11 Ways to Invest in Real Estate (With or Without Buying Property)

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11 Ways to Invest in Real Estate With or Without Buying Property

Real estate is a very attractive investment, and it’s a key part of the portfolio of many millionaires.

One of the great things about real estate is that there are many different ways to invest. However, if you’re new to investing in real estate, understanding your options and knowing which one is right for you can be a challenge.

In this article, we’ll look at 11 different ways to invest in real estate. First, we’ll cover some ways to invest without buying and owning property. And after that, we’ll look at the options that do involve buying or owning property.

Hopefully, with the help of the information presented in this article, you’ll be able to identify opportunities that would be a good fit for your own situation and start to move forward.

Possibly the best aspect of investing in real estate is the addition of incoming-generating assets to your portfolio that will produce passive income. That passive income can be an excellent supplement, or it can help to provide for you and your family during retirement, allowing you to live off dividends.

Ways to Invest in Real Estate Without Buying Property

While real estate can be an outstanding alternative investment option, not everyone wants to own properties. Buying and owning investment property comes with a lot of commitment in terms of both time and money.

Maybe you like the idea of investing in real estate, but you have no interest in being a landlord. Fortunately, there are some fantastic options that allow you to invest and make money in real estate without the need to own and manage properties.

1. Real Estate Crowdfunding

Over the past decade, real estate crowdfunding has become extremely popular. There are hundreds of platforms that fall into this category, and of course, there are some differences between those websites/platforms.

In general, crowdfunding allows you to pool your money together with other real estate investors. Rather than buying an investment property, you’ll have an ownership interest in a property or a portfolio of properties.

Some investments involve residential properties (like rental properties or house flipping) and others involve commercial properties. As an investor, there’s a lot to like about this opportunity. You can invest and generate residual income without the need to deal with the property.

Another significant benefit is that you can get started with smaller amounts of money. Each platform will have its own requirements and minimums, but some (like Fundrise) are as low as $10.

The convenience and ease also make crowdfunding a very attractive option. You can find real estate investment opportunities at any time, select the ones you want to invest in, and invest immediately.

You’ll also love the potential to earn a very good return on your investment. Of course, the returns vary depending on the specifics (with some being higher risk than others), but returns of 10% or more are possible.

Real estate crowdfunding can be a great way to add some diversification to your portfolio without sacrificing the ability to earn a solid return.

There are also a few downsides to be aware of. First, some of the platforms and investments will only be available to accredited investors (requires an annual income of $200,000 or $300,000 for joint filers, or a net worth of $1 million). This requirement means that some of the investments will be unavailable to most people. However, there are some good real estate crowdfunding platforms for non-accredited investors (see a few below).

Second, if you’re investing in individual properties you should still do some vetting on your own. Most crowdfunding platforms will work to minimize risk by vetting the deals before they go live on the platform, but you should still perform your own due diligence.

Fundrise

Fundrise

If you’re new to real estate investing, Fundrise is a great place to start and a solid addition to your investment portfolio. With Fundrise you can invest in a portfolio of income-generated properties. They have different strategies available based on your goals, so you can choose the one that is the best fit for you.

Fundrise is extremely popular because it’s available to everyone (you don’t need to be an accredited investor). For as little as $10, you can invest in a professionally-managed portfolio of income-generating properties. You don’t need to vet or pick out individual properties, so it’s completely hands-free.

Read our Fundrise review to learn more.

Groundfloor

Groundfloor

Groundfloor is another popular platform that’s open to everyone, not just accredited investors. Like Fundrise, you can invest through Groundfloor for as little as $10, making it an ideal way to get started with real estate investing.

Unlike Fundrise, you’ll invest in specific properties with Groundfloor. It’s essentially a peer-to-peer lending platform where house flippers can get funding to perform renovations. You’ll be able to see the details of all available investment opportunities and choose the ones you want to invest in. These are short-term loans, ranging anywhere from a few months to a year in length.

For more details, please read our Groundfloor review.

