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5 Top Secret Ways to Invest in Real Estate

by Alan Daniel

The truth is that many people think that real estate investing is cut and dry. For example, you might think investing in real estate revolves around core and common ideas like buying your first home. Indeed, many people tend to think this way, even today, where buying your first home is seen as an investment.

They see it as an investment and they pay a good portion (15% – 20%) on their mortgage cost upfront via  a downpayment. Then, over time, they ensure to install upgrades that range from new floors to better countertops and more. 

Further, they will keep the place up to par with regular maintenance. For example, their regular maintenance might include plumbing, HVAC, and other related household maintenance activities. 

These are all elements seen as a form of investment for many people as they maintain the value of their homes.

But thankfully, there are a variety of other ways to invest in real estate and there are actually many secret ways to invest in real estate. Here are the 5 top secret ways to invest in real estate.

 

Home Hacking

House or home hacking goes like this. First, an individual will purchase a home and hold the mortgage. Then the individual holding the mortgage will bring in responsible roommates. These roommates will live within the house and pay the monthly mortgage to the mortgage holder.

The individual who holds the deed and the mortgage then builds equity in the home while minimizing expenses. In some instances, one may not even have to worry about monthly mortgage payments!

Of course, with this approach, you do have to trust the roommates and have to take on paying for fixes and keeping up with maintenance on your home.

 

CrowdStreet and Other Real Estate Investing Platforms

Founded in 2013, CrowdStreet is the largest online real estate investing platform in the U.S.. The CrowdStreet Marketplace connects individual investors directly to real estate investment opportunities previously only available to institutions and extremely well-connected, high net-worth individuals By harnessing the power of crowdfunding, CrowdStreet is a fantastic option for accredited investors to take advantage of all the benefits of adding real estate to their portfolios.

A direct real estate investment is just that—–individuals can invest directly into the equity of the project of their choosing, or  a fund that picks the assets for you. Through CrowdStreet’s fully online process, investors can browse, compare, and invest in deals across every asset class and risk profile, making it easy to build a portfolio that fits their individual needs. Just like investors pick individual stocks and bonds, investors can pick individual deals on the CrowdStreet Marketplace. CrowdStreet also offers funds for easy diversification as well as private managed accounts through their subsidiary, CrowdStreet Advisors.

The deals listed on the CrowdStreet Marketplace are led by commercial real estate firms, also known as sponsors. These companies are leaders in their industries and handle the business plan, purchasing, and management of the properties. This allows investors to remain completely hands-off with their investment. To date, CrowdStreet has funded deals from more than 250 sponsors, and as the investor community grows, more sponsors want to bring their best projects to the Marketplace. 

Crowdstreet’s offerings are only available to accredited investors (those with individual annual income over $200k, household income over $300k, or a net worth of at least $1MM excluding primary residence). Sign up for a free account to browse current deals.

If you are not an accredited investor, you can consider investing in a real estate syndication as a passive investor. With the emergence of technology and various software, like this real estate investor portal you can find and vet syndicators and evaluate their deals. Minimum investment in real estate syndications starts from $50,000, with some deal sponsors allowing even for a lower amount. Projected cash-on-cash returns in most syndications are 8-10% per year. The hold period is five years on average, and the projected profit upon sale of the property can be as high as 60%.

 

Public REIT Investing is an Open Secret 

Public real estate investment trusts (REITs) enable you to invest in real estate without any hassles. 

That is right. With publicly-traded real estate investment trusts, you can take advantage of a variety of benefits while minimizing all types of issues for yourself. A publicly traded real estate investment trust will have managers, funding, systems, and everything that you expect from a legitimate company. 

Did you know that publicly traded real estate investment trusts will invest in specific sectors? For instance, one will invest in medical themes where they only rent to hospitals or retirement care communities. Another publicly traded REIT may invest in manufactured housing and another may invest solely in malls or apartments.

There are even a few of these that will invest solely in casino properties with specific types of lease options.

What is fantastic about this option is that you do not have to worry about hard money lenders, real estate agents, or other people that may be necessary in other types of real estate investing. Instead with publicly traded reits, you just need an account with Etrade, Schwabb, Robinhood, or others to invest in the right REIT tickers.

The managers of the companies will do all the heavy lifting, you just have to make the right decision when you pore over their financials. 

Invest in Real Estate Notes

Note investing is another underappreciated aspect of real estate investing. These real estate investors will buy loans from lending entities and then tell the borrowers that they now process the loans. It is a fantastic deal for everyone involved, the previous lending entity gets to move on to other deals, the new note holder collects the earnings, and the debtor makes the payments as usual.

A portion of the market appreciates this option because they start note investing with $6,000 or less. The critical point here is to make sure you know about what you are getting into and to work with professionals to mitigate risks.

 

The Airbnb Method

A few individuals will go with the Airbnb method. What is the Airbnb method, you ask? Simple. The Airbnb method is where you go to people who own houses and make a proposition. You will tell them that you can increase their rents by placing the property on Airbnb, VRBO, and similar platforms. But you will go one step further and say that you will manage the property as well.

This way, the property owner gets their regular checks per month, and you get a percentage of those earnings. What is fantastic about this method is that it requires little capital on your part.

 

These are some of the more intriguing ways to invest in real estate in 2021!

 

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