Investing in real estate doesn’t have to mean owning property. In today’s world, there are several innovative ways to benefit from real estate investments without the hassle of buying and managing physical properties. By exploring these options, you can enjoy the financial rewards of real estate investing while sidestepping the challenges of property ownership.
1. Invest in REITs
A Real Estate Investment Trust (or REIT) is a company that owns and operates real estate. You can buy shares in a REIT and thereby own a small part of the company that owns the real estate. Your money is pooled with other investors’ money and is used to purchase real estate properties. The REIT manages the property, and you get the benefits of the cash flow and appreciation generated by the physical property owned by the REIT.
2. Real Estate Crowdfunding
Private equity real estate investing used to belong solely to the super-rich and well-connected. But crowdfunding has allowed average investors to participate in real estate in a way that was impossible before. The profits from renovating, operating and eventually selling the real estate get divided among the investors. There are usually two pieces – a dividend (paid out quarterly or annually from operating cash flow), and equity growth (from appreciation, reflected in the share price).
3. Hard Money Lending
If you have the cash, you can “become the bank” and lend money to house flippers or landlords who need to do serious work to a property before they can get a typical bank loan. A hard money loan is generally a short term (one year or less) loan issued on a property during the renovation phase.
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4. Become a “Money Partner”
Similar to hard money lending, becoming a money partner means you are bringing the cash to the table, and the other party is bringing the deal (and usually managing the renovation or operation of the property). But instead of offering them a loan at a set interest rate, you are becoming an equity partner with them and will make a certain percentage of the total profit at the end of the day.
5. Real Estate Mutual Funds
These funds are managed by professional fund managers who have expertise in selecting and managing real estate investments. This allows you to benefit from their knowledge and experience without needing to manage properties yourself. Unlike physical real estate, which can take time to buy or sell, real estate mutual funds can be bought and sold easily on the stock market. This provides greater liquidity and flexibility in your investments.
6. Real Estate Notes
When you invest in real estate notes, you are essentially buying debt secured by real estate. This means you are purchasing the right to receive payments from the borrower who took out the loan to purchase the property.
7. Wholesaling
The basic premise is you go out and hustle looking for good deals on properties, put them under contract, then sell that contract to another investor for a fee. You have to be willing to put in the work to find truly great deals. These usually come from people in financial or another type of distress.
8. Get a Real Estate License
Most people will tell you you will never make any money as a part-time real estate agent, but that’s not always the case. If you have an interest in real estate already, getting your license can be a great way to earn some extra money. And most of the work is on nights and weekends, so even if you have a day job, it can be done.
9. Real Estate Exchange-Traded Funds (ETF)
Unlike physical real estate, which can take time to sell, REIT ETFs are traded on stock exchanges. This means you can buy and sell shares quickly and easily, providing greater liquidity and flexibility. They provide an easy, cost-effective, and diversified way to invest in real estate. They offer the benefits of real estate investment without the complexities and responsibilities of property ownership.
10. Provide a Freelance Real Estate Service
If you are interested in the real estate industry but aren’t quite ready to buy property, you can learn a lot by providing a service to real estate agents or investors. There is an entire industry built around financial, marketing, software, and other services provided expressly to those in real estate. Almost any freelance service you can think of can be targeted toward the real estate niche.
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