Ways to Invest in Real Estate Without Owning a Property

3 Real Estate Investment Options That Don’t Involve Owning a Property

Did you know the average home price in the U.S. was $495,100 in the second quarter of 2023?

If you want to buy a family home, that price might be cost-prohibitive. But it might be even more unattainable if you wish to purchase a rental property. Owning one or more investment properties can help you create a strong financial foundation. It can be part of building a diversified income stream that includes stocks, savings, and bonds. But you’ll need deep pockets to get started.

If you decide to bite the proverbial bullet and buy a rental property, figure out whether you’re cut out to be a landlord. It can be difficult wearing the two hats of property owner and landlord. Some investment property owners hire property management firms offering landlord services. Ensure you find the right one for your needs — and that means considering the location. You need a Dallas property management firm if you own a rental property in Dallas, TX, for instance.

But what are the options if, after some soul-searching, you can’t afford an investment property? U.S. consumer debt last year climbed to $17.1 trillion. Yes, that’s “trillion” with a “t”. And that tally is up 4.4% from $16.38 trillion the year before. If you’re drowning in consumer debt and don’t want to worsen the debt albatross around your neck, buying real estate is a no-no.

The good news is there are other ways to invest in real estate so you don’t miss out. Keep reading to see three ways to buy real estate if you can’t afford to purchase properties outright.

1. Real Estate Investment Trusts

One way to invest in real estate without buying physical properties independently is through real estate investment trusts or REITs. They’re publicly traded businesses that own, operate, or finance income-generating real estate. You can buy units in REITs on stock exchanges. 

There are REITs in various property sectors. By owning units in a REIT, you’ll get a portion of the income products. So, the more units you buy, the more income you’ll make. And you can benefit without purchasing, managing, or financing properties. You can find REITs focusing on retail centers, office buildings, data centers, cell towers, medical facilities, and other real estate segments. REITs pay dividends monthly, quarterly, or annually.

2. Crowdfunding

Real estate crowdfunding platforms offer everyday investors the opportunity to participate in real estate ventures they otherwise wouldn’t have access to. A real estate crowdfunding platform is worth considering if you want to own stakes in office buildings, hotels, apartment complexes, and other real estate asset classes.

It’s as easy as signing up to a real estate crowdfunding platform, selecting investment opportunities, and funding your account. You won’t have to go into debt tabling a large sum of money to invest in real estate. 

3. Real Estate Mutual Funds

Another way to invest in real estate is through real estate mutual funds. Real estate mutual funds invest mostly in real estate operating companies and REITs. These funds, meanwhile, are overseen by experienced portfolio managers. You can take advantage of dividend payouts and capital appreciation, which can make investing in real estate mutual funds a financially rewarding endeavor.

You probably already invest in mutual funds, so consider options for real estate-focused funds.

If you can’t afford to buy investment properties, consider REITs, crowdfunding or real estate mutual funds. While buying a property outright might not be a realistic option right now, you can take advantage of other opportunities to invest in real estate. Who knows? You may one day get that rental property you want. But in the meantime, you can invest in real estate in other ways.