Real estate investment is generally associated with hefty capital investment. But what if we tell you that you can invest in the real estate sector without spending a large amount of money on properties. With several new trends emerging in the industry, there are now various ways to invest in real estate apart from buying a physical property. Here are top 5 ways to invest in a real estate asset without actually buying it.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are referred to as companies that make debt and equity investments in commercial real estate. Launched in 1960 to provide investors an opportunity to invest in real estate as an asset class, REITs offer a minimum of 7-8 percent annual return to small and mid-level investors.
Just like mutual funds, REIT investors hold shares of REITs and earn returns in the form of dividends, depending on the performance of their investments. If you are also looking to invest in REITs, opting for companies with favorable track records and high dividend yield is advisable.
Real Estate ETFs
Real Estate Exchange-traded funds (ETFs) also offer great opportunity for investors to gain exposure to the property market. These funds typically invest in a basket of real estate-related assets, such as REITs, real estate development companies, and construction firms. Real estate ETFs provide diversification and can be bought and sold on the stock market just like individual stocks.
Real Estate Wholesaling
It is a good way for individuals to break into the real estate industry, without investing a massive amount. In this process, the investor as a wholesaler gets into an agreement to buy an undervalued property. This space is then sold at a higher price, thereby resulting in profit. The wholesaler usually earns from the fees that are added to the transaction.
Real Estate crowdfunding platforms pool funds from several investors and invest on their behalf in opportunities that otherwise would be extremely costly to explore. This usually involves a minimum investment amount. With a focus on both residential and commercial real estate, these online platforms provide investors access to invest in a single property or an assortment of diversified real estate options as well.
However, the medium is best suited for those who can afford to continue with their investments uninterrupted for a longer period of time.
Hard Money Loans To Investors
A hard money loan, also known as a bridge loan, is extended by an individual to a real estate investor. It refers to short-term lending to finance an investment project. The loan is generally provided on the basis of the value of the property secured.
Usually, the lender provides credit up to 65-75 percent of the property value and earns by way of interest, which is mostly higher in comparison to traditional property loans.