What’s the best way to invest in real estate?

Real estate is one of the largest financial asset classes in the world — and investing in it is a fantastic way to earn passive income and diversify your portfolio. Plus, since principal can be recouped in a default (in most cases, through the sale of the property through a foreclosure sale), they’re on the safer side when it comes to investing your hard-earned cash. But, the list of options can be a tad overwhelming. Are you someone who wants to earn passive income from the comfort of your home? Or, are you looking for something more hands-on like becoming a landlord or creating your own fix-and-flip project? 

Lucky for you, we’ve made a short list. When you consider the possibilities — real estate loans, REITs, and physical properties — ask yourself, “Which will help me earn the most passive income, so I can build long-term wealth?” Take a look at three of the most common ways to invest in real estate, so you can diversify your portfolio with confidence.

Before we begin, we want to make sure that this post is not written to be interpreted as investment advice. Each investor has their own goals and risk tolerance. Please consult an investment professional prior to investing.


Short-term real estate loans

Real estate debt investing used to be largely closed-off to the public. Now, companies like PeerStreet are reinventing a more transparent system designed to produce higher returns than bonds, savings, and other equities. So you can earn extra income and diversify your portfolio just like institutions have for decades.

How it works

Developers of fix-and-flip and rental properties borrow capital from private lenders. PeerStreet will purchase those loans and place them on our platform. Then, investors can invest in the loans and get monthly payments as the borrowers pay the interest and principal back. It’s a simple, hands-off approach to generating monthly income.

Benefits

Drawbacks

Real estate investment trusts (REITs)

REITs are one of the first alternative investments people think of when they’re looking to expand their portfolios. REITs are corporations that act like mutual funds — but, instead of securities, REITs are made up of real estate assets. These assets may include buildings like offices, hotels, apartments, and shopping malls.

How it works

You can invest and trade REITs on the stock market, just like you would stocks. When you invest, you get access to all of the real estate properties owned by that REIT. And since they’re required by the IRS to pay out 90% of their taxable income to shareholders, dividends are usually much higher than stocks. 

Benefits

Drawbacks

Buy-and-rent property

If you’re looking for a more tangible way to earn passive income, you can buy residential  or commercial properties and rent them out. This can be a particularly rewarding type of  investing because you get to put boots on the ground and be a part of the process — from start to finish.

How it works

At first glance, investing in physical properties is simple. You buy a property that looks promising, then rent it out and make money through rental income and appreciation. Typically, investors keep each property for over 10 years, making it a relatively stable, long-term investment. But, buying and renting out your own property can be expensive and time-consuming. It takes a certain level of expertise, hard work, and dedication to each project you take on.

Benefits

Drawbacks


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Investing in real estate is one of the easiest ways to diversify and earn more passive income. And at PeerStreet, we’ll source high-quality real estate loans and give you complete transparency into each investment, so you can feel good about where your money’s going — and get excited about where it will go next.

PeerStreet is an intuitive technology platform for investing in real estate that provides high-quality real estate investments at your fingertips and makes the market work for you. Try PeerStreet today.

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