How to Invest in Real Estate (From Least to Most Effort) | Stash Learn
How to Invest in Real Estate
By: Team Stash
Published: Feb 24, 2023
• Updated: Jun 09, 2026
In this article:
- 1. Purchase a REIT (Real Estate Investment Trust)
- 2. Use an online real estate platform
- 3. Rent out a room in your house
- 4. Buy a rental property
- 5. Try your hand at house flipping
- Real estate investing within reach
Does investing in real estate feel like it’s only for Mr. Monopoly? Believe it or not, you don’t need a top hat and bags of cash to get into real estate investing. There are actually several options, ranging from low to moderate to high levels of effort, for investors interested in adding this sector to their portfolio. As with any type of investment, there are advantages and there are risks.
On the highest-effort end of the spectrum, you can invest in residential or commercial real estate property to lease out or sell for a profit later. The benefits can include tax advantages, a steady stream of passive income, and the potential for long-term security and high returns. However, realizing returns may take a while, maintaining rental property takes time and money, and you run the risk of declining market value and occupancy demand.
Many investors prefer the much lower-effort option of purchasing shares in a Real Estate Investment Trust (REIT), which can help you diversify your portfolio by gaining exposure to the real estate industry without having to buy any rental property. Other options for real estate investing include using an online real estate platform, renting out a spare room, or house flipping. Depending on the amount of time and money you want to put in, you may find a real estate investing strategy that works for you.
1. Purchase a REIT (Real Estate Investment Trust)
Effort required: Low
A REIT, short for Real Estate Investment Trust, is a company that owns, operates, or finances income-producing real estate. Types of residential or commercial real estate may include a wide array of properties such as:
- Apartments
- Office buildings
- Shopping malls
- Hotels, resorts
- Self-storage facilities
- Warehouses
- Hospitals
- Infrastructure
You can also invest in mortgages on those properties. The company earns money from renting or leasing the rental property it owns or, in the case of mortgage REITs, from interest on mortgages and mortgage-backed securities. REITs work similarly to mutual funds by pooling the capital of many investors. When you buy shares in a REIT, you can then earn dividends from the shares you own without having to purchase, manage, or finance property yourself. Most REITs are registered with the Securities and Exchange Commission and publicly traded, which can allow more people to get exposure to the real estate sector. If you’re looking for the easiest way to diversify your portfolio with real estate investment, a REIT or an exchange-traded fund (ETF) that includes REITs may be worth exploring.
| Pros of REITs | Cons of REITs |
|---|---|
| Portfolio diversification | Sensitive to interest rates |
| Typically accessible through national exchanges | Must pay ordinary income tax on dividends |
| Generally pay healthy dividends | May have high up-front/annual fees and commissions |
| Build a passive income flow | Subject to the same risks as the real estate market |
| They are required to distribute 90% of profits via dividends | Passive income flow depends on occupancy levels |
| May help protect your portfolio if other investments underperform |
2. Use an online real estate platform
Effort required: Low
Online real estate platforms connect real estate developers with individual investors who want to finance projects, either through debt or equity. You might think of them as crowdfunding platforms specifically for real estate. Generally, investors pay a fee to the platform and take on a significant amount of risk with the hope of receiving monthly or quarterly distributions. While online platforms make real estate investing a bit more accessible, many of the platforms are only open to accredited investors—people who’ve earned more than $200,000 in each of the last two years, or who have a net worth exceeding $1 million. However, there are some alternative platforms with lower account minimums available to non-accredited investors.
| Pros | Cons |
|---|---|
| Portfolio diversification | Lower returns compared to buying property on your own |
| Less capital required than purchasing real estate on your own | Mostly available to accredited investors only |
| Usually no fees like closing costs or commissions | Lack of control over the property development |
| Passive investment vehicle | Illiquid investment (cannot be easily converted to cash) |
3. Rent out a room in your house
Effort required: Medium
If you already own a home, you may consider renting out extra space to generate income. Rental income from a spare room, basement apartment, or converted garage can help offset the cost of your monthly mortgage payment. But unlike splitting rent with a roommate, when you own the home, the person living with you is your tenant. That means your passive rental income stream comes with obligations like tenant management, property maintenance, and adhering to strict landlord-tenant laws.
| Pros | Cons |
|---|---|
| Passive income stream | Rental income is taxable |
| Possible to charge higher rent to offset the tax bill | Renter may cause damages |
| Possible shared utility expenses | Risk of violating housing codes and other laws |
| Can make financing a more expensive house more accessible | Potential risk of inviting a stranger into your home |
4. Buy a rental property
Effort required: High
Purchasing a property specifically for rental to long-term tenants or short-term vacationers can get you into the real estate market. If you’ve got the financial means and the inclination to manage as a landlord, buying a rental property might be the right investment for you. Long-term, single or multi-family rentals can generate monthly passive income from rental contracts.
| Pros | Cons |
|---|---|
| Portfolio diversification | Illiquid asset |
| Passive income vehicle | Maintenance and management expenses can decrease income |
| When real estate values increase, so does the value of your investment | Capital and credit needed |
| Interest paid on your property loan may be tax deductible | Must pay fees and upkeep property even if it’s vacant |
| Rental income is not subject to Social Security tax | Tenant management responsibilities |
| Direct control over the investment | Property taxes |
5. Try your hand at house flipping
Effort required: Highest
House flipping involves buying a property, holding onto it for a short time, and selling it for profit. Sometimes the flip involves renovating a fixer-upper before selling, but it may be as simple as holding the property until you can sell it for more than you bought it. In either case, the goal is to buy low and sell high.
| Pros | Cons |
|---|---|
| Diversifies investments | Capital and credit required |
| Potential for high returns depending on the local market | High pressure |
| Potential for quick profit | Home might not sell quickly |
| Control over the investment | Renovation costs could be significant |
Real estate investing within reach
Investing in real estate can require significant capital and credit, so options like purchasing rental property or flipping houses may not be accessible to all investors. Lower barrier options like investing in REITs or using an online investment platform make it easier to dip your toe into the real estate market and diversify your portfolio.
As with any type of investing, the real estate investing strategy you choose should align with your risk tolerance, time horizon, current financial state, and future financial goals.