7 Strategies To Invest in Real Estate Without Buying a Property
Investing in residential and commercial property is an effective way to grow wealth.
Compared to the stock market, which is renowned for its volatility and tends to dwindle during inflation, the real estate industry is much more stable. It leads to lower risks and an appreciation of investments. In addition, it offers fairly high returns.
However, the entry requirements for conventional real estate investment are relatively elevated. Property prices are at an all-time high, meaning you need a considerable sum of money to buy your own home or commercial building. Furthermore, the daily operations involved with real estate governance are tiresome and time-consuming.
Fortunately, new investment avenues were created with the advancement of technology and the global economy. Nowadays, you can invest in property without dealing with the complexities and expenses of real estate management.
This article will introduce seven ways to invest in property without buying real estate.
Development Projects
Development projects are an excellent way to enjoy income from your equity or investments without being involved in minute decisions related to construction or governance. Investing in development will allow you to finance the building of residential and commercial properties.
By doing so, you're helping a developer bring their ideas to life and contributing to the gentrification of local economies by creating new jobs and providing solutions to housing problems. Due to the broad range of development companies, you can choose to invest in businesses that match your preferences and investment level.
Decentralised Autonomous Organisations
These entities, known as DAOs, rely on blockchain technology and smart contracts to invest and manage real estate. By selecting this approach, you'll become part of an investor's collective that acquires, governs, and sells properties without traditional intermediaries like realtors and real estate management firms.
But how can you invest in decentralised autonomous organisations? The process is quite simple – participants pool their funds to invest in real estate jointly. The capital can consist of cryptocurrency, fiat currency, or a combination of both. Each investor gets their share of digitised tokens, which represent their ownership percentage. The tokens can be traded on decentralised exchanges.
Real Estate Investment Trusts (REITs)
Similar to DAOs, REITs merge funds from many investors to acquire and manage income-generating properties, like apartment complexes, office buildings, shopping centres, etc. When you invest in REITs, you're entitled to a share of the produced revenue without having to buy or administer the real estate yourself.
REITs offer different benefits to their investors, such as:
• Low entry barrier – Purchasing individual REIT stakes costs less than acquiring a physical property in full.
• Liquidity – Legacy real estate investments are usually illiquid. On the other hand, REIT shares are famed for their liquidity because they can be sold on major stock exchanges, just like stocks.
• Diversification – Investing in REITs gives you access to a diversified real estate portfolio, which can significantly reduce risk.
Residential Property Construction
The housing crisis is a fact. Even in the most advanced countries, there's a noticeable lack of residential properties, especially in their least developed regions. For this reason, many real estate professionals believe that the construction of new homes will continue to rise over the following decades.
Knowing this, it's easy to see why investing in home building could be a smart and lucrative decision. An entire industry of homemakers will need to design and develop new neighbourhoods and revamp old ones. Putting your money into such operations will almost guarantee you great returns in the long run. And the best part is that you won't have to deal with the hassles of ownership.
Real Estate Tokenisation
Real estate tokenisation is an innovative procedure in which real estate is transformed into digital tokens stored on a blockchain network. Each token represents a fractional ownership stake in the residential or commercial property.
Tokenisation is a great way to acquire partial ownership over standard and prime real estate. Unlike other types of property investment with tokenisation, the entry barrier is much more affordable and reasonable. For example, investors could acquire one share of St. Regis Aspen Resort for $1 when the tokens were launched. At the end of the first day, one token was priced at $1.32, and even though it was a 32% rise from the initial rate, the price was still within the means of millions of people worldwide.
Real Estate Wholesaling
Many first-time real estate investors rely on wholesaling to amass capital and scale their portfolios. It's one of the most popular techniques to invest in property without owning it. Wholesaling is when you have a legal agreement to purchase real estate, but instead of closing the deal, you sell your right to the contract to another investor for a price.
Real estate wholesaling requires less funds because investors don't directly buy the property. Instead, they acquire the right to purchase, which they then resell to a third party for a higher price before the original legal agreement closes. Wholesalers basically act as middlemen who facilitate the transaction between the end buyer and seller.
Real Estate Crowdfunding
Investment platforms have been around for some time, but they're still considered as a new way to invest in real estate without purchasing property. You can use the software to take part in crowdfunding efforts to invest in large-scale residential and commercial deals alongside other investors.
With this method, you can invest in standalone projects or a portfolio with different types of real estate. Crowdfunding opens the door to work with development and real estate companies that need capital to operate while saving you from the expenses and effort of buying a property yourself.
Contrary to popular belief, real estate investment isn't exclusive to high-net-worth individuals and doesn't only involve the purchase and governance of physical property. In today's digital world, everyone with an Internet connection and a payment card can invest in real estate. Whether through DAOs or tokenisation, there are different routes to explore to build equality and benefit from financial returns without really buying property.
