There is a common misconception that the only way to invest in real estate is through buying investment property and renting it out to make money. This presumption is understandable; however, in the vast world of real estate investing, there are many investment strategies which don’t involve direct property ownership or buying investment property!
Buying investment property is definitely no picnic. Becoming a landlord comes with many responsibilities from tenant-screening, through maintaining investment properties and collecting monthly rent, to having to deal with tenants who aren’t paying rent. Hiring a professional property management is one option, but there are other alternatives.
A real estate investor has the ability to achieve steady cash flow, benefit from real estate appreciation, and have a diverse real estate investment portfolio all without the hassle of buying investment property and the ongoing responsibilities of being a landlord! In this article, we discuss four different investment strategies for you to invest in real estate that don’t involve direct property ownership or buying investment property.
Related: Real Estate Investing 101: Top Real Estate Investment Strategies
Invest in Real Estate Without Buying Investment Property – Real Estate Wholesaling
The first investment strategy that comes to mind when thinking if how to invest in real estate without buying investment property is wholesaling. As a real estate wholesaler, your role is to simply serve as a middleman. Here’s how real estate wholesaling works: the wholesaler first finds a distressed seller and negotiates selling the investment property for a significantly low price. After coming to an agreement, the wholesaler assigns the investment property to a contract which includes a date. The wholesaler’s job is to find an end-buyer for the investment property before that date. After finding an end-buyer who is interested in buying the investment property, the wholesaler closes the deal as quickly as possible and walks off. In essence, the wholesaler earns a fee for closing the sale of the investment property.
Many property investors are attracted to this investment strategy simply because buying investment property and property ownership are not required. As a result, the real estate investor will be able to make a profit from real estate investing without being responsible for any repairing costs, mortgage payments, or managing an investment property. Keep in mind, however, that wholesaling is still a risky investment which requires experience in real estate and financial and negotiation skills, as well as a connection to a network of potential buyers. Thus, even though buying investment property is not required, the success of the investment is the wholesaler’s responsibility.
To learn more about all aspects of real estate investing, continue reading our blog.
Invest in Real Estate Without Buying Investment Property – REITs
Another investment strategy for making money in real estate without buying investment property is by investing your money in real estate investment trusts. REITs were introduced in 1960 for the purpose of giving investors the ability to invest in real estate as an asset, without the need for buying investment property.
Real estate investment trusts are companies that own and finance real estate investment properties ranging from apartment buildings, through office buildings and shopping malls, to hospitals and large investment properties.
REITs only require capital from their investors. Therefore, property investors buy shares of the REIT, while property ownership belongs to the REIT, which splits the profits in exchange for your investment. REITs investors receive a passive income in the form of dividends depending on the performance of the REIT’s investments.
This investment strategy is the best for someone who is thinking of entering the real estate investing industry but doesn’t have a big capital for buying investment property nor the time for property ownership and having to deal with tenants, property management, etc. In addition, REITs typically own multiple investment properties. Thus, investing in REITs not only means minimal responsibilities for the real estate investor, but also a diverse real estate investment portfolio!
Related: The Best Tips on How to Grow Your Real Estate Investment Portfolio
Invest in Real Estate Without Buying Investment Property – Real Estate Partnership
Real estate partnerships are another great investment strategy for investing in real estate without buying investment property. Following this investment strategy, a real estate investor could work as a private money lender and lend money to another real estate investor who will be buying investment property and taking care of managing it and overseeing daily operations.
As a partner and money lender, you have the choice of using your money to finance buying investment property and then play a passive (or an active) role when it comes to managing it. There are no set rules when it comes to real estate partnerships; however, an agreement should be prepared and signed to clearly define everyone’s roles and responsibilities from the beginning. As a partner, you’ll receive part of the profit that the investment property generates – that includes cash flow, appreciation, depreciation, and eventual profit when selling the investment property.
This investment strategy for real estate investing is the best for property investors who would rather avoid the common work and responsibilities that come with buying investment property and becoming a landlord.
Invest in Real Estate Without Buying Investment Property – Airbnb Rentals
Investing in real estate through Airbnb is becoming more and more popular. Airbnb is an online platform which allows property investors to rent out real estate investment properties of all types (whether apartments, vacation rentals, your residential home, or even just a room) for a short time period.
Related: The Ultimate Guide to the Airbnb Investment Property
One of the main reasons why Airbnb is gaining popularity is due to the fact that it’s a great way for almost anyone to become a real estate investor and make money without buying investment property! As an Airbnb host, you don’t need to own investment properties to rent as an Airbnb! A real estate investor can rent out the basement or even an extra room in his/her own residential home. Investing in real estate through Airbnb offers property investors more flexibility as well because, as Airbnb hosts, property investors can choose when to rent out, who their guests will be, and the nightly rate price to charge. Buying investment property to rent it out is not an obligation for Airbnb hosts; they can be part of real estate investing and start making money from the comfort of their own homes!
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Invest in Real Estate Without Buying Investment Property – Conclusion
Your interest doesn’t lie in buying investment property and joining the class of property investors through direct property ownership? No worries! You can still choose from the above-mentioned ways to start real estate investing without having to deal with tenants, mortgages, foreclosures, and the ongoing responsibilities of a typical real estate investor. These investment strategies of real estate investing open up many different options for investors who aren’t ready for buying investment property or simply want to enjoy the many benefits of real estate investing without direct property ownership.
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