Blog Uncategorized 13 Smart Ways to Invest in Real Estate in 2024 (Updated!)

13 Smart Ways to Invest in Real Estate in 2024 (Updated!)

Real estate is known to gain value over time. There are many ways to earn money from investing. Here are some strategies that can make your money work for you. 

1. Real Estate Investment Trusts (REITs)

REITs are a good option for people looking to invest in real estate without a lot of money or risk. The process is similar to buying stocks and bonds, but instead of investing in companies, you are investing in properties; typically commercial properties like office buildings, apartment buildings, and shopping malls. Your money is dispersed among properties worldwide. 

These trusts take the stress out of typical real estate or stock investing. You invest the money and management will handle the logistics. You can sit back and collect dividends which are typically higher than most stock investments. 

REITs are highly liquid. You can buy and sell shares via a brokerage account. You can go big by buying shares of exchange-traded funds (ETFs) that own many REITs. Or you can buy fractional shares of REITs to get your feet wet without making a major investment. 

You also have the option of investing in private REITs. Unlike public REITs, they do not trade on public stock exchanges. You purchase them directly from crowdfunding companies. 

Private REITs may invest in land or commercial properties. Unlike public REITs, they are not very liquid, and they require a long-term investment. 

2. Crowdfunding

Crowdfunding allows you to invest in just about anything- and real estate is no exception. Browse real estate crowdfunding platforms to find investments that may be a good fit. You will go in, alongside other investors, to aid with acquisition and development. 

Most crowdfunding projects require long-term investments of five years or more. You may see a profit before then, but payout terms are on a case-by-case basis. You may also get penalized for early withdrawal. 

Some platforms may charge fees that will detract from your returns. Others may have requirements. For example, some platforms won’t allow you to invest below a minimum amount which can range from $500 to $25,000. Others won’t let you invest unless you’re an accredited investor. 

Fundrise and Crowdstreet are two real estate crowdfunding platforms that offer a variety of investment options. Check them out to determine if you want to move forward with the process. 

3. Buy a Home

The simplest type of real estate investment involves buying your own home. People typically buy homes and make large payments. But once inflation and market values increase, they find they pay less than homeowners and renters currently buying. 

Homeowners also have the option to sell their homes at any time. They tend to make a profit off the sale. They can increase their profitability with home improvements such as remodeling, painting, and room additions. 

Additionally, homes provide equity that you can use to qualify for loans. 

Home values tend to increase every year. From 1994 to 2019, they increased only about 3.9% annually. However, returns can be as high as 11.28% per year. 

Homeowners must also consider expenses such as insurance, property tax, interest, and repairs. But overall, they tend to earn a significant profit when they sell. 

4. Invest in Rental Properties

Rental properties offer several investment options. You can buy a single-family home and rent it as a residence or vacation home. You can offer short-term rentals such as Airbnb. Or you can purchase a multi-family home and rent it to different tenants.

A rental can generate significant profits, but it’s also quite labor-intensive. You must take care of maintenance on the property, deal with rent collection, ensure the property is occupied, and so much more. 

Owners often hire property management companies to take care of these tasks. But the fees you pay will detract from your profits. It’s essential to ensure your property generates enough income to cover fees and makes your investment worthwhile. 

5. House Flipping

House flipping is a common investment strategy. It involves buying homes that are priced below market value, fixing them up, and selling them for a profit. 

Flipping can be lucrative, but it’s also risky. You must find a property that you can fix enough to turn a profit while ensuring you don’t exceed your budget. 

Your best bet is to find homes that don’t need a lot of work in up-and-coming areas. In this scenario, you will make a considerable profit off rising home prices alone. You won’t need to invest as much in repairs. 

Check out the best real estate credit cards if you need some extra backing when getting started.

6. House Wholesaling

Wholesaling is a quick and easy way for investors to earn a profit without spending a lot of money or going through a complicated purchasing process. It involves putting a seller’s home under contract and finding an investor interested in buying it. The wholesaler sells the home to the investor at a price higher than the one contracted with the seller and keeps the difference. 

The process usually involves distressed properties. But unlike flipping, the wholesaler does not make any renovations or money investments. They simply make a fee off matching buyers with investors. 

Real estate wholesalers will typically make 5% to 10% of the sale price. The process generates money quickly with little effort. However, if you are unable to find a buyer within the contract’s timeline, you can lose the earnest money required to pay the seller before proceeding. 

Expert tip: Check out more on how to generate mortgage leads without losing your mind.

7. Buy Raw Land

Buying raw land is a risky investment strategy, especially if you are planning on developing the land yourself. Land can be purchased and developed for any of the following uses:

• Residential properties
• Commercial properties
• Agricultural properties
• Recreational land

Investors typically run into issues regarding permits, zoning, timeline delays, and a lack of proper planning. Typically, money will be made once the land is sold. It is not recommended for small investors. 

On the bright side, land can be purchased relatively cheaply. Unlike rental properties, there’s not much damage that can be done to raw land. It tends to gain value over time. 

The best strategy for raw land purchases may be to simply buy the land, allow it to increase in value, and sell it. Leave the development to the next investor. 

8. House Hacking

House hacking involves modifying owner-occupied properties to make them suitable for multiple tenants. Examples include converting basements and garages and adding ADUs. They allow homeowners to earn extra income by renting spaces on their property. 

