For many aspiring investors, the idea of real estate conjures up images of down payments, mortgages, and property maintenance. Traditionally, owning physical real estate—whether it’s a rental home, a duplex, or a commercial space—has been the go-to method for building wealth through property. But what if you could tap into the real estate market without ever swinging a hammer or dealing with tenants?
Good news: you can.
In this guide, we’ll explore several non-traditional real estate investment options that don’t require owning a single square foot of property. These include Real Estate Investment Trusts (REITs), real estate crowdfunding platforms, and peer-to-peer real estate lending. We’ll also break down how these methods differ from direct ownership, highlight potential benefits and risks, and provide beginner-friendly examples to help you get started.
1. Real Estate Investment Trusts (REITs): Stocks That Pay You Like a Landlord
What Are REITs?
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate. Think of them as mutual funds for real estate. By purchasing shares of a REIT, you’re essentially buying into a portfolio of properties—ranging from apartment buildings to shopping malls and data centers.
How They Work
REITs trade on major stock exchanges, and many are as easy to buy as Apple or Amazon stock. What makes REITs particularly attractive is that they are legally required to distribute at least 90% of their taxable income to shareholders in the form of dividends. This can create a steady stream of passive income.
Example
Meet Sarah, a 28-year-old graphic designer who wanted to diversify her investments without taking on the headache of being a landlord. She bought shares in VNQ, a popular REIT ETF (exchange-traded fund), and now earns quarterly dividends—no clogged toilets or broken HVAC systems involved.
Pros of REITs
- Low barrier to entry (can start with as little as $100)
- Highly liquid (easy to buy/sell like a stock)
- Diversification across many property types
- Regular dividend income
Risks
- Market volatility (REITs can dip like stocks)
- Interest rate sensitivity (REIT values often drop as rates rise)
- Limited control over specific property investments
2. Real Estate Crowdfunding Platforms: Team Up with Other Investors
What Is Real Estate Crowdfunding?
Real estate crowdfunding lets multiple investors pool their money to fund a real estate project—be it a new apartment complex or the renovation of a boutique hotel. These platforms connect you with vetted projects and allow you to invest with as little as $500 or $1,000.
Popular platforms include Fundrise, RealtyMogul, and CrowdStreet.
How It Works
Once you create an account on a platform like Fundrise, you can browse through various investment opportunities. These may be equity investments (you own a piece of the project and share in its profits) or debt investments (you lend money and earn interest).
Example
Jason, a 34-year-old software engineer, invested $1,000 in a Fundrise real estate investment trust. His portfolio now includes stakes in residential and commercial developments across the U.S., and he receives quarterly updates and dividend distributions without needing to manage anything himself.
Pros
- Lower capital requirements compared to buying a property
- Access to private real estate deals
- Portfolio diversification
- Passive income potential
Risks
- Liquidity constraints (some platforms lock in your money for 3–5 years)
- Platform risk (depends on the company’s performance and vetting)
- Project risk (if a project fails, so does your investment)
3. Peer-to-Peer Real Estate Lending: Be the Bank
What Is It?
With peer-to-peer (P2P) real estate lending, you’re not buying property or shares—you’re acting like a bank. Investors fund real estate loans made to individuals or developers and earn returns in the form of interest payments.
Platforms like Groundfloor and PeerStreet specialize in this model.
How It Works
You lend money toward a real estate project (often short-term fix-and-flips), and in return, the borrower repays you with interest—typically ranging from 6% to 12%. Many platforms allow you to browse different loans, see borrower details, loan-to-value ratios, and project plans before committing.
Example
Maria, a 45-year-old schoolteacher, used Groundfloor to lend $500 toward a short-term home renovation loan. The project successfully wrapped up in nine months, and she earned 9% interest on her investment.
Pros
- High potential returns
- More control over loan selection
- Typically short-term commitments (6–12 months)
Risks
- Default risk (borrower may fail to repay)
- Illiquidity (capital is tied up until the loan term ends)
- Platform risk (depends on quality of due diligence and borrower screening)
How These Differ From Owning Property Directly
Feature | Traditional Ownership | REITs | Crowdfunding | P2P Lending |
---|---|---|---|---|
Upfront Capital | High (down payments) | Low | Low | Low |
Liquidity | Low (hard to sell) | High | Low–Moderate | Low |
Active Involvement | High (management) | None | Minimal | Minimal |
Risk Exposure | Property-specific | Market-wide | Project-specific | Loan-specific |
Income Potential | Rental income | Dividends | Dividends | Interest |
Choosing the Right Path as a Beginner
Here are a few questions to help you choose the best method for your needs:
- Do you want liquidity? → REITs are best.
- Are you OK with tying up money for a few years? → Try crowdfunding.
- Want higher returns and more risk? → Look at P2P lending.
- Want zero management headaches? → All three are viable.
Final Thoughts: You Don’t Need a Deed to Get Into the Game
Investing in real estate has evolved far beyond bricks and mortar. Today, you can build a diversified, income-generating portfolio without ever buying a house or commercial building. Whether you’re drawn to REITs for their simplicity, crowdfunding for its hands-on feel, or P2P lending for the bank-like returns, there’s never been a better time to take a non-traditional path into real estate.
Just remember: diversify, do your research, and know your risk tolerance. Real estate can be an excellent long-term wealth builder—even if you never own a single door.