Real estate can be a very attractive investment, an 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 take a look at 11 different ways to invest in real estate. First, we’ll cover some ways to invest without buying and owning properties. And after that, we’ll look at the options that do involve buying or owning properties.
Hopefully, with the help of the information presented in this article, you’ll be able to identify the 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 a great 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 a great alternative investment option, not everyone wants to own properties. Buying and owning property can come 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 great options that allow you to invest and make money in real estate without the need to own and manage properties.
1. Real Estate Crowdfunding
Within the past several years, real estate crowdfunding has become extremely popular. There are more than 100 different websites 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 with other investors. It basically takes a peer-to-peer lending approach for the real estate industry.
Some investments will involve residential properties (like rental properties or house flipping) and others will involve commercial properties. As an investor, there is a lot to like about this opportunity. You can invest and generate residual income without the need to buy or 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 are just a few thousand dollars, and others are less than $1,000.
The convenience and ease also make crowdfunding a very attractive option. You can find 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 good 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 below).
Second, if you’re investing in individual properties you should still do some vetting on your own. Most of the 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.
Popular Real Estate Crowdfunding Platforms:
If you’re interested in this type of investment, here is a quick summary of some of the leading options.
If you’re new to real estate investing, Fundrise is a great place to start. With Fundrise you can invest in a portfolio spread throughout the United States. They have different strategies available based on your goals, so you can choose the one that is the best fit for you.
Their starter portfolio allows you to begin with as little as $500, and you do not need to be an accredited investor. With this approach, you won’t need to pick out individual properties or projects to invest in.
EquityMultiple offers investment opportunities in pre-vetted commercial real estate projects. With their platform, you can create a diversified portfolio across markets, asset classes, and project types.
Investments with EquityMultiple are open to accredited investors only. The minimum investment will depend on the specific project, but will not be lower than $5,000. Many projects have a $10,000 minimum investment.
Realty Mogul offers a few different investment options, including REITs and single 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 low minimum investment of $1,000.
The investments in individual properties are available only to accredited investors, and they have minimum investments anywhere from $15,000 – $50,000.
PeerStreet gives you the option to be more hands-on and select the individual investments in your portfolio, or you can set parameters and let the automated investing do the work for you. Most of the investments are residential properties.
PeerStreet has a low minimum investment of just $1,000, but it is available only to accredited investors.
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 $500 or less.
- Invest in single properties or portfolios of properties.
- Potential for high return on investment.
Another great option for hands-off real estate investing is a REIT. A REIT (real estate investment trust) is a company that invests in real estate and distributes earnings to shareholders. By investing in a REIT you will have an 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. They are 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 are 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 high fees. They are 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 comme