4 Ways To Invest in the Housing Market Without Buying a House

• Author: Jenny Wolff
• Posted: 2024-06-02

Investing in the housing market is popular way for those with disposable income to grow their wealth. Many people invest by buying a property or multiple properties and renting them out to earn additional income. But what if you do not have the time, energy, or will to buy a property and maintain it for tenants? Fortunately, there are at least four other ways to invest in the housing market without the need to personally go through the buying process for a house.
 

1 - Investing in a Real Estate Investment Group

A real estate investment group (REIG) is a group of investors that passively invests in the housing market by utilizing the services of a company that buys or builds apartment blocks or condos. Investors join the group by investing in a single unit or several units through the company. The company collectively manages all of the units, taking care of maintenance, advertising vacancies, and tenant screening.

The company managing the REIG takes a percentage of the collected rent as payment for the management tasks. The rest of the money collected goes to the investors, minus the amount pooled to cover occasional vacancies. Even if an investor's particular unit is empty, they will still receive money from the collected proceeds.

When investing in a REIG, it is important to remember that this type of investing requires the investor to have access to financing and a capital cushion. It is also important to review the fees being charged by the company, as some of these fees can be quite high, reducing your return on investment.
 

2 – Investing in a Real Estate Limited Partnership

A real estate limited partnership (RELP) is similar to a real estate investment group, but typically invests in larger residential properties. RELP are designed to exist for a limited time, typically between 7 and 12 years, and once the project is completed with the property sold, the RELP is dissolved.

Investors in a RELP typically see their return when the real estate development is sold, although some limited payouts may be made over the duration of the project. Some have an investment minimum which can fluctuate based on the number and size of the property purchases. These minimums can range as low as $2,000 to more than $100,000.
 

3 – Investing in a Real Estate Investment Trust

A real estate investment trust (REIT) is a stock exchange-traded trust that uses investors’ money to purchase and operate income properties. There are two main types of REITs. An equity REIT represents ownership in real estate, while mortgage REITs are based on income from real estate mortgage financing.

Many investors choose to invest in the housing market through REITs because the investments are highly liquid. This makes it easier for investors to obtain regular income and cash out their investment when they want. Investors are paid just like if they had invested in regular dividend-paying stocks. A REIT must pay out 90% of its taxable profits as dividends in order to maintain its REIT status and avoid paying corporate income tax.
 

4 – Investing With a Real Estate Investing Platform

One of the newest ways to invest in the housing market without buying a house is investing through a real estate investing platform. Real estate investing platforms, also known as real estate crowdfunding, connects investors with real estate developers looking to finance projects. The potential returns can be quite attractive and some investments may pay cash distributions.

Real estate investing platforms offer a range of different investing options, including real estate funds and individual real estate projects. Different investment opportunities will have different deal terms, so it is important to do your research before making your choice. Some platforms may require a minimum investment, which can range from $500 to $25,000. The platforms also charge an annual management fee, which is typically around 1 percent.

If you are interested in investing in the housing market, there are plenty of ways for you to choose from. However, just like any other investment, you have to know what you are getting into. Research your choices and choose investments that match your ideal time commitment and level of risk. No investment is guaranteed, but doing your research will increase your chances of success.