How to Invest in Real Estate Without Being a Landlord
March 25, 2022
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If you are intrigued about the benefits of investing in real estate but worry about owning it yourself, there are many ways to enjoy the returns without the stress of managing a property yourself. Today, accredited and non-accredited investors can enjoy the returns and excitement of investing in real estate.
If you’re ready to try your hand at real estate investing but want to know how to invest in real estate without being a landlord, keep reading.
Why Invest in Real Estate
You’ve likely heard the term, ‘don’t put all your eggs in one basket,’ right? Investing in real estate is one of the best ways to diversify your portfolio so that you aren’t putting all your money in stocks or bonds.
Real estate can help you hedge against inflation, and it often doesn’t react the same as the market when there is a big shakeup. Of course, there’s a risk in any investment you make, but real estate can help diversify those risks, so you minimize your risk of a major loss.
How to Invest Without Being a Landlord
The good news is that you don’t have to be a landlord to invest in real estate projects. Today there are many other ways to invest in real estate that are open to all types of investors, not just accredited (wealthy) investors. There are even some real estate investments you can make with as little as $10 if you want to take it slow.
If you wonder how to invest without being a landlord, here are nine great ways.
Crowdfunding via Digital Real Estate Investing Apps
Real Estate crowdfunding is one of the easiest ways to invest in real estate. You download a crowdfunding app, choose your investments, fund your account, and that’s it. You don’t have to know much about real estate, and you can invest with as little as $10 in some cases. It's a low cost way to invest if you don't have the money for a big down payment or if you're not an accredited investor.
There are many popular digital apps for investing in real estate, such as Fundrise, Peerstreet, Concreit, and Diversyfund. Each app invests differently - some use the funds to buy equity in a property earning rental income as dividends. Others invest in a property’s debt, acting as the lender for the real estate developer, which pays investors dividends as interest.
REITs mean real estate investment trusts. You buy real estate investment trust shares from a real estate investment company that invests in commercial properties or mortgage backed loans. Investing in mortgage REITs means investing in multiple real estate properties or real estate backed loans. You buy a share of the trust, and the fund manager handles what properties or mortgages to invest in based on its goals.
You can choose to invest in private REITs that don’t trade on the secondary stock exchanges or traded publicly REITs that do and tend to be more liquid.
Real estate investment groups (REIGs) are for investors who want to invest in commercial real estate but don’t want the duties of playing landlord. REIGs buy commercial properties, such as multi-family units, apartment buildings, and commercial buildings. They earn income from rental properties, property management fees, and interest if they invest in mortgages.
Investors pool their capital together to give the REIG more money to invest in more properties. This method is usually best for accredited investors with a lot of capital to invest.
Rent Out Property Using a Management Company
If you want the excitement of owning property that you'll rent out yourself, but being a landlord isn't right for you, try renting out a property using a property management company. Of course, you’ll have to watch your expenses when you do this because property manager fees will decrease your profits. Still, if it works into your budget, you can earn money and not have to worry about managing tenants, the property, collect rent, or even screen tenants when a lease expires.
Real Estate Funds
Real estate funds are sold by a fund manager who pools the funds received from investors and invests them in several properties all in one fund. It could be residential or commercial properties, but the fund manager's investment choices are up to the investment manager.
If you’re wondering how to invest in real estate without being a landlord, this is a quick way to jump in headfirst without the responsibility of handling the properties yourself.
Real Estate Syndications
Real estate syndications are another way to pool funds from multiple investors together to buy a single property. However, the properties are usually multi-million dollar properties, such as apartment buildings. Real estate syndication deals can last for 3 - 7 years, depending on the sponsor, and it’s always a good idea to do your research before choosing a sponsor to make sure they have a good track record.
Invest as a Silent Partner With an Active Investor
Sometimes you have the money to invest but don’t want any say or responsibility in the investment property itself. If you’d rather take a more passive approach, you can invest your money ‘silently,’ trusting the active investor’s choices and abilities to manage properties well.
Hard Money Loans
Hard money loans are short-term loans used mainly by investors that fix and flip. They also go by the name bridge loan because they bridge the gap between the time the investor buys a home that needs renovating and wouldn't pass an appraisal and the time it’s fixed up and can either be sold for a profit or turned into a rental property.
The borrower will either sell the property and pay the loan off in 6 - 12 months or refinance it with standard financing, paying off the hard money loan. These loans typically charge high interest rates and have an increased risk of default.
Become a Wholesaler (A Middle Man)
A real estate wholesaler does the legwork in finding excellent properties but doesn’t buy it themself. Instead, a wholesaler puts the property under contract then immediately assigns the contract to one of their investors, who ultimately buys the home. The middle man or wholesaler profits from the slightly higher contracted price they sell to the investor.
What Is Passive Real Estate Investing?
Passive real estate investing occurs when you invest money in real estate without owning physical real estate property. It could be a REIT, crowdfunding through a real estate app, real estate syndication fund, hard money loan, or you could operate as a wholesaler. Today, the sky's the limit when you’re learning how to invest in real estate and making passive income without being a landlord.
Do I Need to Have a Lot of Money to Invest in Real Estate?
If you’re not investing directly in real estate to own it, you don't need much money. Some real estate investment apps, for example, have opportunities to invest in real estate with as little as $10.
What Qualities Should First-Time Real Estate Investors Look For In Prospective Investments?
Before you jump headfirst into a real estate investment, do your due diligence. Find out the fund manager’s experience and track record. Ask for information about the properties, the real estate developers or the borrowers to know what type of risk you’re taking and ensure you are as informed as possible about the investments your money will fund.
Is Real Estate a Good Investment?
Any investment can be risky, just as any investment can be considered good. Real estate has a good track record and is often a hedge against inflation, but that doesn’t mean it doesn’t come with its risks. It’s always a good idea to diversify your money to avoid putting all of your eggs in one basket.
What Is ‘Portfolio Analysis’ in Real Estate?
A portfolio analysis means assessing all investments in a single portfolio. For example, if you invest in a fund that invests in multiple properties, an analysis would look at the portfolio as a whole as well as each individual property.
Knowing how to invest in real estate without being a landlord can be a great way to diversify your portfolio. Instead of putting all your eggs in one basket, you can spread out the risk and enjoy the returns of different types of assets. There are many ways to enjoy the returns real estate offers today whether you're wanting additional income or putting money back for retirement. Even if you don’t know the first thing about real estate investing.
Want to learn more about investing in real estate? Check out our app today!
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