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Real estate is a desirable investment that’s a vital 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 challenging.
This article will look at 11 different ways to invest in real estate. First, we’ll cover how 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 situation and start to move forward.
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 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 time and money.
Maybe you like the idea of investing in real estate, but you have no interest in being a landlord. Fortunately, some fantastic options 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. Hundreds of platforms fall into this category, and some differences exist between those websites/platforms.
In general, crowdfunding allows you to pool your money together with other real estate investors. So rather than buying an investment property, you’ll have an ownership interest in a property or a portfolio of multiple 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. First, you can invest and generate residual income without dealing with the property.
Another significant benefit is that you can get started with smaller amounts of money. Each platform will have its requirements and minimums, but some (like Fundrise) are as low as $10.
The convenience and ease also make crowdfunding a desirable option. You can find real estate investment opportunities anytime and select the ones you want to invest in immediately.
You’ll also love the potential to earn an outstanding return on your investment. Of course, the returns vary depending on the specifics (with some being at higher risk than others). Still, 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 consider. 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 investments are unavailable to most people. However, some good real estate crowdfunding platforms exist 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 due diligence.
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. In addition, 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. With this approach, you don’t need to vet or pick out individual properties, so it’s completely hands-free.
Groundfloor is another popular platform 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 is a new platform 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 ones.
RealtyMogul offers a few different real estate investment options, including REITs and individual properties. The REITs are public and non-traded. They make it easy 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.
Another excellent 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:
- Publicly Traded REITs are subject to SEC requirements and are highly liquid. Liquidity is a big issue regarding real estate investments, especially REITs. With a publicly traded REIT, you can get out of the investment at any time (just like selling shares of stock). Publicly-traded REITs may come with lower risk than other REIT types, 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 as a publicly 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 to be a higher 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 real estate types.
REITs offer an excellent way to get involved in real estate investing quickly without needing 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 straightforward 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.
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 lack liquidity and should only be used for long-term investments.
- Some REITs come with high fees.
Arrived is a unique platform that allows you to invest in rental properties without the need to own or manage the property. Instead, 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’s 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. Then, you’ll see all the essential details to decide which one is right for you. Of course, suppose you prefer a portfolio approach. In that case, you can invest a smaller amount in several properties rather than a more significant 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 a 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 invest in real estate is to invest in companies participating in and serving the industry. So, for example, you might invest in construction companies, home builders, real estate companies, hotels, etc.
You can buy stock in publically traded companies that fall into these categories. Generally, the overall real estate market will impact the share price.
Join Public to get up to $300 of free stock when you make a deposit.*
Webull is currently offering new users up to 12 free stocks for trying the platform. You’ll get two free stocks (each worth $3 – $300) for signing up. Deposit any amount to get 4-10 more free stocks worth $7-$3,000 each. Sign up for Webull through this link to be eligible for the bonus.
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, 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
An experienced general partner leads a Real Estate Limited Partnership. Other investors can join as limited partners. As a limited partner, you’re a shareholder. You can earn a return based on profits, but your liability is limited to the number of your investments.
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.
- The decisions of the general partner will highly influence your results.
Ways to Invest in Real Estate that Involve Buying/Owning Property
Now that we’ve looked at 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 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, or 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. Again, this involves both time and money. As the landlord, you could get calls from tenants for things like plumbing issues and other unexpected problems. The way to get around this is to hire a property manager to take care of all 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 with 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:
- A tremendous long-term approach to building wealth and generating cash flow.
- It can be expensive to get started.
- Being a landlord involves taking responsibility for maintenance (unless you hire a property manager).
8. Vacation Properties
Owning vacation properties is another option similar to owning rental properties. The difference is that you’ll typically be dealing with long-term tenants with rental properties. 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. For example, you’ll have to get it cleaned between guests, and keeping it booked can also involve some work and expense.
You can hire a property manager or a company to handle the property and bookings if you want to reduce your involvement. But, of course, that comes with a fee. Hiring someone is probably necessary if the property is not in your local area.
With vacation properties, you can use the property for yourself and your family at certain times of the year and rent it out when you’re not 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:
- It can be expensive to get started.
- Possible to use the property for yourself and rent it out at other times.
- It 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 home at a reasonable price, improve it, and sell it at a higher price that results in a profit.
Many houses 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 partially dependent on the housing market. In the right situation, you may be able to make a significant profit in a short time. Still, it’s equally possible that you could lose money and time.
To succeed as a flipper, you must be familiar with the market. You must have the knowledge and ability to do work yourself or hire someone competent. Finally, you’ll need to work with a sense of urgency. The carrying costs of owning the home until it is sold will significantly impact 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 cash 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 start real estate investing is to rent out your old house after you move instead of selling it. You can live in a place for a few years, then move on to another home and rent out your old house.
This approach makes it possible to build up a portfolio of rental properties slowly. 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
Renting a room or unit is one of the most realistic options for starting with rental properties, and there are a few possibilities. For example, 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 money you need to pay your mortgage by taking on a tenant or roommate. In some cases (especially with multi-unit properties), you may be able to offset the cost of your mortgage completely.
This approach 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 an excellent introduction to rental properties.
Getting Started with Real Estate Investing
Now that we’ve looked at 11 different options for investing in real estate, look at your situation and 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.
Suppose you don’t want to own or manage properties. In that case, you still have a few possibilities, and 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 passive investment.
*Public.com 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 provided by Apex Crypto LLC (NMLS ID 1828849). Apex Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. See Public.com/disclosures/