or a total stock market index typically has low fees, and it's going to closely match what the overall stock market returns.

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What type of property has the highest ROI? ›

Investing in a commercial property can offer fantastic tax benefits, low barriers to entry, and some of the highest return rates. Whether it's an investment in a long or short-term property, investors can create positive cash flow with a high return on investment.

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What is a good yearly ROI for real estate? ›

Generally, a good ROI for rental property is considered to be around 8 to 12% or higher. However, many investors aim for even higher returns. It's important to remember that ROI isn't the only factor to consider while evaluating the profitability of a rental property investment.

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Is 7% ROI good for real estate? ›

What one investor considers a “good” ROI might be considered “bad” for other investors. A “good” ROI is highly subjective because it largely depends on how risk-tolerant a particular investor is. But as a rule of thumb, most real estate investors aim for ROIs above 10%.

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Can you live off 200K investment? ›

Summary. Retiring with $200,000 in savings will roughly equate to $15,000 annual income across 20 years.

Is 200K enough for a house? ›

With a $200,000 annual salary, you could potentially afford a house priced between $600,000 to $1,000,000 or even more, depending on your financial situation, credit score, and current market conditions. However, this is a broad range, and your specific circ*mstances will determine where you fall within it.

Is $20,000 enough to invest in real estate? ›

Another advantage is that it may take a lower investment to get started, for example, with a single-family house. You may be able to get into a property with $20,000 or $30,000 instead of the potentially hundreds of thousands required for a commercial property.

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Is 100k enough to invest in real estate? ›

Investing $100,000 in Real Estate

These are easy to finance and can generate income by being rented out for part of the year. They also have potential for price appreciation and can give investors lots of leverage. A 20% down payment of $100,000 allows an investor to control a home worth $500,000.