HappyNest

HappyNest

HappyNest is a new platform that’s open to all investors and requires a minimum investment of just $10 to get started. Like Fundrise, HappyNest takes the portfolio approach. As an investor, you’ll have an ownership interest in a portfolio of income-generating properties. The HappyNest portfolio focuses on commercial properties rather than residential.

RealtyMogul

Realty Mogul

RealtyMogul offers a few different real estate investment options, including REITs and individual properties. The REITs are public non-traded, and allow you to invest in commercial real estate. The REITs are also open to all investors, with a minimum investment of $5,000.

The investments in individual properties are available only to accredited investors, and they have minimum investments that typically range from $5,000 – $35,000.

Highlights of Real Estate Crowdfunding:

  • Easy way to get started with real estate investing.
  • Some platforms and investments are available to anyone, while others are available only to accredited investors.
  • Some platforms offer minimum investments as low as $10.
  • Invest in single properties or portfolios of properties.
  • Potential to be a high return investment opportunity.

2. REITs

Another great option for hands-off real estate investing is a REIT. A REIT (real estate investment trust) invests in real estate and distributes earnings to shareholders. By investing in a REIT, you’ll have an ownership interest in a portfolio of properties, rather than investing in a single property.

There are several different types of REITs available:

  • Publically Traded REITs are subject to SEC requirements and are highly liquid. Liquidity is a big issue when it comes to real estate investments, and especially REITs. With a publically traded REIT, you can get out of the investment at any time (just like selling shares of stock). They’re generally considered the lowest level of risk for REITs, but they may also bring the smallest returns.
  • Public Non-Traded REITs meet the SEC requirements but are not traded on an exchange. They are also lower in risk, but you won’t have the same liquidity that you would have with a publically traded REIT.
  • Private REITs do not need to meet SEC requirements and they’re not traded on an exchange. Since they do not have to meet SEC requirements, they are considered higher in risk. They may be able to achieve higher returns, but many private REITs involve significant fees. They’re also not liquid, and you should only invest in a private REIT if you plan to leave the money in the investment for the long-term.

REITs can also vary in terms of the class of real estate. Some focus on residential properties like apartment complexes. Others focus on commercial properties, hotels, and other types of real estate.

REITs do offer a nice way to get involved in real estate investing easily and without the need to get your hands dirty with an investment property. But private and non-traded REITs generally lack liquidity.

One of the best ways to invest in REITs is through an exchange-traded fund. The ETF may invest in a wide variety of REITs, which adds even more diversification.

The benefit of investing in a REIT ETF is that it’s 100% liquid. You can buy and sell at any time, just like trading shares of stock. It’s also extremely easy to get started. Thanks to brokerages like Public.com and Webull, you can buy fractional shares of ETFs, which means you can get started with any amount of money.

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See our list of the best real estate and REIT ETFs to learn about some of the funds you can invest in.

Highlights of Investing in REITs:

  • Easy way to invest in real estate without owning property.
  • Not limited to accredited investors.
  • Non-traded REITs tend to lack liquidity and should only be used for long-term investments.
  • Some REITs come with high fees.

3. Arrived

Arrived

Arrived is a unique platform that allows you to invest in rental properties without the need to own or manage the property. You’ll buy a share of a particular property (not a portfolio of properties), and you’ll earn passive income from the rental income generated by the property.

Update: Landa is another platform that is similar to Arrived.

You don’t have to be an accredited investor to invest through Arrived, and you can start with as little as $100.

After you create a free Arrived homes account, you’ll be able to view the properties currently open to new real estate investors. You’ll see all the important details so you can decide which one is right for you. Of course, if you prefer a portfolio approach, you can invest a smaller amount in several properties rather than investing a larger amount in a single property.

As an Arrived real estate investor, you’ll receive quarterly payments with your share of the rental income. You’ll also benefit from appreciation when the property is eventually sold.

Overall, Arrived is the closest you can get to owning a traditional rental property without having any of the responsibilities or time commitments.

