1. Real estate crowdfunding
Real estate crowdfunding is a strategy that allows enterprises to raise capital from large groups of individuals. It's done via online platforms that provide a meeting ground/marketplace between real estate developers and interested investors. In exchange for their money, investors receive debt or equity in a development project and, in successful cases, monthly or quarterly distributions.
2. Real estate investment trusts (REITs)
If you want to wade into real estate, investing in a real estate investment trust (REIT) will provide exposure to the market without the time and cost commitment of buying your own property.
REITs are companies that own, operate, or finance properties and real estate ventures. Like mutual funds or exchange-traded funds, they own not just one, but a basket of assets. Investors purchase shares of a REIT and earn a proportionate share of the income produced by those assets.
3. Real estate limited partnerships
A real estate limited partnership (RELP) provides investors with a diversified portfolio of real estate investment opportunities, allowing you to merge your funds with other investors' to buy, lease, develop, and sell properties that would be hard to manage or afford independently.
Like REITs, RELPs usually own a pool of properties, but they differ in their structure and organization. Primarily: RELPs are a form of private equity - that is, they are not traded on public exchanges
4. Become a landlord
One classic way to invest in real estate is to buy a property and lease it, or part of it. Being a landlord can come in many forms.
The first is to buy a single-family home and rent it out, a strategy that will only generate income if overhead costs are low. If your tenant's rental payment doesn't cover the mortgage, insurance, taxes, and maintenance, you're effectively losing money. Ideally, your monthly mortgage payment will be relatively fixed, while rent prices rise, increasing the amount of money you pocket over time.
5. House flipping
Some people take it a step further, buying homes to renovate and resell. Though those TV shows often make it look easy, "flipping" remains one of the most time-consuming and costly ways to invest in real estate. But it also has the potential to produce the biggest gains.
To be a successful flipper, you should always be prepared for unexpected problems, budget increases, time-inducing mistakes, a longer renovation timeline, and issues selling on the market.
6. Invest in your own home
Finally, if you want to invest in real estate, look closer to home - your own home. Homeownership is a goal many Americans strive to achieve, and rightfully so. Residential real estate has had its ups and downs over the years, but it generally appreciates in the long-term.
Most folks don't buy a home outright, but take out a mortgage. Working to paying it off, and owning your home outright, is a long-term investment that can protect against the volatility of the real estate market. It's often seen as the step that precedes investing in other types of real estate and has the added benefit of boosting your net worth, since you now own a major asset.
