10 Ways to Invest in Real Estate Without Actually Buying Property

Investing in real estate is a long-proven way to build wealth but not necessarily the easiest. The finances and expertise needed to buy and manage property are out of reach for most typical investors. But there are a lot of ways to profit from real estate without actually buying property.

Here are 10 examples.

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Equity real estate investment trusts (REITs) own and manage portfolios of income-producing properties across a wide range of industries -- from hotels to malls to cell towers and beyond.

There are more than 200 REITs on the major stock exchanges. A few of the most widely held are retail specialist Realty Income, mobile tower leader American Tower, and industrial warehouse giant Prologis.

ALSO READ: Real Estate Investment Trusts: What They Are and How to Invest in Them

Mortgage REITs (mREITs) don't directly own and manage real estate. They finance or buy and sell the mortgages that underlie commercial and residential real estate, the latter typically in bundled packages from issuers such as Fannie Mae and Freddie Mac.

All REITs are required by tax law to pay out at least 90% of their taxable income as dividends, and mREITs typically pay out significantly higher yields than their equity REIT brethren. Two to consider are Annaly Capital Management for residential mortgages and Blackstone Mortgage Trust for commercial real estate.

There are several major commercial real estate services companies that trade on the major exchanges. They offer a broad range of services, from financing to consulting to property management and at times, ownership. Major players here include CBRE Group and Jones, Lang, Lasalle.

ALSO READ: 6 Things to Know About Investing in Commercial Real Estate

Shares you buy in a homebuilder's stock not only make you a part-owner of their construction business but also give you a stake in the property they own as they develop homesites. The big three here are D.R. Horton, Lennar, and PulteGroup.

ALSO READ: How to Invest in Real Estate: A Complete Guide

Major retailers are major consumers of space, and they are increasingly buying and leasing their warehouse and distribution facilities. Amazon, Walmart, and Kroger are just three examples of companies moving to buy more of their critical industrial space instead of being dependent on leases.

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Opportunity zones were created a few years ago to give tax breaks to investors who put money toward development and redevelopment in areas across the country that are deemed in need of such investment. The money goes into qualified opportunity funds that are then used to buy the property.

ALSO READ: 4 Real Estate Tax Tips to Consider in 2022

There are exchange-traded funds (ETFs) and mutual funds that maintain portfolios weighted to reflect indexes of numerous classes of stocks, including real estate. That includes the widely held Vanguard Real Estate Index Fund, which owns shares in about 180 REITs, and the T. Rowe Price Real Estate Fund, which holds both REITs and publicly traded real estate-related companies.

The power of the internet comes to play in crowdfunded real estate investment sites like RealtyMogul, Fundrise, and CrowdStreet. These companies offer individuals the opportunity to invest in properties on an institutional level, often with minimums of $500 to $25,000, depending on the platform and property.

ALSO READ: An Introduction to Real Estate Crowdfunding

A hard money loan would be one you make directly to a real estate investor or company. Such a loan is typically secured by real property as collateral. Real estate notes are a very similar concept and are often sold to other investors at a discount to the balance, making the rate of return even higher for the new loan owner.

There are private developers of larger projects, like senior and student housing and office buildings, who will allow individuals to buy shares. Stakes in these projects can carry a higher reward but also a risk compared to more liquid and transparent choices such as publicly-traded stocks.

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Buying shares of stock in publicly traded companies is the most liquid and transparent way to gain passive income from real estate investing. Still, all the channels discussed above have long been used by savvy souls to successfully grow wealth from real estate they don't directly own or manage.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Marc Rapport owns Amazon, Annaly Capital Management, Blackstone Mortgage Trust, and Vanguard Real Estate ETF. The Motley Fool owns and recommends Amazon, American Tower, Lennar Corporation, and Prologis. The Motley Fool has a disclosure policy.