This post is provided by Ruth Lyons with InvestorJunkie.com.
You’re probably already familiar with the many benefits of real estate investing—especially if you’ve spent much time here on InvestFourMore. Real estate investing is a great way to diversify your portfolio. It can be an effective way to hedge against inflation. And, if done right, it can provide steady streams of income. But maybe there’s still something that’s holding you back from diving in. That’s OK. Not everyone is cut out to be a landlord or a flipper. Deadbeat tenants…leaky toilets at 3 a.m…dealing with contractors on a daily basis…even the thought of purchasing and managing real estate investments can be a little intimidating. But there’s good news—you can invest in real estate without “getting your hands dirty.” There are plenty of good options for an investor who wants portfolio exposure to real estate without having to take on a side job as a landlord or renovator. And some of these passive real estate investments deliver enviable annual gains…even in today’s low-interest-rate market.
9 Ways to Invest in Real Estate with None of the Hassle
Leave it to the magic of the internet to open up the world of real estate investing to practically anyone. Believe it or not, there are online programs that will let you passively invest in real estate for as little as $500. Here are a few of my favorite online platforms that are worth checking out if you want to dive into the lucrative world of real estate investing without messing about with faulty plumbing in the middle of the night. You can find an in-depth review of each one by clicking on the company’s name.
- CrowdStreet is what’s known as a “crowdfunding” platform. Through these programs, your funds are pooled with those from other investors, and the returns are shared with everyone who pitched in. CrowdStreet gives its users the opportunity to invest directly in commercial real estate for zero fees. However, it’s only for those who qualify as accredited investors and requires a minimum investment of $10,000.
- Fundrise offers a product called the “eREIT.” Although it’s based on the traditional real estate investment trust (REIT), which groups real estate holdings into a security that can be traded like a stock, there’s a big difference with the eREIT. Instead of going through a broker (and paying big-time fees), you buy directly from the issuer for just an 0.85% annual asset management fee when you buy a Fundrise eREIT. Fundrise offers an assortment of eREITs based on your investment objective.
- Patch of Land uses crowdfunding technology to invest in real estate “fix-and-flips.” It funds only short-term debt investments, which can be considered safer than equity positions in real estate because they are first in line for repayment should there be a situation where a property loses value. As an investor with this service, you start earning interest the day you invest. The minimum investment is $5,000, and there are no fees for the investor. The interest rates published at the outset are usually the rates you end up receiving.
- RealCrowd is a commercial real estate crowdfunding platform that offers four different types of pre-vetted deals that correspond to the risk and reward inherent in the underlying investment properties. As with CrowdStreet, you must be an accredited investor to participate, but here the minimum is only $5,000. This service has proved to be quite popular—in fact, it’s set the record for the largest “raise” of any one crowdfunding opportunity ($13.5 million), and it has offered more than $1.8 billion in opportunities.
- RealtyMogul is another crowdfunding service that enables investors to participate in a wide range of real estate investments, including multifamily dwellings, office buildings, industrial sites, self-storage, retail, medical buildings, and hospitality establishments. There are also opportunities to participate in single-family “fix-and-flips.” You can invest in just about any property as long as it is not used as a primary home or as a secondary residence. The minimum investment for most deals is $5,000, although some start at $1,000. RealtyMogul also offers REITs with a $2,500 minimum investment.
- RealtyShares provides a platform focused on smaller business investments, including single-family house flips, rather than exclusively on large apartment buildings and commercial investments. You have a choice of investing in groups of properties or in a single, specific property. The service offers both residential and commercial property investments with a holding period of between six months and five years. The $5,000 minimum investment allows you to diversify into many types of investments on the same platform, although you must be an accredited investor.
- Rich Uncles provides an online platform for investors to buy shares of its single-tenant commercial property REIT, called the Rich Uncles NNN REIT. This is invested in property leased by retail businesses which pay monthly rent, such as gas stations, drugstores, and grocery stores. The collected rent is then distributed to shareholders monthly as dividend income. The minimum investment is just $500, and you don’t need to be an accredited investor. There are no fees to investors, and the typical return is 7%.
- RoofStock isn’t involved in crowdfunding or REITs. Instead, it allows non-accredited investors to purchase income-producing, single-family turnkey rental properties. The service provides research, analytics, and insights to evaluate and purchase specific properties at set prices. Roofstock pre-certifies all properties before listing them. Although, of the bunch, it comes closest to traditional real estate investing, RoofStock takes most of the “grunt work” out of being a real estate landlord. It even offers a list of certified management companies that will tend the properties should you wish to be totally hands off.
- Sharestates is a crowdfunding platform that allows you to invest in residential or commercial properties (or both, of course). It requires only $1,000 to start. Using proprietary technology, Sharestates vets, acquires, funds, and services projects more quickly and at a lower cost than banks and finance companies. Sharestates’ founders have 30-plus years of combined real estate experience (titles, mortgages, underwriting, etc.), unlike many other real estate crowdfunding companies where the founders are financial or technical entrepreneurs. There is a flat fee of 2% annually, and you must be an accredited investor to participate.
Thanks to passive programs like the ones listed above, you can get the benefits of real estate investing without becoming a landlord or a flipper.
Each of these platforms is slightly different and typically caters to a specific niche, but they’re all conceptually the same—providing an online technology platform that facilitates a match-up between real estate operators looking to raise capital and investors looking to invest in specific real estate projects through cash flow from brick-and-mortar structures.
Interested in learning more? You can find a detailed comparison of real estate crowdfunding platforms here.