The real estate market is red hot right now. Perhaps you’ve heard that already? You don’t need to be in the real estate industry to know that home values are high across the country and a huge number of people are buying and selling homes.
Consequently, real estate investors are taking advantage of the booming real estate market to enjoy exceptional return on investment (ROI). They are doing this through a variety of investing strategies, many of which may be easier to implement than you think.
Understanding how to invest in real estate isn’t something all Americans know about, but they should. You may think it’s reserved for high net worth individuals or corporations with lots of cash to spend on rental properties and commercial real estate. Not so fast.
You can actually learn how to invest in real estate with no money at all through various financial instruments that don’t require money upfront. Through various forms of lending, for example, you can acquire a rental property and make monthly income from leasing it to tenants. You may be thinking, “that sounds great, but can I invest in real estate without buying property?”
Absolutely. Keep reading to find out more.
11 Ways To Invest In Real Estate Without Buying Property
Buy Stocks In A Real Estate Company
If you know how to buy stocks, you know how to invest in real estate. When determining the right stocks to choose, many investigate what industries thrive. As previously mentioned, real estate is one of those industries.
Buying stocks in real estate companies, home construction companies, and other real estate-focused companies is a great way to start investing. Furthermore, if you prefer a mutual fund to a stock, you can begin investing in a real estate mutual fund as well.
Real Estate ETFs
A real estate ETF (exchange-traded fund) is a collection of stocks or bonds related to real estate. Many real estate investors like ETFs of all kinds because they allow for diversification and reasonable cost.
Many real estate ETFs invest in real estate investment trusts (REITs) because they purchase various properties and generate income from them in a variety of ways.
If you are interested in being a real estate investor but don’t want to buy property yourself, you may want to invest in a real estate investment trust.
Real estate investment trusts bring many investors together to purchase commercial and residential property. They provide income for their investors in various ways, most commonly through leasing the properties and selling them at a profit.
Publicly traded REITs can be found on a stock exchange, where anyone can invest in them just like other stocks. Private REITs are a little harder to invest in, as they require a specialized broker and a high net worth.
Mortgage REITs buy mortgages using the secondary market. As you might guess, the success of these REITs is heavily dependent on the rise and fall of interest rates.
Equity REITs essentially serve as a landlord for investors. They handle rent collection, property maintenance and manage all the other operations of commercial and residential real estate purchased by the REIT.
Real Estate Mutual Funds
Mutual funds provide diversity in investment, making them appealing to both new and seasoned investors. When you buy a stock, you are purchasing a stake in an individual company. When you invest in a mutual fund, your investment is spread across many different companies, sometimes in the thousands.
The nature of stocks and mutual funds leaves some investors thinking buying real estate stocks is “putting all of your eggs in one basket.” Real estate mutual funds, in contrast, spread the risk across many different companies.
Home construction companies are in high demand right now. Home inventory across the country is low and buyer demand is high. With so many people looking to purchase property and not enough homes for sale, many are turning to new construction.
If you have ever thought about being a builder, architect, or general contractor, now is the time. These professions are in high demand, which means they can charge more for their services than ever before.
Buying stock in home construction companies or mutual funds that focus on this industry is appealing right now as well. Since many home construction companies are seeing good profits in the current market, their stocks are trending upward.
Hard Money Lenders
If you have good cash flow and money to lend, consider being a hard money lender. In this situation, you fill the role of a bank or mortgage company for potential homebuyers. Hard money loans are usually for a short term and feature high interest rates. This means you can make a considerable amount of money without your funds being tied up for an extended period of time.
House flippers (more on them below) who need to do extensive work on a property before selling it at a profit are an excellent possible customer to seek as a hard money lender. Frequently banks won't approve them for a loan to buy a property that needs too much work, so they need to find alternative lending options.
If you want to make money on buying property without actually buying property, wholesaling might be right for you. This strategy involves finding a property owner willing to sell their home at a discounted price, agreeing on an offer, and then finding a new buyer before the deal closes.
Wholesalers put a property under contract at one price and then search for a new buyer willing to pay more for the property. Once the deal closes, the wholesaler keeps the difference between the price they agreed upon with the seller and the new buyer's final sales price.
