Close to 90% of the world’s millionaires have some sort of real estate exposure. Real estate investing can help you grow your net worth and develop new forms of income.
In the past, real estate investing was primarily for investors who easily qualified for loans—usually those in a higher tax bracket. But today’s changing times and technology have made it more accessible to make small investments. We’ve outlined 19 different ways to get your investment started in real estate – well beyond the basics of buy a house and rent it out.
Some are appropriate for beginners, others are more fitting for existing homeowners, and some are suited for deca-millionaires or people with specialized skill sets. No matter who you are, you can invest in real estate with one of these options.
House Hacking: A Low-Risk Way to Start Investing
House hacking involves renting out part of your primary residence to earn income. You can do this on a part-time basis (renting out your house once per year when a huge NASCAR race comes to town), or more consistently.
Compared with other forms of real estate investing, house hacking tends to be a low-risk way to start. Even some renters may qualify to do some form of house hacking. These are a few house-hacking options you can consider.
80 Ways to Make Money From Home
Want to find ideas to make extra money? Check out The College Investor’s best ways to money from home.
1. Get a Roommate
Living with roommates is a great way to keep your living costs low. But if you own your house, you can turn this frugal hack into a stream of income. If you own a three-bedroom home, you may be able to rent out two rooms and cover your mortgage, for example. Depending on your phase of life, it may be relatively easy to fill these rooms with friends.
If you’re interested in turning your house hack into a long-term, wealth-generating machine consider buying a duplex or triplex for your first house. You and a roommate can live in one unit, while you rent out the other two.
2. Rent Your Garage (or Barn) For Cash
If you keep a relatively minimal lifestyle, your garage, shed, or outbuildings (if you live in the country) could be an untapped gold mine for you.
Companies like Neighbor.com, Stache, and STOW IT allow qualified people to become “hosts.” They also provide insurance and a built-in network of potential customers. You can typically charge a few hundred dollars per month to someone who wants to store their items in your space.
If you reside near an urban area or close to downtown, you may also be able to collect a fee for people wanting to park in your driveway for a few days.
3. List Your House Or Room On Airbnb
With Airbnb, you can rent out a single room or your entire house, condo, or apartment. If your city hosts a huge event once per year (think a NASCAR race, SXSW, an enormous concert, conference), it may pay to vacate the city and rent your house to event attendees.
Depending on the layout of your house, you may be able to rent out a single furnished room to people looking for a place to stay.
Bonus Tip: Have you heard of an app called Neighbor? It might be an even easier way than Airbnb to earn extra money.
Airbnb vs. Booking.com: Where Should You List Your House?
In this article, we compare listing a house on Airbnb and Booking.com, so you can decide which site is better for you.
Focus on Capital For a More Passive Approach
If you want a more passive approach to real estate investing, you can focus on providing the capital, while others focus on developing the business.
4. Hard Money Lending
Hard money loans are short-term loans with a lien against a property. Home flippers and other developers may need these bridge loans as they secure longer-term financing for their projects. You can find online hard money lending platforms, but networking in your local community may help you feel more comfortable with this risky type of loan.
5. Real Estate Investment Trusts (REITs)
REITs are a portfolio of real estate investments held to generate cash flow or appreciation. Publicly traded REITs often invest in commercial real estate like storage and office buildings across a geographically diverse region.
Public REITs can be bought and sold through your brokerage. Private REITs are less liquid, and you may be required to hold them for years. Private REITs may emphasize land development, large rental properties, or other investment types.
Companies like Fundrise offer private REITs, which allow you to start investing in real estate for as little as $10. Your small investment owns a tiny fraction of the underlying investments. Check out Fundrise here >>
The Best Fundrise Alternatives
In this article, we break down three strong Fundrise alternatives worth considering.
6. Real Estate Syndications
Real estate syndications involve a group of people co-investing to buy a large real estate deal. A proliferation of online companies makes investing in real estate syndications easier than ever. With some of these companies, you can dip your toes into investing with just a few hundred dollars.
With a real estate syndication, you a limited partner in an LLC that owns a property. The person running the syndication will be the general partner – they also typically manage the property.
Two popular real estate syndications are Open Door Capital and White Haven Capital.
7. Farmland Investing
Farmland investors buy land and rent it out to farmers who provide the equipment, seed, and other inputs. You may not be an expert in finding farmland, but companies like FarmTogether and AcreTrader can help you find and market your farmland.
Check out Acretrader here and make your first farmland investment >>
Photo by Tomasz Bazylinski
Real Estate As a Business
Real estate as a business offers ways to make money through real estate. However, these investments aren’t completely passive. You’ll have to do work to find properties, market, and provide upkeep.
A comprehensive business plan can lead to more than spare cash. In time, many of these options can lead to semi-passive income streams that could cover full-time living expenses.
8. House Flipping
HGTV has made house flipping seem like a glamorous business where it’s easy to make money. It involves buying a house at a low price, fixing it up, and selling to make a handsome profit.
As a current house flipper, let me assure you that the money-making part isn’t as easy as it looks on T.V., but it is possible. Not only are finding deals on real estate a challenge, the repairs may cost more than you expected (even if you’re experienced with renovations). Plus, you have to deal with permits, licensing laws, and other local matters.
My best tip? Talk with local house flippers before you jump into this business. This type of due diligence can keep you from getting caught in bureaucratic red tape and overpaying for homes that likely have problems that are common in your area.
9. Long-term Single-Family Homes
Buying a single-family home and renting it out for a year or more can provide stable cash flow. If you currently own your house and are looking to move, check the rental prices in the area. If you can earn a profit by renting out the house, it may make sense for you to keep it rather than selling.
