Getting started with investing in real estate can be one of the smartest investment decisions that you’ll ever make. As an alternative investment asset, real estate offers a great way to diversify your investment portfolio outside of just traditional investments such as stocks and bonds. Plus, it can provide you with generous profits.

Real estate investments have historically proven to be one of the most profitable investment avenues. A recent study, across multiple countries, revealed that real estate is the asset class that’s most consistently provided the highest returns on investment (ROI) over the past 150 years. And that’s even compared to when the stock market is doing GOOD! In the current economic environment, with stocks down big in the first half of 2022, real estate looks like an especially attractive alternative.

There are dozens of ways to make money with real estate. In this article, I’ll outline for you three of the simplest and least expensive ways to start investing in real estate –

1. REITs
2. Real Estate Online Crowdfunding
3. Rent Out a Room

1 – Real Estate Investment Trusts (REITs)

Real estate investment trusts – commonly referred to by the acronym, REITs – are an easy and inexpensive way to break into real estate investing. REITs are entities that own/invest in commercial real estate, such as office buildings, retail spaces, hospitals, or hotels. Most of them specialize in one type of property. So, if you think that office space is likely to be the most profitable commercial real estate venture, then you can look for a REIT with that focus.

Some REITs are private companies, but the majority are publicly traded on exchanges. You invest in publicly-traded REITs the same way you invest in any publicly-traded company – by buying shares. 

You can buy shares of individual REITs, or shares of a REIT exchange-traded fund (ETF) that holds investments in a number of REITs. Since REITs and ETFs are traded on exchanges throughout the day, they’re a very liquid investment.

REITs have a special appeal for investors who like regular income from their investments: they usually pay relatively high dividends because they’re required by law to pay out 90% of their profits in the form of dividends to investors.

2 – Real Estate Online Crowdfunding

Real estate online crowdfunding is a little more complicated and a little more expensive than investing in REITs. To find the best investments, you’ll have to do the research necessary in order to evaluate individual investment opportunities.

If you’ve ever invested through online peer-to-peer lending websites, such as Prosper, then you’ll understand how real estate crowdfunding works. Basically, real estate crowdfunding platforms connect property developers with multiple investors who are willing to lend the developer part of the money they need for a project or development.

One potential disadvantage to this type of investment is that your money may be tied up for a significant amount of time – typically somewhere between six months and five years – before you receive substantial returns. However, you may receive payouts of quarterly or monthly distributions throughout the term of your investment.

The interest rate returns you can make are substantial – up to as much as 15-20%. However, the required minimum investment with some platforms or individual loan projects may be rather high. (A crowdfunding platform looking to fund a $2.5 million loan to a developer doesn’t want the headache of having to deal with 250,000 individual loans of $10 each.)

Two of the most widely-used lending platforms that you can check out are RealtyMogul and Fundrise.

3 – Rent Out a Room

Before you go buying an entire apartment complex or office building, start small – rent out a spare bedroom in your house or apartment. You won’t get rich, but you can easily put an extra several hundred dollars a month in your pocket. Best of all, this is one real estate investment that’s pure profit – you don’t actually have to invest any money at all, other than the cost of running an ad.

Do screen applicants carefully. You want to do your best to make sure that there won’t be any problems with your new “roommate”. It’s probably a good idea to go with a short-term lease – just six months – so that you don’t risk getting stuck living with someone who turns out to not be your favorite person in the whole world.

At a bare minimum, talk with a couple of applicants’ personal references, and definitely verify their employment/income. Also, make sure you’re insured, just in case your tenant is a budding rock star who gets drunk one night and spray paints the walls and sets the bed on fire.

Get Started With Real Estate Investing – Conclusion

Real estate investing can give you excellent returns on investment. And as an alternative asset, it can help to diversify, and thereby reduce risk and volatility in your overall investment portfolio.

There are dozens of different kinds of real estate investments, for all different kinds of investors, with their individual financial goals and desires, time constraints, skills, and interests. The investments presented in this article are some of the easiest ways that you can get started with real estate investing.