6 of the Weirdest Ways to Invest in Real Estate

By: , Contributor

Published on: Jan 09, 2020

Here are several off-the-beaten-path options for potentially making money in real estate.

Traditionally, most real estate investors get their start by either buying an older home to fix and flip, buying a single-family home to rent out, or purchasing an income-producing commercial property like a multifamily unit. However, there are lots of other ways to invest in real estate, including some unusual ones.

Here's a look at six of the oddest ways to invest in real estate.

Billboards and display advertising

A potentially low-cost way to start earning some rental income is to install a billboard (or buy an existing one) in a heavily trafficked area and lease it to advertisers. An alternative option is to purchase shares of a specialty real estate investment trust (REIT) that focuses on owning billboards, like Lamar Advertising (NASDAQ: LAMR) and Outfront Media (NYSE: OUT). Lamar Advertising currently operates more than 360,000 outdoor displays while Outfront Media manages about 510,000 total displays.

Entertainment ventures

Most commercial real estate investors are comfortable with the idea of buying an office building or retail location. A similar yet more unique approach is to buy an entertainment-focused property, such as a movie theater, and lease it back to the tenant. One company taking this off-the-beaten-path approach is EPR Properties (NYSE: EPR), which is a REIT that owns more than 400 entertainment, education, and recreation locations that it leases to operators under triple net leases.

Farmland

While most farmers own their land, some also lease acreage from property owners. As such, an investor can buy arable land or a pasture and lease it to a farmer or ranger. An alternative option is to consider buying shares of Gladstone Land Corporation (NASDAQ: LAND) or Farmland Partners (NYSE: FPI), which are REITs focused on owning farmland. Gladstone owns 111 farms with more than 86,000 acres, while Farmland Partners currently holds more than 150,000 acres.

Medical-use cannabis facilities

The marijuana industry has been growing like a weed (pardon the pun) as governments legalize it for both medical and recreational purposes. Growers need specialized facilities to support rapidly rising demand, which is driving investment into the sector. One REIT focused on owning these locations is Innovative Industrial Properties (NASDAQ: IIPR), which acquires medical-use cannabis facilities and leases them back to growers. The company bought more than 30 properties last year, which drove triple-digit growth in both its rental revenue and dividend.

Parking spots

Parking is at a premium in many big cities. Because of that, investors can buy parking spaces -- which can cost as much as $80,000 each or more -- as well as entire lots and lease them out. Another option is to purchase vacant land near a city center or tourist area and turn it into a parking lot.

Prisons

While private prison ownership is controversial, investors do have two REIT options in GEO Group (NYSE: GEO) and CoreCivic (NYSE: CXW) to consider. GEO Group manages 130 facilities in the U.S., U.K., Australia, and South Africa, including secure facilities, processing centers, and community reentry centers. CoreCivic, meanwhile, operates 50 correctional and detention facilities, 29 residential reentry centers, and 56 properties leased to other government agencies.

Uncommon options don't always produce outsized returns

Investing in unusual real estate opportunities has several benefits, including further diversifying an investor's portfolio as well as providing the potential to earn higher returns. The latter was the case for Innovation Industrial Properties, as it was one of the top-performing REITs of 2019.

However, not all quirky real estate options will deliver outsized returns. That was, unfortunately, the case for prison REITs last year. Both lost value as more people soured on the idea of outsourcing corrections. Real estate investors need to be careful when dabbling outside the tried-and-true segments of the market because those bets won't always pay off.

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