Real estate is a great way to diversify your investment portfolio and generate passive income. However, it’s an illiquid asset that requires substantial time and resources to manage.
Plus, it’s risky – you could lose your entire investment in a market crash. Luckily, there are many other ways to invest in real estate besides becoming a landlord.
1. Wholesaling
Real estate investment is a solid option for investors seeking a steady stream of income. It also provides a solid hedge against inflation because rents can rise more rapidly than inflation.
Wholesaling is one of the quickest ways to get into property investing. It involves buying properties at a discount and selling them at a higher price. This strategy is especially lucrative when you invest in properties that can quickly increase in value, such as mobile homes or land.
Be sure to research all the options before deciding to buy a home or become a landlord. And don’t invest money you can’t afford to lose.
2. Flipping
Thanks to HGTV, flipping properties has become a popular way to get into real estate investing. The idea is to buy a property that needs work, do some renovations, and sell it for a profit. This can be a much quicker path to a return on investment than becoming a long-term landlord.
However, it’s also a risky one, especially when you’re flipping properties in hot markets that can cool suddenly. Plus, it’s a highly leveraged business where one mistake can wipe you out completely. Also, you’ll be relying on others to vet the deals and perform necessary repairs. That makes it a less liquid investment than, say, an REIT or your own rental property.
3. Crowdfunding
Real estate investing may seem like the domain of slumlords in big cities or rich billionaires, but it’s a great way for average investors to earn dividends. And with a few new options, it’s easier than ever to get started.
You can invest in equity or debt crowdfunding campaigns, both of which offer a return on investment. However, it’s important to note that not all crowdfunding investments lead to profitable outcomes.
Real estate crowdfunding platforms can be a good option for passive investors who want to participate in the property market without having to visit properties, estimate costs of annual upkeep and maintenance or deal with tenant phone calls. These investments are often illiquid and depend on the property market, but returns can be high.
4. REITs
Unlike flipping, which requires constant cash flows to make a profit, REITs provide steady income from real estate they hold for the long haul. REITs are similar to mutual funds, and they invest in commercial real estate such as office spaces, malls, apartments and hotels.
REITs may be publicly traded or private, and they can include equity REITs that own buildings or mortgage REITs that finance properties. Publicly traded REITs offer liquidity and are a popular investment option.
Real estate investments typically don’t correlate as much with the stock market, which can be helpful for diversifying your portfolio. However, it’s important to understand that investing in real estate isn’t a risk-free golden ticket.
5. Joint Ventures
Investing in real estate can be risky, even for the most experienced investor. Leverage devours income, and inexperience can lead to mistakes that decrease income.
Renting out property is a way to earn consistent cash flow, but it requires a lot of work. Fielding calls about broken toilets and leaking water can also make landlording less appealing.
Real estate investment trusts (REITs) and online real estate platforms offer more hands-off opportunities for investing in real estate. However, owning rental properties is an excellent way to generate income if you have do-it-yourself renovation skills and the patience to manage tenants.
6. Renting
Real estate is a great way to diversify your portfolio. It can offer steady income, protect your assets from market fluctuations, and even increase in value over time.
However, it is not without risk. Real estate investments can be more illiquid than stocks, and they often require significant up-front costs. Also, real estate can be highly leveraged, which can devour your profits and lead to bankruptcy if you’re not careful.
Thankfully, there are many ways to get into real estate investing that don’t require buying your own property. From house hacking to new business platforms, you can dip your toe into this lucrative investment.
