Some investment opportunities can be a good start if you’re new to passive real estate investing. Most methods of passive investment fall into one of four categories: crowdfunding, REITs, real estate funds or remote ownership. Real estate crowdfunding is just what it sounds like. You raise and pool money with other investors for a real estate project or investment you may not have afforded alone. This method is usually reserved for online crowdfunding platforms where users can pool funds and invest indirectly in mortgage loans across the country. Real estate crowdfunding shares similarities with online platforms that allow users to invest in partial shares of company stocks.1. Crowdfunding
2. Real Estate Investment Trusts
Real estate investment trusts (REITs) invest in various types of real estate – like apartment buildings and commercial properties – and annually pay out profits as shareholder dividends.
REITs manage properties and collect rent. In some cases, they fund mortgages and collect interest. REITs are publicly traded trusts, and like stocks, they make investors money by paying out dividends. Many Americans diversify their portfolios and generate income by investing in REITs through their retirement accounts.
REITs typically provide a steady stream of cash. You shouldn’t expect them to deliver the explosive growth or payouts of riskier investment options.
3. Real Estate Funds
A real estate fund is a type of mutual fund that invests in public real estate securities, sometimes including REITs. Real estate funds are more of a long-term investment than REITs and provide value through appreciation rather than dividends.
Unlike REITs, real estate funds tend to be diversified, investing in many types of properties – not just commercial real estate. Because professionals manage real estate funds, investors don’t need to spend time doing extensive research to figure out where to put their money.
4. Remote Ownership
While remote ownership offers investors a little more control, it’s still considered passive investing, making it a good option if you want some involvement with properties but don’t want to be a landlord.
With remote ownership, an investor owns the investment property but relies on an on-site property manager or management company to oversee the property and its upkeep. Many remote investors live out of state and keep tabs on their properties through emails or phone calls.
Remote investing allows potential investors to purchase properties in high-demand areas they live far away from. However, relying on others to manage your investment property can present challenges, especially if you don’t plan on visiting often.
