While real estate investing offers some very lucrative opportunities, traditional types of real estate investments also tend to require an additional investment of time and labor. Fortunately, there are now more opportunities for passive investments, which means your participation is limited to your initial investment. Below are a few options for passive real estate investing that are easier for new investors to navigate.
The options for online fundraising have been growing consistently over the past several years, expanding to include fundraising for real estate projects. Today, investors can contribute to a wide range of projects from multi-family homes to commercial buildings. In return for your original investment via a site like Realty Mogul or Fundrise, you’ll receive regular dividends on your earnings.
A real estate investment trust, or REIT, allows you to invest in a company that manages the mortgages on several properties. While you don’t hold a stake in the ownership of these properties, you do earn income on the profits that these properties generate. As there are multiple investments in one fund, a REIT offers a way to build a diverse portfolio.
Investing in a real estate mutual fund is similar to a REIT in many ways. Again, you’ll be investing in a fund that manages several different real estate projects. The funds are managed by experienced real estate professionals, particularly those with knowledge of the commercial real estate market. The fees associated with a mutual fund are typically lower than those associated with other types of real estate investment funds.
Independent Money Lending
Another option to consider is to loan your money directly to a group seeking financing for a specific real estate project. This is probably the most direct method for passively investing in real estate, and it provides the opportunity for you to set your own terms. Usually, lenders charge an initial fee equal to two or three points on the loan along with an annual rate of up to 12%, but you can tweak those terms to fit your situation.
The methods mentioned here are just a few of the options open to you for passive real estate investing. There may be more opportunities available online, or in your own community. As with any type of investment, conducting your own research will help you determine the methods with the least risk and the best opportunities for growth.