Today’s smorgasbord of real estate investment options make real estate accessible for every investor, regardless of their available time or budget. Read on to learn more about options for investing in real estate without buying a home.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More.
REITs and REIT ETFs
Real estate investment trusts (REITs) are among the most entry-level real estate investments anyone can pursue in terms of both cost and effort.
Investors buy shares of REITs, which are companies that own and operate income-producing real estate. Alternatively, some REITs own real estate debt rather than property. Regardless of type, REITs are known for paying handsome dividends to shareholders.
To maintain their tax-advantaged status, REITs must distribute at least 90 percent of their taxable income as dividends. REITs historically produce greater returns than the overall stock market, but they are not fail-proff. Often, REITs minimize dividend payments by reducing their taxable income through tax deductions.
In the plus column, REITs are an easy way to diversify your portfolio. Each REIT usually specializes in a specific type of property, and that may be anything in between mini storages or multifamily homes. Adding multiple REITs creates the added bonus of exposure to various real estate sectors, which can be helpful when some industries experience a decline.
Investors have a few options for buying REIT shares. Some are publicly traded, whereas others won’t be found on national exchanges because they are privately traded.
To reduce time spent researching each REIT, consider investing in REIT exchange-traded funds, which are professionally managed funds that, in turn, invest in several REITs.
Real Estate Syndications
Real estate syndications offer investors the best potential for their money and without the effort of directly owning a home. Syndications are real estate companies that source at least some of their funding from equity investors called limited partners. Then, those limited partners earn a share of the project profits.
Limited partners contribute capital but are truly passive investors without the responsibility of managing the property or making decisions. Those duties, and many others, fall on the sponsor.
The project sponsor finds the subject property, executes the transaction, oversees the property operations, and then handles the termination of the project, which happens upon the sell of the property. In turn, limited partners receive the return of their capital plus, ideally, additional returns as the property makes money.
Syndications usually require long-term capital commitment and will have minimum investments ranging from $50,000 and up.
Land Ownership
Buying rental property as an investment comes with many moving parts to coordinate, but land serves as a real estate investment option that includes direct ownership without the burden caused by structures.
Land ownership takes many shapes. Some purchase and then lease agricultural land for steady rental income without the responsibility of repairs and maintenance. Another hands-off option is to buy land and its mineral rights, to lease those rights and collect royalties.
Alternatively, some investors buy land and simply hold it. There are usually one of two thoughts behind that method. Land is a traditionally safe investment vehicle that hedges against inflation, meaning it can be a good place just to let money rest without the worry that it will lose value due to inflation.
Even better off, though, is the investor who accurately predicts the future desirability of an area and can snap up land and then hold on to it until the time comes to turn an impressive profit.
Crowdfunding
Real estate investment is constantly shifting with changes in technology, and one development from those changes is crowdfunding as a vehicle for real estate investment.
Via crowdfunding, those with real estate projects can directly connect with those with capital to invest. In a mutually beneficial scenario, crowdfunding can be an excellent way for newer owners without established credit to get their first projects off the ground. For investors, crowdfunding fills the niche of interested investors who cannot afford syndications.
Partner with an Active Investor
Finally, partnering with an active investor may be the perfect fit for someone with a large amount of capital but no desire to be a landlord.
In these arrangements, the managing partner takes on the role of decision-maker and implements the business plan, much like the project sponsor in a syndication. Of course, in some partnerships the decision-making may be a team effort, depending on the partnership agreement in place.
Final Thoughts
Passive investors play a critical role in the real estate industry by providing much-needed capital to projects of all sizes and across all sectors. Through my 1-on-1 coaching program, I can help you find the right real estate investment path for your goals.
Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More.
