How to Invest in Real Estate Online

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Contributor, Benzinga
September 27, 2023

Investing in real estate has long been a valuable way to add diversity and income-generating assets to your investment portfolio. It’s never been easier to invest in real estate opportunities without the hassle of buying and maintaining properties, worrying about tenant-landlord laws or paying for the continuing expenses associated with property upkeep.

Online real estate investments provide you with a more passive way to invest in the real estate market without the expenses that come along with property choice and maintenance.

Take a look at two major investing strategies you can use to invest in real estate without purchasing individual properties and review platforms that make it simple to add real estate to your investment portfolio.

Best Ways to Invest in Real Estate Online

Here are the most common and simple ways you can invest in real estate online today.

Real Estate Crowdfunding 

One viable method for investing in real estate without owning an individual property is by investing through a real estate crowdfunding platform. Online real estate crowdfunding platforms (like Yieldstreet or DiversyFund) identify real estate opportunities that experts believe have the potential for growth. From there, the platform allows investors to pool their money to fund the development or purchase of the property. When the investment matures, investors receive payouts proportional to their initial amount invested.

In many cases, the company that owns the platform will pre-fund the investment, meaning that investors need not wait years for the investment to be fully actualized.

Most platforms provide investors with projected returns even before the opportunity is funded. This feature gives you a better understanding of how long your investment will remain illiquid, as you cannot take profits until the investment matures in most circumstances.

The downside to this method of investing is that most platforms are only open to accredited investors. To qualify as an individual accredited investor, you must meet at least one of the following criteria:

  • Earn an annual income of at least $200,000 as an individual or $300,000 when combined with a spouse for the previous two years and expect to continue meeting this earning level.
  • Have a net worth equal to $1 million (either alone or together with a spouse) excluding the value of your primary residence.

Banks, family offices and other financial institutions may also act as accredited investors, assuming that they meet asset management and value standards.

Real estate crowdfunding sites will typically require that you submit proof of your net worth or income to verify your status as an accredited investor before you’re able to use the platform. If you don’t currently meet the requirements to qualify as an accredited investor, you might want to consider investing in real estate investment trusts (REITs) instead.

Real Estate Investment Trust (REIT) 

A REIT is a company that owns or finances real estate opportunities that generate income for investors. Most REITs operate in a straightforward manner. First, the REIT identifies a property that it believes has the potential to produce income. The REIT will then purchase the property and repeat the process, creating a portfolio of properties that it funds and maintains. The REIT finds tenants for the commercial or residential spaces that it operates and rents them out, producing income.

You can invest in a REIT by purchasing shares of a REIT’s stock. As a stockholder, you’re entitled to a percentage of the income that the REIT’s properties produce in the form of dividends. A dividend is a small portion of a company’s profits that you gain on a quarterly, monthly or annual basis.

The amount of money you’ll receive per payment period varies depending on how many shares of stock you own. For example, if REIT X offers $.50 in dividends per share per year and you own 1,000 shares of stock, you’ll receive $500 when the company’s dividend payment date arrives.

REITs are unique because, unlike other types of companies, they are required to pay out dividends to shareholders. To maintain special tax advantages, a REIT must pay out at least 90% of its taxable income to shareholders in the form of dividends. Most REITs aim to pay out 100% of their taxable income in dividends. This rule means that REITs can be a valuable stream of passive income.

Investing in a REIT is almost identical to purchasing standard shares of stock. Each share of stock will change in value on a daily and even hourly basis. You’ll place an order through your broker, who will fill the purchase on your behalf.

Many brokers allow you to make your first investment with as little as $1 by purchasing fractional shares of stocks. This feature makes them a much more accessible investment on average when compared with real estate crowdfunding platforms.

How to Make Money with Online Real Estate Investing

Investing in real estate begins by identifying solid opportunities. Let’s take a look at a few of the factors you’ll want to consider when you compare real estate opportunities.

Look for Industries Expected to Grow

No matter if you’re comparing REITs or opportunities offered on a real estate investing platform, consider the industry. Some sectors are expected to grow in demand within the next few years. For example, demand for healthcare services is expected to rise as baby boomers age into their golden years. The retail sector has been declining for years as shoppers turn to online retailers. Think about the industry each real estate opportunity is in before you invest.

Focus on Transparency

If you decide to invest through a real estate crowdfunding platform, make notes on each offering’s transparency. The company should make it clear what percentage of the investment is funded, when you can expect returns and why the company has chosen this particular investment. Be wary of a company that makes it difficult or inconvenient for you to do your due diligence on its offerings.

Be Careful of Dividend Yield

Dividend yield matters when assessing offerings. A company’s dividend yield is equal to the total amount of money it offers in dividends per year divided by its current share price. Say Company X has a share price of $20, and it distributes $1 in dividends each year per share of stock issued — it has a dividend yield of 5%. Though REITs can be a big draw for dividend investors, be wary of companies with a dividend yield equal to 15% or higher. These are considered to be riskier investments.

Getting Started in Online Real Estate Investing

Getting started with real estate investing on a real estate crowdfunding platform begins by assessing your income and current net worth. If you qualify as an accredited investor, you’ll have a much wider selection of potential investments on these platforms, which often hand-select investment opportunities based on potential for return and merit. Consider a few of Benzinga’s favorite real estate crowdfunding sites to begin exploring options. Note that many of these platforms require minimum investments of $1,000 or more.

If you don’t have thousands of dollars to put down or you don’t yet qualify as an accredited investor, you might want to consider starting your investing journey with REITs. Many brokerage platforms allow you to invest in fractional shares of stock, which means that you can begin investing with as little as $1. To begin exploring investment opportunities, check out Nareit’s REIT Company Directory here.

Best Real Estate Crowdfunding Platforms

Are you ready to start exploring the best real estate crowdfunding opportunities? Crowdfunding sites are available for accredited and nonaccredited investors. Browse a few of Benzinga’s favorite crowdfunding sources below.

Best Online REIT Brokers

Investing in a REIT begins by opening a brokerage account. If you already have a brokerage account, you can use your current account to begin buying and selling shares of REITs. Don’t already have a brokerage account? Consider a few of these top choices.

Adding Diversity to Your Portfolio With Real Estate

Real estate investments can add a layer of diversity to an investment portfolio. However, it’s important to remember that real estate investments can be volatile. No matter how you decide to invest, use real estate investment to complement a robust portfolio made up primarily of more stable investments — like S&P 500 index funds, total market index funds and bonds.


Frequently Asked Questions


Why should I add real estate to my portfolio?


Adding real estate to your investment portfolio can provide diversification, long-term financial stability and various benefits such as rental income, property appreciation, tax advantages and leverage for further investment opportunities. It has historically been a reliable option with the potential for higher returns and wealth accumulation.


What is direct vs. indirect real estate investing?


Direct real estate investing involves purchasing physical properties and being responsible for property management, while indirect real estate investing involves investing in real estate-related assets managed by professionals. Both offer different advantages and considerations depending on the investor’s goals.


What is digital real estate?


Digital real estate refers to owning and using virtual properties and assets online, such as websites, social media accounts and online marketplaces. Similar to physical real estate, it can be bought, sold, rented or developed to generate income. It has become important with the growth of the Internet and reliance on digital platforms for business and personal use.

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.

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