Real estate has many avenues for investors to participate in quadrupling their income source. Owning rental property is often considered to be an excellent way to generate passive income. If being a landlord is not your cup of tea, you can check out many other viable hands-off approaches to investing in real estate.
Diversifying your real estate investment strategy opens up a plethora of possibilities. Being a landlord will allow you to get consistent rental income per month. However, there are additional responsibilities to consider like renovation, maintenance, and so on.
So let’s get down to listing down ways you can do exactly that. But first, let’s answer a crucial question in the following section- why invest in real estate at all?
Why Invest In Real Estate At All?
Investing in real estate is a strategic move that applies an age-old fact- “Don’t put all your eggs in one basket”. Diversifying your portfolio is more in line with classic investment practices like stocks and bonds. This way you can spread your risk over multiple areas and have a higher chance of at least one of them being profitable eventually.
One reason to consider real estate as part of your investment strategy is its unique ability to act as a hedge against inflation. Unlike certain financial assets, real estate has a lower chance of falling in value with rising inflation. Real estate often appreciates over time thus protecting your investment.
Real estate investments are also resilient to financial market volatility. With economic growth and downturn, real estate acts independently from it and is usually unhinged for the most part. So during market shakeups, your real estate investments will remain stable overall.
9 Ways To Invest In Real Estate Without Being A Landlord
Nowadays, you do not necessarily have to be a landlord to invest in real estate. Here are a few ways you can invest in real estate without being a landlord.
Real Estate Funds
Real estate funds are managed by a fund manager. These funds pool capital from multiple investors and strategically invest in a diverse portfolio of properties. These properties can be both residential and commercial. The investment manager handles property selection, management decisions, and overall fund strategy.
The great thing about this method is that your investment is spread over multiple properties, enhancing your portfolio. This hands-off approach is ideal for those seeking real estate investment opportunities without having to be a landlord.
Real Estate Syndication
Real estate syndications offer a collaborative approach to property investment by pooling funds from multiple investors to acquire high-value properties. These properties can be multi-million dollar assets like apartment complexes. This model enables individual investors to participate in larger real estate ventures that might be challenging to pursue independently.
With syndications, you can target high-value properties and get access to substantial projects, owned by multiple investors. These syndication deals typically span 3 to 7 years, depending on the sponsor and project nature. Do your due diligence and conduct thorough research on the sponsor’s track record before committing.
The critical role of sponsor selection cannot be overstated. You need to prioritize sponsors with a proven track record. The better the sponsor’s history the more security you have for your hard-earned dollars invested.
Crowdfunding
There are many digital real estate crowdfunding apps, that offer a simple entry into the real estate market. With as low as a $10 investment, these user-friendly platforms will help you get into the world of investing with a few clicks of a button.
You have the option of choosing between equity and debt investments based on your preferences and financial goals. You can own a portion of a property and earn dividends from rental income or act as a lender for real estate development. The options are flexible, and you don’t need much real estate knowledge for it.
These avenues give you low-cost entry, making real estate investment accessible to those without high upfront capital. Diversification across different projects further reduces risks, while dividend-paying investments provide a regular income stream without the complexities of day-to-day property management.
These platforms offer a simplified approach for individuals to participate in real estate investment, tailored to their financial objectives and level of risk tolerance.
REITs
Real Estate Investment Trusts (REITs) offer a hassle-free approach for individuals to invest in real estate without the complexities of property ownership. These trusts, provided by real estate investment companies, focus on commercial properties or mortgage-backed loans. Investing in mortgage REITs means you’re part of a diversified portfolio managed by professionals.
The process involves purchasing shares in the REIT, granting you a stake without the need to manage specific properties or mortgages managed by professional fund managers. Investors have the option of choosing between private REITs that offer exclusivity without a stock exchange listing. You also have the option of publicly-traded REITs that are more liquid and easy to trade on stock exchanges.
REIG
Real Estate Investment Groups (REIGs) allow investors to invest in commercial real estate without the direct responsibilities of landlords. These groups can strategically acquire diverse commercial properties. Income is generated through rental income, property management fees, and interest from mortgage investments.
REIGs are collaborative, as investors pool their capital to collectively invest across different portfolios. This approach not only increases financial capacity but also distributes risks and rewards among participants. This method is more suited for accredited investors with a lot of capital. This way their capital is spread over a broader range of commercial properties.
This method provides an effective way for investors to collectively invest in commercial real estate. In short, you can enjoy the benefits of rental income and property appreciation without the direct involvement of being a landlord.
