When most people think of real estate investing, they imagine buying a house or a rental property. While owning property is a traditional way to invest, it’s not always practical. Maybe you’re saving for a down payment, don’t want the responsibility of being a landlord, or simply don’t have time to put into a property.

Thankfully, you can still invest in real estate without buying property. With innovative tools and platforms available today, real estate is more accessible than ever—even if you don’t have deep pockets or expert-level investing knowledge.

1. Real Estate Investment Trusts (REITs)

REITs (pronounced “reets”) are one of the most popular ways to invest in real estate without buying property. Think of a REIT as a company that owns and manages a portfolio of income-producing real estate, such as office buildings, apartment complexes, shopping centers, or hotels. When you invest in a REIT, you’re essentially buying shares of that company.

Why Choose REITs?

  • Low Barrier to Entry: You can invest in REITs just like you would stocks, often with as little as a few dollars. They’re traded on major stock exchanges.
  • Diversification: REITs give you exposure to various types of real estate, so you’re not tied down to just one property or market.
  • Regular Income: By law, REITs must pay out at least 90% of their taxable income as dividends to investors. This means you can earn passive income without the hassle of being a landlord.

Potential Risks

On the flip side, REITs can be sensitive to interest rate changes. Rising interest rates may reduce investor demand, which can affect returns. It’s also essential to research individual REITs carefully, as they vary in performance and focus.

2. Real Estate Crowdfunding

Crowdfunding platforms have changed the game for aspiring real estate investors. These platforms pool money from multiple investors to fund real estate projects, such as new developments or large-scale renovations. You can buy a small stake in a project and earn a share of the returns.

Popular Platforms to Explore

Companies like Fundrise, RealtyMogul, and CrowdStreet are leaders in this space. Each has its niche, so whether you prefer residential properties or commercial developments, you can find a good fit.

Why Crowdfunding Works

  • Low Minimum Investment: Many platforms allow you to start investing with as little as $500.
  • Access to High-Quality Deals: Top-tier projects that were once reserved for wealthy investors are now within reach.
  • Customizable Investments: Choose projects that match your risk tolerance and financial goals.

Keep in Mind

Crowdfunded real estate investments are often less liquid than stocks. This means your money might be tied up for years until the project is completed or sold. Always read the fine print to understand when and how you’ll be able to access your returns.

3. Real Estate Mutual Funds

Investing in real estate mutual funds is another simple and effective option. These funds pool money from investors and invest in a mix of stocks and bonds tied to the real estate market. For example, they might include shares of REITs and construction companies or mortgage-backed securities.

Benefits of Mutual Funds

  • Professional Management: A fund manager handles the investment decisions, so you don’t have to.
  • Diversification: Mutual funds invest in a broad range of assets, reducing risk.
  • Flexibility: You can buy or sell shares at any time, making these funds more liquid than crowdfunding investments.

Things to Watch Out For

Mutual funds often charge expense ratios (fees), which can eat into your returns over time. Make sure you understand and compare these costs before investing.

4. Exchange-Traded Funds (ETFs)

Real estate ETFs are quite similar to REITs but slightly more versatile. ETFs are collections of real estate-related investments grouped together and traded on stock exchanges, just like individual stocks. They’re designed to track the performance of a specific real estate index.

Why ETFs Make Sense

They’re affordable to get started with and highly liquid, meaning you can buy or sell shares quickly. ETFs also offer diverse exposure to the real estate market, from commercial buildings to real estate technology companies.

A Note of Caution

Like all market investments, ETFs can fluctuate in value. Be prepared for some ups and downs along the way.

5. Real Estate Notes

Buying real estate notes means purchasing the debt owed on a property. Essentially, you step into the lender’s shoes. When property owners make their mortgage payments, you earn a portion of the interest.

A Unique Opportunity

This type of investing can yield high returns, especially if you’re buying notes at a discount. However, it does require a solid understanding of lending, as there’s always a risk of borrower default.

Actionable Tips to Get Started

If these options sound appealing but you’re unsure where to begin, here’s how you can take the first step confidently:

  • Do Your Research: Learn about the specific platforms, funds, or companies you’re investing in. Look for reviews, past performance, and transparency in fees.
  • Start Small: You don’t need to go all-in right away. Many options, like REITs and ETFs, allow you to dip your toes in with minimal investment.
  • Diversify Your Portfolio: Real estate is just one piece of the puzzle. Spread your investments across multiple asset classes to reduce risk.
  • Keep an Eye on Fees: Pay attention to fees for mutual funds, ETFs, and crowdfunding platforms. Over time, high fees can chip away at your earnings.

By starting small and staying informed, you can enjoy the perks of real estate investing without the headaches of homeownership.