Highlights of Investing in Arrived:

  • Buy a share of income-generating rental property.
  • Passive way to invest in rental property and generate cash flow.
  • Not limited to accredited investors.
  • Start with as little as $100.
  • Get paid quarterly from rental income.

4. Invest in Companies that Serve the Industry

Another way to essentially invest in real estate is to invest in companies that participate in and serve the industry. This could include construction companies, home builders, real estate companies, hotels, and more.

You can buy stock in publically traded companies that fall into these categories, and generally, the share price will be impacted by the overall real estate market.

The easiest way to start investing in stocks is to use Public.com or Webull, which both offer commission-free trades of stocks and ETFs. Sign up for a free Public.com account through this link and you’ll get a free slice of stock worth up to $300*. Sign up for Webull through this link and get six free shares of stock worth up to a total of $12,600.

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Highlights of Investing in Companies:

  • Buy stock of companies involved in real estate.
  • Not limited to accredited investors.
  • Highly liquid (sell at any time).
  • High risk, high return.

5. Invest in Farmland

When you think about investing in real estate, farmland may not be the first thing that comes to mind. However, farmland is an excellent investment with an impressive long-term track record.

There will always be a need for farmland, and the supply is continuing to decrease. As a result, farmland is likely to continue to increase in value. And of course, farmland is also ideal for generating cash flow through rental income.

The challenge of investing in farmland is that it’s not the most practical option for the average person. Crowdfunding platforms like AcreTrader and FarmTogether have made farmland investing far more accessible than ever before, but these platforms are currently only open to accredited investors.

Highlights of Investing in Farmland:

  • Strong historical returns.
  • Not directly correlated to the stock market.
  • Limited options for non-accredited investors.

6. Limited Partnerships

A Real Estate Limited Partnership is led by an experienced general partner. Other investors can join as limited partners. As a limited partner, you’re basically a shareholder. You can earn a return based on profits, but your liability is limited to the amount of your investments.

The results of investing in a limited partnership can be very good if it’s well run, but you also risk losing your investment if it’s not well run.

Highlights of Investing in Real Estate Limited Partnerships:

  • Possible to get started with just a few thousand dollars, instead of buying a property yourself.
  • High risk, high return.
  • Your results will be highly influenced by the decisions of the general partner.

Ways to Invest in Real Estate that Involve Buying/Owning Property

Now that we’ve looked at some of the best ways to invest in real estate without buying property, let’s move on and look at the options for those who don’t mind actually owning the property.

7. Rental Properties

Owning rental properties is a great way to build wealth and passive income. The investment property could be an apartment, condo, townhouse, single-family home, duplex or multi-unit property, or even a commercial property.

Building a portfolio of rental properties can be a great strategy, but there are some downsides. First, you’ll typically need money for a significant upfront investment to purchase the property. Unlike some of the other options we looked at earlier, you can’t get started with just a few hundred dollars.

Second, you’ll have responsibility for maintenance and upkeep. This involves both time and money. As the landlord, you could be getting calls from tenants for things like plumbing issues and other unexpected problems. The way to get around this is to hire a property manager who will take care of all of these details. However, paying the property manager will be an added expense.

Third, as the landlord, you will also be dealing with tenants. Some tenants will be great, but others may be more of a headache. Again, hiring a property manager will help with these issues.

The best way to get started is to work with a realtor who has experience with rental properties. Decide what you are looking for and get the help of a qualified real estate agent to find an investment property that suits your needs.

Highlights of Investing in Rental Properties:

  • Great long-term approach to building wealth and generate cash flow.
  • Can be expensive to get started.
  • Involves being a landlord and taking responsibility for maintenance (unless you hire a property manager).

8. Vacation Properties

Owning vacation properties is another option that is very similar to owning rental properties. The real difference is that with rental properties you’ll typically be dealing with long-term tenants, and with vacation properties, you will be renting it out for a few days at a time.