This investment strategy tends to pay off, especially for people that live in desirable areas. However, you must check with your HOA and local government agencies to ensure you are permitted to build additional properties. If you get the green light, you are in a prime position to start raking in the dough. 

9. Fractional Ownership 

Fractional ownership can be applied to rental properties and commercial properties. 

If you are interested in investing in a rental property without investing thousands of dollars, look for opportunities on crowdfunding platforms. Some potential owners will allow you to buy a share in their property for as little as $20. At this rate, you can invest in several properties and diversify across property types and locations. 

You will get rental income while you own the property, and you will earn capital gains when the property sells. 

Some crowdfunding platforms will let you sell your shares at any time. Others will require long-term investments of five to seven years. It’s a smart strategy for investors that don’t have a lot of capital, but the more money you have, the more you will earn. 

You can also investigate fractional ownership of commercial properties. Similar to rental properties, the investor will cover 50-57% of the purchase price and collect the rest from passive investors. This strategy, also called real estate syndication, is one of the industry’s best-kept secrets. 

Fractional owners will get a rental income of around 15-50% while they own the property, and they will get a hefty paycheck when it sells. They will also enjoy benefits of ownership like tax deductions. 

The syndicator may also refinance the property which could potentially mean infinite returns. The investor will get their initial investment back and keep collecting interest which will increase over time. They will get another big payout when the property sells. 

Fractional ownership may seem too good to be true, but there are some drawbacks. For example, these deals offer no liquidity. Once you’ve invested your money, you won’t see it again unless the syndicator sells or refinances. 

Also, these investments often come with hefty minimums that range from $50,000 to $100,000. However, you can go in with other investors to generate enough cash to invest. 

10. Private Equity Real Estate

Private equity real estate is a professionally managed fund that invests in real estate. It differs from a REIT in that it requires substantial capital and may only be available to high-net-worth and accredited investors. It is riskier than other types of investments, but it can generate returns of 8 to 10%. 

The process involves general partners investing in various properties in different locations which may include raw land, existing properties, and struggling properties. The investments are often pooled and structured as businesses such as limited partnerships (LPs), limited liability companies (LLCs), corporations, private REITS, separate insurer accounts, and other legal structures. They require a significant investment (usually $250,000 or more) and little liquidity. 

Money can be locked up for years. Distribution can be slow. Additionally, fund managers can charge investors 2% of invested assets plus 20% of profits. 

However, the strategy is worth it for many top-tier investors. It’s not unusual to see profits that range from 6-10%. 

11. Crowdfunded Real Estate Loans

Crowdfunded real estate loans involve investors lending money to other investors looking to flip a home or do a renovation. The main investor will apply for a loan through a crowdfunding lender. The lender will then raise money from the public to fund the loan. 

In most instances, you won’t invest in a specific loan. Rather you will invest in a pooled fund that owns many loans. However, some platforms will let you pick the loans you are funding.

You will earn a weekly fixed dividend of around 5% a week. Some platforms will allow you to pull your money at any time. They also don’t require much capital. Investors can invest with as little as $1.

Each loan is backed with a lien against the property. If the borrower defaults, the lender forecloses, and you get your money back. They also have a Loan to Value ratio of 60-80% so the lender earns plenty of equity to cover their loan. 

Crowdfunded real estate loans are short-term, typically 6-12 months. The minimal commitment lowers your risk. 

12. Private Notes

Another investment strategy involves becoming a private lender for a real estate investor. You will make money off the interest. You can also work out your terms to make loans more attractive to borrowers and collect higher interest rates. 

On the downside, private lenders have few protections. It’s critical to work with someone you know and trust. You can record a lien against the property to ensure repayment, but the process is often more trouble than it’s worth. 

13. Different Types of Properties

Investments can further be broken down according to the type of property you are investing in. For example, you can invest in single-family homes, multi-family homes, commercial spaces, and more. Here are some property types to consider. 

• Retail Venues: These include boutiques, big-box retailers, grocery stores, gas stations, and so on. They have the potential to produce more cash flow than residential properties. 
• Office Buildings: Office building tenants tend to be less volatile than residential tenants making for a good investment. 
• Multi-Family Units: Multi-family units are typically better investments than single-family units as owners only deal with one transaction. They will also make more money off various tenants. 
• Industrial Lots: Industrial lots typically consist of warehouse and manufacturing spaces. If the lot is in a convenient location, it will attract tenants. This investment type is beneficial in diversifying portfolios. 
• Mixed-Use Spaces: Mixed-use spaces will feature offices, warehouses, and manufacturing spaces. Their ability to attract diverse businesses makes them a sound investment. 

Real estate investing is a smart move. Some options even allow you to move forward without much capital. Which will you choose to grow your portfolio? 

Expert tip: Check out more real estate side hustle ideas if you’re looking for some extra income.

Resources: We have guides on the ins and outs of the topics you need to know to be a successful estate agent (like circle prospecting, probate leads, real estate website builders, real estate lead generation companies, or a well designed real estate CRM). If you’re looking for more advanced topics like real estate ads, building your own real estate lead generation website, which real estate marketing tools you’ll need,  how to build a successful social media strategy, or even just real estate marketing ideas in general, you can try looking for a real estate mentor or an answering service that can help show you the way.