It’s no secret that one of the oldest ways to invest in real estate is through buying actual property. But what if you don’t want to sell your kidney to compete in a bidding war in today’s market? 

Aside from this, maybe you aren’t interested in owning, don’t want to become a landlord, or you’re looking for a new way to invest in real estate entirely. 

In today’s post, we’ll look at alternatives to the typical real estate investing methods. We’ll cover everything from crowdfunding & REITs to executing a live and flip. 

What is the traditional way to invest in real estate?

Real estate can be an excellent opportunity for investors. Many people buy property to rent it out and renovate and resell the property in the future for a profit. 

Another traditional way to invest in real estate would be to buy a plot of land and either:

• Develop the land into something that generates income (property, business, etc.)

• Hold it with hopes that it would increase in value over time

There are many benefits of investing in real estate as well. For one, it’s tangible, which many people find reassuring — especially these days with so many digital assets being at the forefront of our lives.

Its value is usually stable, so you may be less likely to see your investment decline dramatically than other investments in times of economic turmoil.

How much money do you need to start to invest in real estate — or how little?

You might believe that you need a large sum of money to start investing in real estate. However, that doesn’t necessarily have to be the case, given many opportunities to invest. 

For example: depending on your brokerage account, it could be less than $20 — no matter your current financial situation.

A few types of non-traditional investing

REITs

A real estate investment trust (REIT) is a portfolio of real estate investments cooped into one fund. Most REITs trade like stocks on the stock exchange and make it possible for individual investors to earn dividends.  

REITs specialize in a specific real estate sector. However, diversified and specialty REIT portfolios may hold different types of properties. Example: a REIT that consists of both retail and office properties.

Dollar-cost averaging by regularly contributing extra cash or setting up an auto-deposit or buy to an investment account is a great way to build up an amount that could lead to significant passive income over time. 

Crowdfunding

Crowdfunding is a method of pooling investment funds with a group of other investors. Advantages of this strategy are: minimized risk because total investment spreads across multiple investors, and there is low cost to entry (ex: some platforms have tiers starting as low as $10.)

Fundrise (a US-based platform) was one of the pioneers of real estate investing via crowdfunding, and there will surely be more crowdfunding opportunities popping up in the future. One Canadian alternative to Fundrise is Fundscraper (minimum $5000 investment).

With crowdfunding, there are some genuine risks, like losing your entire investment or not having access to the funds in the event of an emergency because they are illiquid. 

If you are looking for more information on crowdfunding, check out Maple Money’s article from last month, where he shared a Beginner’s Guide to Crowdfunding in Real Estate.  

Live & Flip

This method includes purchasing a property with a plan to live in it while renovating/rehabbing that property to sell it for a profit eventually. 

Although, a word of caution. Remember when you heard about that friend who just got a great place? And how it ‘just needs a little work.’ Well, most people underestimate how much work home renovations can be, how much they cost, and how long they can take. 

Many new home buyers with good intentions start down this path end up way over their heads with the cost or scope of the projects.

Taxes

You can own real property in various ways, whether through outright ownership, joint tenancy with rights of survivorship, tenant in common, or as part of a corporation. But, of course, each has its tax implications. 

If you’re unfamiliar with the different types of ownership and the associated tax obligations, please consult with a professional before making real estate investments so you can be sure to avoid any unpleasant surprises.

When is the best time to invest in real estate, and how much should you invest?

The answers to those questions depend entirely on your financial situation. However, investing in real estate can be a great way to build your wealth and achieve a lot of independence. 

If you are looking for an investment that can produce dependable income without too much time commitment, this is the perfect opportunity for you. However, you may find that it does take some time to get started. This time will be well worth the investment, though, because you will have all the time in the world to work on other things.

Many people think that investing in real estate must require vast sums of cash, but this doesn’t have to be true. If you are looking for a smart way to invest in real estate, this is the best option for many people.

If you want to protect your assets, build equity, and gain some passive income without dealing with tenants, repairs, noise, and long hours — try investing in real estate in non-traditional ways.