Real Estate Investing
How to Invest in Real Estate Without Being a Landlord (2023)
Real estate investments are great for building passive income streams. You can buy a property and get monthly revenue from rent, become an Airbnb host, or renovate and flip it for faster returns.
But before you can even think about revenue, you must secure hefty down payments. The National Association of Realtors says down payments range from 7% to 17% of the sale price.
Even if you found a way to secure capital, you need to think about all the duties of a landlord such as rent collection, tenant screening, and maintenance.
If you want to flip a property, you have to pay extra for renovations, marketing the property, and spending time finding a buyer. With everything considered, is real estate still a worthwhile investment?
Why Invest in Real Estate?
Real estate is still one of the best investment vehicles for generating wealth. But revenue isn’t the only benefit, you also get advantages in:
- Cash flow - Real estate cash flow is net income after mortgage payments and operational expenditures. As you pay your mortgage and develop equity, your cash flow improves.
- Diversification - Real estate is a great way of diversifying assets. It generally isn’t moved by major shifts in market sentiment resulting in lowered portfolio volatility.
- Tax deductions - Real estate investors get tax benefits and deductions including ownership, operation, and management costs. You also lower taxed income through property depreciation over its useful life.
- Investment Appreciation - Real estate appreciates over time, and so does rent, which can increase cash flow.
How to Invest in Real Estate Without Being a Landlord: 7 Practical Ways
Owning property is expensive. For many years, investing in real estate was only for investors who had tons of capital and large firms.
Now, the general public has avenues to invest in real estate even without being a landlord such as the following:
Real Estate Crowdfunding
Popular examples of crowdfunding came in the form of platforms like Kickstarter. The public invests in a product (in this case real estate) and gets rewards based on their contribution.
Real estate crowdfunding can be done online through apps such as Crowdstreet, Fundrise, and RealtyMogul. Users go through a list of available investment options on these platforms.
After researching a project, users can decide to make an investment offer that meets or surpasses the stated minimum. Some projects have a minimum investment of $25,000.
But if you want to test the waters, platforms like Fundrise has portfolios you can invest in for as low as $10.
Becoming a Real Estate Wholesaler
A real estate wholesaler can be seen as a middleman who connects investors to a great property. Wholesalers take care of the research on the property but don’t actually buy it.
Instead, they assign contracts to one of their investors and gain profit from the higher contracted price they sell them for.
The risk is relatively low if you’re a wholesaler. But you do have to network with the right people, build your name, and your authority in the industry.
Real Estate Investment Trusts (REITs)
REITs are like stocks wherein you buy shares of a property from a real estate investment company. When REITs profit, they pay out investors with dividends.
This type of real estate investment is both publicly traded and has high liquidity. That means REITs are easy to buy into while shares can be sold just as fast. There are different types of assets available for investment, either inside a single REIT or across numerous REITs.
- Apartment complexes
- Office buildings
- Retail establishments
- Cell towers
Real Estate Investment Groups (REIGs)
REIGs invest in revenue-generating real estate projects. They offer investors flexible ways of being involved. You can engage in investment strategies or be a silent investor.
Each REIG has different rules, structures, and portfolios. But every REIG is responsible for overseeing the properties, portfolios, and member contributions.
This type of real estate investment is perfect if you want to:
- Combine resources with other investors to own property
- Learn more about real estate investing from more experienced members
- Share or delegate responsibilities of property ownership
Real Estate Syndications
Syndication allows investors to invest in large projects they couldn't afford or handle alone. The projects involved in this type of real estate investment typically cost millions of dollars.
If you want to invest in syndications, be sure to do as much research as you can. You need to ensure that the syndication your investing in has a proven track record.
Contracts for this type of real estate investment last between three to seven years. As an Investor, you just have to keep an eye on your bank account and report earnings to the IRS.
A sublet is a contract between a tenant and a sub-tenant to rent a residential or business space for a certain duration. It allows a tenant to leave without violating their lease and still pays rent.
Sublease agreements allow tenants to rent to subtenants. This is a great way to invest in real estate without buying property.
Subleasing is possible if the property is in a short-term rental area but is being leased long-term. Investors adopting this approach must be careful not to breach their leases.
Hard Money Loans
This real estate investment is common for investors who want to renovate a property and flip it for profit. It’s also called “bridge loans”.
That’s because they bridge the gap between the investor buying a house that needs work and wouldn't pass an appraisal and fixing it up so it can be sold or rented.
In 6–12 months, borrowers sell the property or refinance it. This investment suits risk-takers. High-interest rates raise default risk.
Investing in real estate diversifies your portfolio, softens the impact of volatile markets, and generates passive income. The best part is, you can invest without buying properties.
Here are some key notes to consider:
- You can invest in real estate without property through REITs, REIGs, Syndication, subleasing, and more.
- Down payments for property range between 7% - 17% of the sale price.
- Crowdfunding helps people get into real estate investment with its low entry points.
If you want to invest in premiere real estate for as low as $100, look no further than Getaway. Investors can access members-only perks such as discounted vacation stays and more!
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