Vacation properties can be lucrative in the right situation, but they can involve even more work than a rental property. You’ll have to get it cleaned between guests, and keeping it booked can involve some work and expense as well.

You can hire a property manager or a company to handle the property and bookings if you want to reduce your involvement. Of course, that comes with a fee. Hiring someone is probably necessary if the property is not in your local area.

One reason that vacation properties are popular is that you can use the property for yourself and your family at certain times of the year, and rent it out when you’re not going to be using it. Even if it’s not rented out all the time, whatever rent you get will help to offset the cost of owning the property.

Highlights of Investing in Vacation Properties:

  • Can be expensive to get started.
  • Possible to use the property for yourself and rent it out at other times.
  • Usually requires hiring a property manager.

9. Flip Houses

If you watch cable TV, you’ve probably seen many shows that feature stories of people who make money (or lose money in some cases) by flipping houses. The goal is to buy a house at a good price, improve it, and sell it at a higher price that results in a profit.

Many houses that are purchased with the intent of flipping are fixer-uppers, or worse. Foreclosures and other distressed properties are often good candidates for flipping.

Flipping houses is a high-risk, high-reward business that is partially dependent on the housing market. In the right situation, you may be able to make a significant profit in a short amount of time, but it’s equally possible that you could lose money and a lot of time.

In order to have success as a flipper, you will need to be very familiar with the market, have the knowledge and ability to do work yourself or hire someone competent, be willing to accept risk, and you’ll need to work with a sense of urgency. The carrying costs of owning the home until it is sold will have a big impact on your profitability, so you’ll need to get it completed and sold as quickly as possible.

To buy the properties, you’ll need to have money available or have easy access to money through an investor or loan.

Highlights of Flipping Houses:

  • Requires capital to get started.
  • High risk, high reward.
  • Requires knowledge and experience.

10. Rent Your Old House

One way to get started with real estate investing is to rent out your old house after you move, instead of selling it. You can live in a house for a few years, then move on to another home and rent out your old house.

This approach makes it possible to slowly build up a portfolio of rental properties. You’ll still have the same potential downsides of owning a rental property (responsibilities for maintenance and dealing with tenants).

The hardest part of this approach may be that you’ll need to save money for the down payment on your next home since you won’t have proceeds from selling a house.

Highlights of Renting Your Old House:

  • Allows you to live in the home for a few years before making it a rental property.
  • Involves being a landlord and taking responsibility for maintenance (unless you hire a property manager).

11. Rent Part of Your House

This is one of the most realistic options for getting started with owning rental properties, and there are a few possibilities. You could buy a duplex or multi-unit house, live in one part, and rent the other unit(s). Or, you could simply rent out a single room or a part of your house.

House hacking is a popular approach in the financial independence community for reducing housing expenses and helping with the cost of owning a home. You can drastically reduce the amount of money you need to pay your mortgage by taking on a tenant or roommate, and in some cases (especially with multi-unit properties) you may even be able to completely offset the cost of your mortgage.

This offers a great option to try out real estate investing and being a landlord with a smaller commitment than purchasing a rental property.

Highlights of Renting Part of Your Home:

  • Great way to reduce your housing expenses.
  • Ideal with duplexes or multi-unit buildings.
  • Serves as a good introduction to rental properties.

Getting Started with Real Estate Investing

Now that we’ve looked at 11 different options for investing in real estate, take a look at your own situation and your goals to see what might be a good fit for you. If you’re ok with owning properties and being a landlord, renting out part of your home is an ideal way to start.

If you don’t want to own or manage properties, there are a few possibilities that you can start immediately with little money. Fundrise has an excellent track record and you can start with as little as $10. Best of all, it’s a totally passive investment.

*Offer valid for U.S. residents 18+ and subject to account approval. This is not a recommendation. You can lose money with any investment. Open To The Public Investing is a member of FINRA & SIPC. Regulatory and firm fees apply. New customers receive free stock with value $3-300; 0.3% receive the max value. Cryptocurrency trading offered by Apex Crypto LLC. See Public.com/disclosures/



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