The statistics on the returns one can make from investing in real estate might be beautiful and inspiring to invest in real estate. Last year alone, the increasing real estate prices and the lowering interest rates helped many investors make lucrative returns on their investments. Such stats can often make people think of investing in real estate.
If you’re in the same place, this blog is for you. Investing in real estate traditionally meant buying properties, finding potential tenants, renting out space, and warning through constant rental income. In other words, being a landlord was what was expected from a real estate investor. Times have changed, and real estate investing has way surpassed the phase of real-estate-investing-as-a-landlord, and there are various ways of investing in real estate.
Now, why would you want to invest in real estate without following the traditional approach of being a landlord? Well, there’s nothing wrong about being a landlord and making good returns on the properties owned and managed by investors. However – many investors do not have the time that’s needed to be put in when you’re a landlord of the property. Besides, there’s always a risk of the vacancy in the property, and thus not all investors want to be landlords.
This blog is for people who want to invest in real estate property but do not want to invest their time and energies in being a landlord and carrying on the activities of finding and managing tenants on the property. Here are six ways to invest in real estate without directly buying the property! Read on.
Six ways to invest in Real Estate without buying property
Number 1 – Investing in REITs
REITs stand for Real Estate Investment Trusts, and they’re one of the easiest ways to invest in real estate without individually holding and owning properties. They are similar to mutual fund investments in the stock market and provide you the benefits of shared risks and rewards.
With REITs, you can invest in an array of Commercial and Residential investment properties through the REITs and thus massively diversify your investments.
This means that – the mood swings and ups and downs of the real estate market are probably not going to hurt you so much at the end of the day. Investing in REITs is a great idea also because of the non-correlation that it has with other kinds of equities.
Thus, you can leverage the shared risks factor and diversification of investments, which will minimize your overall risk percentage and maximize your returns over time.
Entry and exit from REITs are quite simple too, and the financial charges charged by most REITs companies also justify what you’ll be making from the deals. The best part about investing in REITs? You get to experience and have great exposure to how real estate investing works without having to own the property or be a landlord!
Beginner investors also consider investing in REITs first before they can think of other options as they provide to you an ocean of opportunities to explore and experience how real estate investing works first hand.
Number 2 – Invest in Real Estate mutual funds
Just like Stock Market Mutual Funds, Real Estate mutual funds are profitable and provide you an opportunity to invest in various types of properties without having to own them all.
Researching on good companies that undertake real estate mutual funds is the first step in this regard. Narrow down your options based on the portfolio of investments, each of these companies deal. You might want to exclusively invest in residential properties or on multi-family properties or probably a mix of both.
If you want to switch from residential property investments to Commercial Property investments and vice-versa, you can explore and experience investing through real estate mutual funds.
Real estate mutual funds stand out by having a broad diversification among various kinds of real estate holdings at lesser fees. Besides, the risk is shared among hundreds of investors like you, and thus investing will never seem burdensome.
Number 3 – Investing in home construction
The ever-growing real estate industry owes much of its growth to the construction of newer properties – both residential and commercial. The increasing job rates have led to an increasing immigration rate, and there’s an increasing demand for homes.
In the last decade, there has been a steady increase in the number of properties built, and that’s an increasing market even in the future years. Investing in home construction projects thus can be very lucrative.
Be it single-family homes or multi-family homes, there’s a good demand for both, and you can earn good returns by putting your money in such construction projects.
Large homebuilders in the market are constantly on a lookout for investors who can collectively finance their needs and make good returns on such investments. With trends suggesting that there’s only going to be more homes and properties coming up, it’s definitely a good idea to invest in home construction projects.
Number 4 – Investing in real estate-focused companies
An interesting way of investing in real estate without buying the property is by investing in companies that are focused on real estate for their returns and income.
Examples of such companies could be restaurants, resort operators, hotels, timeshare companies, asset management companies, and so on.
Buying stock in such companies means that you are going to make returns based on how much returns these companies are making from their real estate investment portfolio.
As an investor in such companies, you must conduct due diligence on the history of the company, analyze their income statements and profits and make an informed decision on what company to choose to invest in the stock.
The process is not very different from the process of buying stock from a company that’s called for an IPO (Initial Public Offering) – research on the company history, vision, and mission and chooses the one that best fits your focus and mission.
Number 5 – Lending hard money loans
If you want to invest in real estate but do not want to go through the hassles that come along with being a landlord, lending hard money loans could be a wise option.
Hard money loans are basically loans given to investors who are looking for financing in order to buy, renovate, or flip properties. You can start off small by having a small circle of investors who you lend money to and scale up gradually by reinvesting the returns you make on such deals.
Hard money loans are highly looked after by various savvy Commercial real estate investors who do not want to get into the paperwork and verification procedures conducted by banks or other traditional lending institutions.
Many a time, hard money lenders are most sought after by investors who want to make the best of the commercial real estate deals that are very time-specific. So, if you have reserves or cash in hand that you wish to invest in real estate, lending Commercial real estate loans could be your best bet.
The only big challenge here would be in finding the potential borrowers, which is a trick you will learn as time goes by and through experience. Growing your network is super important as you’ll need more people to know that you are willing to provide hard money loans.
So, the number of people who learn about your services, the more you’ll be making. How to set loan rates, loan terms, and other lending conditions depends on the properties you want to deal with and the location of such properties.
As a thumb rule – hard money lenders often lend loans at much higher rates than banks or other traditional lending institutions, and that’s justifiable because hard money loans are processed at lightning speed, which may be the need of the hour for savvy commercial real estate investors out there! So, lending hard money loans or private commercial real estate loans to such investors is definitely a game you might want to try your luck.
Number 6 – Investing in real estate online
Last up on the list is investing in real estate online by signing up for different real estate investment plans that are designed by companies that run online websites for investing in real estate.
What you do is basically conduct your research on some of the best real estate investment companies online, compare and weigh the pros and cons of each such website, look at their portfolio of investments they’ve dealt with in the past and invest your money in such companies.
These companies collect funding from various investors like you and invest in different types of real estate properties like – Commercial properties, residential properties, multi-family properties and so on and provide you returns in the form of dividends earned and the overall property appreciation.
You can thus become a part of their real estate investors without having to go through all the legwork and immense research that’s needed to be done before investing in real estate. They’ll do all of that for you, and you earn through cash flow distributions that are divided in the form of regular fixed or fluctuating dividends and the property appreciation in the long term.