Property Management Companies
Even if you are a landlord and have real estate that you don’t want to deal with, you can still earn from it without direct involvement. You can register your property with a property management company and let them deal with the rest for a fee. The manager will deal with the day to days and you can relax.
When a manager takes over responsibility for your land, they will look over tenant relations, property maintenance, and other tasks. The fees they charge might be hefty given the track history of the company. So make sure your financial goals align with them as this may not be the most profitable way to go.
One benefit of hiring a property manager is the fact that it is a hands-off approach as they will handle everything from screening tenants to collecting rent, and the property renewal process. Think of it as a win-win for both parties.
Silent Partnership
As a silent partner, you can hand over your investment to an active investor who will handle all the mathematics of investments. The active investor takes charge of property selection, management, and decision-making.
You need to be sure of the investor’s track record and expertise in property-related responsibilities. This approach allows you to share in potential returns without direct involvement in property management risks. Combining your money and their brains makes it a great way to get into real estate without having to be a landlord.
Hard Money Loans
Hard money loans play a crucial role for investors involved in fix-and-flip ventures. They serve as a tool in bridging the gap between property acquisition and renovation. These debts provide short-term financing, typically spanning 6 to 12 months, allowing an investor to buy property, renovate and sell for a profit,
With such loans, the focus is primarily on short-term financing. For the borrower, it is very flexible when deciding on an exit strategy. Borrowers commonly aim to sell the renovated property or refinance it with standard financing to repay the hard money loan.
For the investor, the main selling point is that hard money loans often come with higher interest rates which makes it fruitful. However, there is also increased risk associated with short-term and real estate transactions.
Wholesaling
Alternatively, you can also be a real estate wholesaler during property transactions. As a wholesaler, your job will be to identify promising properties through research and networking. The main focus must me on on properties that have the potential of generating high profit.
Once a property is identified, you place it under contract with the seller and then assign the contract to an investor buyer for a fee or commission. This is typically set at a slightly higher price. The profit for wholesalers comes from the margin between the contracted and assigned prices. As a valuable middleman, you earn without having to directly own the property.
Tips To Navigating The Market With Ease
Here are a few pointers to keep in mind when you want to join the real estate market
Get A Great Understanding Of The Market
To properly navigate the market you need minimal knowledge of it. Familiarize yourself with the local market trends and types of properties currently in demand. Once identified rigorously analyze it to make sure you don’t overpay for shares and deals. Maybe you might find a more profitable deal just outside your neighborhood.
Look For Maximum Value For Money
Starting with a budget in mind is a great way to start investing in real estate. Trying to stay within your budget can help you balance affordability and potential returns from purchasing properties. Alternatively, in terms of syndication and other ETFs, take advantage of the plethora of investment applications available to get the best deals out there.
Aim Long-term Over Short Term
When investing in real estate it is always better to aim for long-term gains over short-term ones. Short-term gains are great but building wealth over the long term has greater potential in terms of the sheer amount of money you can generate.
Always Find A Reputable Real Estate Agent
There are many real estate agents out there, but only a few can guarantee you proper management and dividend payouts. Try to find one that has good knowledge of your local area and is well-versed in understanding market dynamics.
Conduct Thorough Research
Before diving into the market you need to first educate yourself about the various types of real estate you can invest in, types of contracts, and categories. Be sure to make informed decisions based on your research to make the perfect profitable investment.
Get in touch with RSN Property Group now and discover how our Multifamily Real Estate opportunities can assist you in accomplishing your investment objectives. Collaborate with us to establish a thriving future for your property portfolio.
Conclusion
Investing in real estate without being a landlord is a smart way to diversify your investments. Instead of narrowing down on in property, spread your risk and enjoy returns from multiple classes of assets. There are many ways to earn passively from real estate, whether you’re saving for retirement or just trying to earn a couple of extra bucks.
You don’t have to be a real estate mogul to do this. Real estate funds, syndications and silent partnerships are truly passive and you can invest and watch the money roll in eventually. On the other hand, wholesaling and hard money loans require a little more footwork. Regardless of that, you don’t have to be a landlord in either scenario.
Frequently Asked Questions (FAQs)
Do you need a lot of money to invest in real estate?
Not really, unless you want to own property, real estate investments can start from as low as $10 through various investment applications.
Is real estate a good investment?
Of all types of investments available in the market, real estate has proven to have a solid track record time and time again. Diversifying your investments is a smart way to ensure your investments have low risk.
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