After a few moves, you may have a tidy portfolio of homes that will be paid off by renters over a few decades. Be sure to consider maintenance and vacancy costs when considering whether to keep or buy a single-family home.
Companies like Roofstock make buying and managing single-family homes very easy. Here’s a quick comparison on other companies that are similar to Roofstock and Fundrise.
10. Small Multi-Family
Duplexes, triplexes, and quadplexes allow you to buy one property with a conventional mortgage, but you can turn each unit into an income stream. In many markets, small multi-family homes offer the best chance for real estate investors to earn profits.
These homes tend to appreciate at a slower rate than single-family homes, so you will need to buy with an eye towards cash flow rather than appreciation. Because you can buy small multi-family homes with conventional loans, you can use loan marketplaces like LendingTree to find the best financing options.
Note: You can also find multi-family listings on Roofstock as well!
11. Vacation Rentals
Renting out a property on Airbnb or VRBO can be a great way to earn money. By renting a property a week at a time, you attract much higher payments compared with long-term leases. Of course, the higher payments may likely mean higher expenses.
Tourists are much harder on a home, and you will have to pay someone to clean the house between guests (unless you plan to do that yourself). An important factor to remember with vacation rentals is that the income tends to be seasonal.
Depending on your expenses, you may find yourself losing money, especially in your first few months as an owner. Budget Girl has a great video series on her profits and losses as an Airbnb host.
12. Commercial Real Estate
Commercial real estate involves buying properties for office, retail, medical, or other commercial uses. Typically, you rent this space out to businesses rather than individuals. You may want to test the waters if your own business needs a physical location.
If you’re a dentist, for example, you may consider buying a medical building for your practice. An owner of a hair salon may purchase a building with retail space and rent out the other units to tanning salons, restaurants, and other related businesses.
Keep in mind that loans for commercial spaces can be difficult to obtain unless you have a track record as a profitable business owner.
Photo by Nastuh Abootalebi
13. Industrial Real Estate
Similar to commercial real estate investing, industrial real estate investing involves buying real estate and renting it out to other businesses. In most cases, industrial real estate buildings can accommodate manufacturing, printing, or other large equipment processes. Your tenants may have specialized needs like cooling for server racks or loading docks for their products.
14. Land Development
Land development involves buying raw or unimproved land and enhancing the value by adding commercial or residential buildings. Land developers often need to work closely with city planners, environmental engineers, and general contractors to see their work to fruition.
A land developer may see an option for a mixed-use business, retail, and residential areas, but they need the city’s approval before building it. This can be challenging to do on your own, but real estate syndications provide one avenue to participate in this valuable work.
15. Land for Resource Extraction
Investing in land for resource extraction is different from most other forms of real estate investing. The resource of value is claimed through mineral or drilling rights rather than direct land ownership. This is more common in resource-rich areas like Texas.
If you have a chemical engineering background or experience in the gas and oil industry, you may be able to acquire land and resource rights on your own. Others may prefer to invest in resource extraction using a Master Limited Partnership.
16. Land Flipping
Land flipping is similar to house flipping, without the intermediate step of fixing a house. Typically land flippers find undervalued land that has high resale potential. They may find unused farmland near a city that could be sold to a housing developer, or a lot zoned for residential use that has nothing on it.
Land flippers provide value to land developers who don’t necessarily have the time to hunt for underutilized land.
17. Mobile Home Parks
Mobile homes are an affordable housing option throughout much of the United States. Mobile home park investors buy (or develop) large lots with utility hookups.
Typically, the park owner will not own the manufactured homes in the park. Instead, mobile homeowners can rent sub-lots from the property owner.
Our recommendation for buying individual parks (when they are available) is RealtyMogul. RealtyMogul allows you to be a limited partner in a property. This is a great way to get started. They don’t always have mobile home parks on their platform, but if you sign up you can see what they offer. Check out RealtyMogul here.
Other Types of Real Estate Investing
18. Wholesaling
This is a side hustle with a real estate investing spin. Wholesalers put a property under contract and then sell the contract to a real estate investor. Most often, they can earn a few thousand on each transaction.
To make money, wholesalers put in time and effort to sniff out deals. They reach out to property owners to find off-market properties and have an established network who may be interested buyers.
19. Tax Lien Investing
When a property owner fails to pay their property taxes, the local government can put a lien on their property. The property owner has to pay the back taxes or the government can foreclose on it. Sometimes, a local government will sell tax liens through auctions. If you purchase the tax lien, you collect payments from the property owner or take over the property.
This can be a high-yield way to invest in real estate, but you need patience and an understanding of the tax system to make this profitable.
What Type Of Real Estate Is Not An Investment?
This investment list covers most forms of real estate investing but the one that didn’t make the list? Your primary residence.
Homeownership can help boost your net worth, and there are multiple strategies to use your house as a way to help earn you income. But by itself, homeownership isn’t an asset.
Owning a home is expensive—you pay for repairs, taxes, insurance, and monthly mortgage. Most people don’t live in one house long enough to pay off their mortgage, so the cost is comparable to or more than renting.
Of course, you can get lucky. You may make a tidy profit when you sell your house (particularly if you do a live-in flip). But honestly, you might be surprised that your house profit isn’t much better than if you simply rented. See this buy vs. rent a house comparison.
Most people shouldn’t count on their primary house as a cornerstone of their investment property. Don’t fall into the trap of becoming “house poor,” or buying a house you really can’t afford, by fooling yourself that it’s an investment that will always pay off in the future.
