Investing in real estate requires a huge amount of property and may seem lucrative. While many presume that the only way to invest in real estate is through direct property ownership. However, there are many other options that you can invest in real estate without buying property. With these options, investors can benefit from real estate appreciation, diversify their portfolio, and also reap the rewards from the rent of property’s tenants. In this article, we will discuss different ways to invest in real estate that does not involve direct property ownership or buying a property.
Ways to invest in real estate without buying property:
Wholesaling is one of the most active forms of real estate investing that does not require you to buy any property. Here the investor also known as a wholesaler enters into an agreement to buy a property that is underpriced. The property is then sold to the end-user at a profit. This process helps you to gain insights into the real estate market and learn a few negotiation skills. Here the wholesaler/investors earn revenue in the form of fee which is attached to the transaction.
Wholesaling is a risky investment as it requires great financial, legal, real estate expertise and network connection of prospective buyers. Here the wholesaler is directly responsible for securing the purchase price and scheduling the time for sale. The wholesaler takes all the responsibility for ensuring the success of the investment.
2. Real estate mutual funds:
Investing in real estate mutual funds is one of the best ways to diversify your portfolio. It is similar to a mutual fund where the investor owns a portion of the mutual fund while the company itself owns the investment that it makes. Here the earnings are in the form of dividend or amount of share appreciation.
Real estate mutual funds invest in REITs, real estate stocks, commercial, and industrial units. The earnings depend on several factors such as demand and supply demographics, market conditions, and interest rates. When deciding the real estate mutual find it is important to understand the composition of the funds’ portfolio.
3. Real Estate Investment Trusts (REIT):
Real Estate Investment Trusts (REIT) is a company that makes debt/equity investments in commercial real estate. It gives an opportunity for individual investors access to invest in real estate as an asset without owning the property. Like mutual funds, Real Estate Investment Trusts (REITs) own the investments that it makes. The investors earn returns in the form of a dividend
4. Online investment platforms:
Online investment platforms pool investments from various investors on their behalf in opportunities that otherwise would have been expensive to access. Online real estate investment platforms range in investment offerings, investment property types. This also provides a single investment platform to invest in single properties. The investment made through online investment platforms offers very low liquidation.
5. Hard money loans:
Hard money loans are loans extended by an individual to a real estate investor. It involves short-term lending to finance an investment project. The loan is received on the basis of the value of the property secured. In hard money loans, you earn interest.
6. Private Equity Funds:
A private equity fund is a real estate investment fund where the investors pool their money together into a fund to make an investment on behalf of the group. This is legally operated in the form of a limited liability partnership. Here the fund manager is in charge of the fund and controls the daily management of the fund. Private equity funds are illiquid and are only viable for investors who can afford a large amount of money for an extended period of time.
Why should you invest in Real Estate?
- Real estate has a high tangible asset value:
Investing in real estate has a high tangible asset value when compared to other investments. Stocks can dip to zero and car value depreciates but real estate investment is beneficial for your portfolio.
- The value of real estate always increases over time:
The longer you hold the real estate the more money you will make. Real estate increases its value with time. Therefore there is no need to worry if the investment is for a long period of time.
- Real estate investment diversifies your portfolio:
Investment in real estate diversifies your portfolio and it is a safe tangible asset to mitigate the risk. Hence investing in real estate is on the best options for your investment goals
- Taxation benefits:
Real estate investment comes with numerous tax benefits. You can get tax deductions on cash flow, mortgage interest, operating costs and expenses, property tax, and other benefits.
If you are not willing to buy a property but are interested in investing in real estate then these above options are best suited for your investment portfolio. If chosen wisely and managed efficiently real estate can offer potential returns and valuable asset diversification without any hassle. However, it is important to choose the real estate options with time commitments so that you meet your financial goals with minimum risk.