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Invest in publicly traded REITs

Real estate investment trusts, or REITs, are companies that own income-producing real estate like apartment buildings, shopping centers and office towers.

You can think of a REIT as a giant landlord: it owns a large number of properties, collects rent from the tenants and passes at least 90% of its income to shareholders in the form of dividend payments.

It’s easy to invest in REITs because many are publicly traded.

Unlike buying a house — where transactions can take weeks and even months to close — you can buy or sell shares in a REIT any time you want throughout the trading day. That makes REITs one of the most liquid real estate investment options available.

Also, there’s no limit as to how much — or how little — your investment can be. While buying a house usually requires a hefty down payment, you can buy shares in a REIT with as much money as you are willing to spend.

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Invest on a crowdfunding platform

Crowdfunding has become a buzzword in recent years. It refers to the practice of funding a project by raising small amounts of money from a large number of people.

These days, many crowdfunding investing platforms allow you to own a percentage of physical real estate — from rental properties and commercial buildings to parcels of land.

Because of the greater risks involved in real estate crowdfunding, some platforms are targeted for accredited investors, sometimes with minimum investments that can reach into the tens of thousands of dollars. To be an accredited investor, you need to have a net worth of over $1 million or an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the past two years.

If you’re not an accredited investor, many platforms let you invest small sums if you like — even $100.

Such platforms make real estate investing more accessible to the general public by simplifying the process and lowering the barriers to entry.

Sponsors of crowdfunded real estate deals usually charge fees to investors as well.

Invest in ETFs

Picking the right REIT or crowdfunded deal requires plenty of due diligence on your part. If you’re looking for an easier, more diversified way to invest in real estate, consider exchange-traded funds.

You can think of an ETF as a portfolio of stocks. And as the name suggests, ETFs trade on major exchanges, making them convenient to buy and sell.

Investors use ETFs to gain access to a diversified portfolio. You don’t need to worry about which stocks to buy and sell. Some ETFs passively track an index, while others are actively managed. They all charge a fee — referred to as the management expense ratio — in exchange for managing the fund.

There are many ETFs that focus on real estate. Options such as the Vanguard Real Estate ETF (VNQ) and the Real Estate Select Sector SPDR Fund (XLRE) could provide a starting point for further research.

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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