With a minimal amount of investment money, you can earn interest and/or rental payments by loaning your funds for real estate deals. This can be a short-term loan or long-term debt such as a mortgage. In addition to earning a passive source of revenue, your initial investment amount can continue to appreciate with the value of the real estate purchased.
The biggest advantage is the low price of entry. You might normally need hundreds of thousands of dollars or more to finance real estate loans in full. Other options basically allow crowdsourcing for these loans, so many different investors will pool their funds together to complete a loan. Interest payments are then shared on the investment amount.
REITs vs Real Estate Investment Companies
REITs are intended to function more like an index fund to balance out risk. While this can be beneficial during some economic situations, you can potentially make a better return on your investments by picking individual companies that let you pool funds with other users to buy real estate and especially rental properties.
In many ways, you can think of the difference between the two as being similar to buying a stock for a specific company versus buying an index fund. REITs should give a more average performance of the market as a while, while individual companies could perform better or worse than those averages.
Diversification can often be the best approach to investing. Putting all of your money into a single stock or fund is extremely risky. However, spreading around your investments in multiple places can help protect against major losses.
Sites like GroundFloor offer a way for anyone to invest in real estate. The interest payment returns can be pretty decent too – GroundFloor has averaged 10.5% returns, for example. I’d rank GroundFloor as the #2 company to use for this type of investing. This site mostly seems to do loans that pay you with interest instead of actually investing in rental properties.
You can actually get started for just $10. You won’t earn a ton of money from such a low investment. However, if you continue to contribute small amounts over time you can build up significant payments eventually.
PeerStreet is another company like GroundFloor that you can use. However, I strongly recommend taking a closer look at them before making a decision to invest. There does seem to be some kind of an issue with the company because of many negative user reviews, but it’s hard to tell if these are because of wrong doing, bad customer service, or just customer angry that funds are locked up in a loan.
The downside to this investment strategy can be that your funds are tied up in the loan. If there are problems with payments, your income can get affected. You can sometimes even have delays recovering your initial investment amount when a loan doesn’t complete as scheduled. I can’t comment amount GroundFloor, but PeerStreet at least has a fair number of negative Google reviews about this exact issue.
Fundrise is an option for real-estate investing that can provide you with interest payments, quarterly dividend payments from collected rent, and long-time investment value appreciation. They’re my recommended pick of these three companies. It will require a lot of money to generate full-time annual earnings with this side hustle, but you should look at it as more of a long-term investment. If you are interested in this type of passive income, contribute a small percentage of your income to this investment each month. Over time your annual revenue from it will grow, and your investment amount even appreciates over time.
This company has been around since 2017. During the 21 quarters they’ve been in operation, up through Q1 2022, they’ve yet to have a negative quarter with average client returns. This is rather impressive since publicly traded REITs and even the S&P 500 both lost around 5% during Q1 2022, while Fundrise accounts gained an average of 3.5%.
A big advantage to using Fundrise is that you don’t need a lot of money to get started either. They actually allow you to open up an account with as little as $10, so almost anyone can invest with them for passive revenue. You do need to be a resident of the USA and at least 18 years old to join though.