Most people think that investing in real estate is similar to buying a house, apartment, or commercial building. There are, however, plenty of ways to invest in real estate that do not involve directly owning physical property. These systems can bring consistent income, enduring wealth, and diversification of you portfolio — and without the weight of managing property.
In this article, we’ll cover some options for investing in real estate without purchasing property, the advantages of doing so, and how to do it.
Why Invest in Real Estate Without Owning Property?
Real estate requires a hefty down payment, a mortgage and regular maintenance costs. A lot of investors don’t want any headaches and still want the real estate exposure.
Pros of Real Estate Investment without owning Property:
✅ Reduced capital requirement – No need for a big deposit.
✅ No maintenance or landlord duties — You have no tenants, repairs, or property management.
✅Diversification – Investors spread themselves out across multiple different types of properties or sectors.
✅ Liquidity – It is easier to sell shares or withdraw funds than it is to sell a physical property.
✅ Creates passive income – Collect on rental properties you don’t own
Now, here’s how to invest in real estate without owning property.
Real estate investment trusts (REITs)
A Real Estate Investment trust also known as REIT is a company that owns or finances income-producing real estate. Investing in REITs is similar to purchasing shares of a real estate corporation.
How REITs Work:
REITs are companies that own and operate properties like apartments, office buildings, shopping malls and hotels.
The investors purchase shares in the REIT and the company pays out dividends in profit.
Most REITs get traded publicly on exchanges, making them relatively simple to buy and sell.
Types of REITs:
Equity REITs – Buy and operate properties (e.g., residential, commercial)
Mortgage REITs (mREITs) – These are investment companies who invest in real estate loans and mortgages.
Hybrid REITs – Own both properties and mortgages.
How to Invest in REITs:
Step 1: Open a brokerage account (Robinhood, Fidelity, E-Trade, whatever).
Look for high-performing REITs that catching your eyes.
Step 10: Invest and receive dividends regularly
📌 For example, Simon Property Group (SPG) is a popular REIT that owns malls in the United States.
Real Estate Crowdfunding
Investors can pool their money to invest in real estate projects on crowdfunding platforms. This allows you to get 1% ownership of several properties without all the headaches of full ownership.
How Does Real Estate Crowdfunding Work?
Real estate projects are listed on crowdfunding sites by developers.
Individuals invest small amounts as a means to finance the project.
The project pays us a rental or appreciation and our investors receive a return.
Best Crowdfunding Sites:
Fundrise (for new investors)
RealtyMogul (commercial real estate)
CrowdStreet (accredited investors)
Investing in Crowdfunding: Here’s How to Do It
Create an account on a real estate crowdfunding platform.
Select a project or a fund in which to invest.
You can invest and get paid out monthly or quarterly.
Example: With a $500 stake in a Fundrise REIT, you have exposure to rental apartments and office spaces.
Mutual Funds & ETFs (Real Estate)
Real estate investment trusts are a good way to invest in real estate if you want a hands-off approach.
How They Work:
Both mutual funds and ETFs invest in a combination of REITs, real estate stocks and mortgage-backed securities.
Professional fund managers take care of them.
Investors receive dividends and capital gains.
How to Invest in Real Estate ETFs & Mutual Funds:
Open a brokerage account.
Read up and select a real estate-focused ETF or mutual fund.
Invest, and the fund manager will take care of everything.
Best Performing Real Estate Exchange Traded Funds (ETFs) & Mutual Funds
✔ Vanguard Real Estate ETF (VNQ) – Follow the performance of large REIT.
✔ Schwab U.S. REIT ETF (SCHH) — Provides broad exposure to real estate stocks.
✔ Fidelity Real Estate Investment Fund (FRESX) – A mutual fund that is diversified.
💬 Case in point: By investing in VNQ, you can earn returns for various REITs simultaneously, reducing risk
Notes on Real Estate & Mortgage Investing
Instead of buying property, you can invest in real estate debt by purchasing mortgage notes or lending money for real estate projects.
How It Works:
Invest in mortgage-backed securities by buying mortgage notes from banks or investment firms.
The homeowner pays you monthly, and you make interest.
If the borrower defaults, you could end up owning the property.
How to Invest in Mortgage Notes?
Online marketplaces such as PeerStreet and Groundfloor.
Lenders that bundle and sell non-performing loans with banks or investment firms
📌 Investor example: Put in $1,000 into Groundfloor and make 6-10% a year on short-term real estate loans.
Hard Money Lending
Hard money lending means you are the lender — in other words, you provide short-term loans to real estate investors who flip houses or purchase rental properties.
How It Works:
You finance what real estate investors do.
They use the loan to purchase, renovate or develop property.
You get paid high interest (usually 8-15%).
Risks & Benefits:
✅ Better returns than typical investments.
✅ Backed by physical real estate.
❌ Risk of borrower default.
❌ Requires capital to start.
📌 Put another way: If you lend $50,000 to a house flipper at 12% interest, and you can get it for a whole year, you’re looking at $6,000 in annual “interest” from the deal.
Renting Out Space You Don’t Use (House Hacking Without a Purchase)
Of course, even if you don’t own a property, there are creative ways to rent out extra space.
Options Include:
✔ Renting out your apartment (consult lease agreements first).
✔ Renting a spare bedroom on Airbnb.
✔ Teaming up with property owners to run rentals for a share of profits.
📌 Example: Renting out a spare room for $500/month could give you an extra $6K/y — without buying real estate!
Conclusion: Compact Property Investment Without Ownership
Owning a home is not the only way to invest in real estate. Real estate offers a lot of opportunities to make money without being a landlord.
Best Options for Beginners:
🔹 REITs & Real Estate ETFs – Simple, budget-friendly, and liquid investments.
🔹 Crowdfunding – Invest with as little as $500.
🔹 Mortgage Notes – Earning passive income by holding real estate debt.
There are risks and rewards to each, so find one that aligns with your financial goals.
💡 Looking for more real estate investment insights? Let me know in the comments! 🚀
You must be logged in to post a comment.