Look for distressed or undervalued properties to be successful at wholesaling. The seller is going to need to agree to a price for below market value for you to be able to find a buyer willing to pay more. Distressed or undervalued properties often are owned by individuals willing to take less money for their home.
Homeowners facing possible foreclosure are good candidates for wholesaling as well. They will often take less than market value for their home to settle their debt with their lender.
If you're not interested in purchasing a rental property but want to start enjoying monthly rental income, house hacking is an excellent strategy. This is a money-making technique that uses your existing home to generate cash.If you own your own home and have space to spare, you can rent out parts of it to help pay the monthly mortgage. Websites like Airbnb make it easy to find short and long-term renters for a room or a section of your home. You can even rent your entire home for a weekend or longer to make even more money than renting a room or two.
Online Real Estate Crowdfunding
Technology has disrupted virtually every industry over the past few decades, and real estate investing is no expectation. Online real estate crowdfunding has made large commercial real estate deals available for any investor.
Previously, these deals have been reserved for large companies or the very rich. Now, with the advent of real estate crowdfunding platforms, you can review various deals and invest in them for as little as a couple of hundred dollars.If you are familiar with crowdfunding platforms like Kickstarter, real estate crowdfunding works similarly. The process is simple. Shop for deals online, pick the ones you like, and start real estate investing without purchasing real estate.
Become A Real Estate Agent
Perhaps the most straightforward way to make money off of real estate without buying property is to become an agent. It's probably easier than you think, and the potential income is limitless.
Understanding how to become a real estate agent begins with investigating the licensing requirements for your specific State. Usually you are required to take a certain amount of pre-licensing classes, take a test to get your license, and start helping people buy and sell residential and commercial property.
Once you are licensed, there are many ways to grow a real estate business from the ground up. Begin by leveraging your existing network. Family, friends, and previous co-workers make up the core of your sphere of influence. Let them know you are making a career change and why they can trust you with all of their real estate needs.
Once you get a good client base, ask them for referrals to new home buyers and sellers. Investigate the various forms of real estate marketing you can employ as well, including online ads, holding open houses for other agents, and creating an agent-to-agent referral network throughout the country.When you understand how real estate agents get paid, you will see the potential to make a lot of money if you are successful. Real estate agents typically make about 3 percent of the sales price on each transaction they work on. For $300,000, that’s $9000 in your pocket when the deal closes! Keep in mind that it’s entirely commission-based so, while there's no ceiling to the amount of money you can make, there’s no floor either.
Provide Services To Real Estate Agents
If you don't want to become a real estate agent but want to make money off real estate without buying property, consider providing services to agents. Photographers, appraisers, lenders, tradespeople, and lead generation services are just a few of the real estate agent service providers you could become.
Think about your passions, skills, and education. Do you love photography? Real estate photographers can make anywhere between $150 and $500 for each photoshoot they do for agents. Are you an online marketing whiz? The number one priority for every real estate agent is generating leads. If you can help them do this, they will be willing to pay you top dollar for it.
When Should I Invest In Real Estate?
Some people think that they need to have accumulated wealth and experience before getting into real estate investing. This couldn’t be farther from the truth. Investing in real estate at a young age is actually the best way to set yourself for long-term financial success.
Many of the ways real estate investors make money is dependent on portfolio appreciation over time. Buy low and sell high, so to speak. The sooner you get in on any of the deals outlined here, the sooner they start going up in value.
Make no mistake, though. It’s never too late to invest in real estate. If you are in your later years and have no interest in purchasing a rental building and becoming a landlord, learning to invest in real estate without buying property is a great alternative. You can even invest in REITs using your retirement account to grow the nest egg that will fund your golden years.
The real estate industry is thriving and getting in on this hot market is a great way to grow long-term, sustainable wealth. It’s important to understand that you don't have to buy property to do it.
From REITs to stocks, construction companies, becoming an agent, and all the other strategies outlined here, getting started is easy. It also doesn't have to require a substantial initial investment either. Investigate these options further, figure out what strategy is right for you, and start making money from real estate investments!