Creative Ways Homeowners Can Invest in Real Estate

Real estate has long been a tried-and-true strategy for building wealth, but many people associate real estate investing with buying rental properties, managing tenants, and becoming a landlord. Although purchasing assets for a steady income and long-term appreciation may feel capital-intensive and overwhelming, there are plenty of innovative pathways to investing in real estate that don’t break the bank or require the time commitment of conventional real estate investing.

Active vs. Passive Real Estate Investing

Active real estate investing is a traditional hands-on strategy in which an investor purchases single-family homes, multiunit buildings, or commercial spaces. Investors may also manage the property, acting as a landlord, screening tenants, marketing the property, and handling maintenance and repairs.

Although active investors have a greater degree of control over decisions, they also shoulder greater financial risk and will spend a significant amount of time managing their properties, including nights and weekends.

Passive real estate investing, on the other hand, is a strategy that allows investors to receive a share of the profit without being involved in the day-to-day operations of property management.

An advantage of passive real estate investing is that less capital is needed upfront, so there are more opportunities to invest. The overall financial risk is also lower if you’re investing in a diverse portfolio of properties managed by a third party.

The drawbacks of passive real estate investing can include lower potential returns, limited control over property management decisions, and associated management fees that could eat into your returns.

Your ideal investing strategy will depend on your individual circumstances, financial goals, risk tolerance, and investment style.

Passive Real Estate Investing

There are several types of passive real estate investments for those looking to generate income or build long-term wealth.

1. Real Estate Investment Trusts

A real estate investment trust, or REIT, is a corporation or trust that pools investor capital — much like a mutual fund — to purchase and manage a diverse portfolio of income-generating properties. Properties may include office buildings, warehouses, medical buildings, apartment complexes, shopping malls, planned residential developments and other assets.

Like traditional stocks, shares of REITs are publicly traded on the major exchanges. Dividends are dispersed proportionately among investors based on the number of shares they own. By law, REITs must disperse at least 90% of their taxable income in the form of dividends to shareholders each year.

Another key benefit of a REIT is its liquidity. REIT shares are publicly bought and sold on stock exchanges, so investors have control over the amount of real estate exposure they have in their overall portfolio and can make decisions on when to buy and sell.

2. Online Real Estate Platforms

Real estate crowdfunding platforms allow investors to pool their money to gain fractional ownership in bigger, high-value real estate ventures that would typically be out of reach for a single investor. Investments in these commercial or residential properties are made online, unlocking opportunities for homeowners with limited capital to participate in promising real estate projects.

A benefit of crowdfunding is that there are diverse investment opportunities in terms of geography and the type of real estate available. You may have the opportunity to invest in a luxury apartment building, boutique hotel, medical facility or a student housing complex near a university. Additionally, investors may choose to back individual projects or a portfolio of projects.

Although crowdfunding is more passive than outright ownership, it’s more active than a REIT because the investor may choose the projects he or she wants to fund.

It’s important to note that real estate crowdfunding platforms vary in their functions and terms. Some real estate crowdfunding platforms connect investors with developers looking to raise capital, which requires more due diligence from an investor. Other crowdfunding platforms act more as a portfolio manager, evaluating and managing investments on behalf of investors. Many platforms also require a minimum period of investment, with potential penalties or fees for early withdrawal.

Returns from online real estate platforms often exceed traditional market rates, making crowdfunding a straightforward way to diversify your portfolio and gain exposure to diverse real estate sectors that might otherwise be out of reach for a single investor.

3. Real Estate Investing Groups

A real estate investment group, or REIG, can be ideal for those who want to own rental properties without taking on the responsibility of running them.

A REIG is a collection of private investors who pool their capital and expertise to invest in a variety of properties, such as apartment blocks, condominiums, or commercial buildings. Members of the collective are allowed to purchase individual units through the company, which requires a healthy amount of capital or access to financing.

Although individual investors may own multiple units, the property as a whole is managed by the company, which handles maintenance and repairs, vacancies, and advertising.

REIGs are typically managed by experienced professionals who have expertise in property acquisition, management, and sales, which can be beneficial for new investors who lack the time, knowledge, and resources to manage their own properties.

Carefully analyze the fee and expense structure of a REIG before investing because most charge management fees, acquisition fees, and performance fees, which can eat into your overall return. Choose a REIG with a long-standing track record and transparent, ethical guidelines.

Venturing beyond traditional real estate investments can be a unique opportunity for homeowners who want to diversify their portfolios and build wealth over time. Thorough research, sound financial planning, and careful consideration of your risk tolerance and investment style will help you discern which type of investment is right for you. Don’t hesitate to seek professional advice from financial advisors or real estate experts before embarking on any new investment journey.

3 Creative Ways Homeowners Can Invest in Real Estate was last modified: April 18th, 2025 by Billy Guteng

Written by Billy Guteng. February 9, 2024

Billy is a content writer for Kukun. He was born in France, and has lived in multiple cities around the world ever since. He loves art, design and architecture as well as construction and real estate.