Rental properties are one of the many ways to invest in real estate, but it requires a higher level of capital. You also need to worry about maintenance since you must ensure that the property is safe and healthy for tenants. Moreover, you also need to be available 24/7 when tenants call for emergencies. Although you can hire a property manager to do such a job, it would undoubtedly cost you. If you can't commit to being a full-time rental property owner or you lack enough capital, you may consider the following alternative investments in real estate:
1. Fractional Ownership
Without the ongoing hassle and upfront expense of owning a property, a fractional investment can be a good option. This investment allows you to enjoy the benefits of owning a property by buying a portion of it. Fractional ownership of properties will also enable you to climb the property ladder, especially since the affordability of properties continues to decline.
Since you bought a 'fraction' of the property, you also receive a 'fraction' of the capital growth and income that it generates. It also means that you're collaborating with other fractional owners, allowing you to split the overall cost of the property.
What's even better about this is that you can use the property for personal needs. For instance, you can spend your vacation at the property, but you should schedule it. You should also abide by the restrictions that your management or property company imposes.
2. Real Estate Investment Trusts (REITs)
Another alternative to invest in real estate without renting out properties is to buy REITs. You can also use it to diversify your bond and stock portfolio since REITs have a highly visible revenue stream. You can earn from capital appreciation and dividend income without having a high overall risk.
You're earning from the capital growth of the mortgages or properties that REITs manage or own, especially if the properties are income-producing commercial real estate. It means you're like owning commercial real estate properties without personally managing them.
Like stocks and bonds, REITs can also be an excellent investment for retirees and savers because of their long-term total returns.
3. Real Estate Wholesaling
If you want to be dealing with people in the real estate industry, then real estate wholesaling is recommended. Although this requires time, marketing skills, and effort, you don't have to go through the full cycle of the selling process. It's a quick way to get paid since you pass all the other tasks to investors after finding properties. It's also a way to start a business in real estate without investing significant capital.
What's necessary is to cultivate relationships as it can build your reputation that could attract more clients. You need to invest your time into sourcing because you're a 'finder' in this game. You can do this through direct mail campaigns, social media marketing, online ads, radio ads, or print ads.
Or, if you love to visit places, you'll love being a finder because you may have to search for 'disheveled' properties in your neighborhood or high-end houses in an HCOL area.
For disheveled properties, you may convince the homeowner to sell the property through this step instead of going into foreclosure. If the owner agrees, you'll be discussing the considerations, potential terms, and conditions of the home before making an offer for the latter.
If the owner agrees, you'll enter into a contract that allows you or someone you delegate to buy the property within a period at the agreed price. You can then find an investor who will likely buy the house by signing another contract that authorizes the investor to purchase the property. Lastly, you then collect the wholesaler's fee upon closing.
4. Fix And Flip
Or you can go into fix and flip investment where you buy properties under market value if you have enough funds. These properties may be outdated or require renovation. That's why their prices are below the market. You must renovate the house quickly to save on losses and expenses that could accumulate as months go by.
The good thing about this type of real estate investment is that you get to sell it at a higher price for you to earn.
You don't need a lot of money to start your real estate investment portfolio. You can begin to rent out properties, fix and flip undervalued houses, or become a wholesaler. Whatever it is, it'd be an excellent way to enter this investment.
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