Not everyone has $50,000 or more lying around and just begging to be invested in real estate. Here are six ways to invest without a huge upfront cost.

You know the reasons to invest in real estate, from diversification to appreciation to tax benefits to protection from inflation. And that says nothing of the higher housing satisfaction among homeowners than renters. 

Still, not everyone has $50,000 or more lying around and just begging to be invested in real estate. Aside from buying a home, the most common way middle-class investors add real estate to their portfolio is with real estate investment trusts (REITs). These securities trade on public stock exchanges, so you can buy in for the cost of a single share and sell at any time. 

That liquidity comes with several costs though. First, REIT share prices are volatile, which adds to their risk. Worse, they correlate with stock markets much more closely than you’d expect from real estate market fundamentals alone.

That calls into question just how much diversification benefit you get from them. Then there are the fees, which REIT operators can hide. Finally, REITs must pay out at least 90 percent of their profits to investors each year. That sounds great on the surface, and can lead to REIT yields in the double digits, but it makes it extremely hard for them to reinvest profits into growing their portfolios (and therefore growing the share price and investor returns). 

Luckily, REITs aren’t the only way to invest in real estate, even if you don’t have much cash. If you want to diversify into real estate beyond REITs, try the following ideas.

1. Crowdfunded real estate loans

Several real estate crowdfunding platforms let you invest small amounts in loans secured by real estate. 

For example, Groundfloor lets you invest $10 toward short-term loans to real estate investors. I invest with them myself, putting $10 apiece toward hundreds of different loans. I earn whatever the interest rate is for each specific loan, and Groundfloor earns the upfront fees charged to the borrower. That keeps our interests aligned, as they don’t charge any fees to investors. Since it launched in 2013, Groundfloor has averaged around a 10 percent annual return across its loans. 

I also appreciate that these loans typically repay within 3-12 months. Most real estate investments require a long-term commitment. 

Last year, Groundfloor also launched a new alternative called Stairs. It’s a pooled fund of many loans, paying 4-6 percent interest. The perk: you can withdraw your money at any time, penalty-free. That makes it a dramatically higher-yield way to hold your savings. 

Concreit offers a similar pooled fund model, paying 5.5 percent. Like Stairs, you can withdraw your money at any time — but it takes Concreit 30-60 days to actually get the money back to you, unlike Stairs’ immediate turnaround on withdrawals. 

2. Crowdfunding: real estate equity funds

Prefer the idea of owning equity in properties, rather than loans secured against them?

Some crowdfunding platforms offer pooled funds that own many different properties. You can invest with Fundrise for as little as $10, gaining instant access to many different funds owning dozens of properties. That makes for broad diversification, and you start earning quarterly dividends right away. 

Just don’t expect instant liquidity. If you cash out your shares within five years of buying, Fundrise dings you with a 1 percent penalty on the portion of your investment held in their eREITs. It also takes a few months for you to get your money back in many cases. 

Yieldstreet also offers broad diversification in their funds. In fact, their Prism Fund includes not just real estate but also art, private notes and even transportation. Unfortunately, they recently raised their minimum investment from $500 to $5,000. But that still beats coming up with a 20 percent down payment on a rental property. 

Consider Streitwise as another example of a pooled fund that owns properties. Their private REIT has averaged an 8.96 percent dividend yield since 2017. Even in 2022, when their yield fell to 7.8 percent, they still handily beat both the S&P 500 (-18.11 percent) and public REITs (-25.10 percent). 

That goes to show how private real estate can help protect your returns during bear markets, even as the sky falls on publicly traded assets. 

3. Fractional ownership in rental properties

If you’ve been wondering whether to invest in rental properties or crowdfunding, you don’t have to decide. You can invest fractionally in rental properties, via crowdfunding platforms. 

Beyond helping your investment portfolio survive bear markets, rental properties can also protect against recessions. Rents don’t historically fall during recessions, after all, even as property values do — which is why more investors have entered the market right now. 

Of course, a down payment on a rental property can easily cost you $50,000 to $100,000. Hardly chump change. 

But several crowdfunding platforms have started offering fractional ownership in rental properties over the last few years, letting you buy in for just $50-100. Arrived (formerly Arrived Homes) lets you buy shares in individual rental properties for as little as $100. You collect rents over the next five-to-seven years, then the property sells and you get paid out proportionately. 

Lofty brings an even higher-tech approach to fractional ownership. They split ownership shares into tokens backed with blockchain technology, which you can buy and sell on Lofty’s secondary market at any time. Lofty sets token (share) prices at $50 for the initial offering, then once a property sells out the shares start trading at market prices based on buyer bid and seller asking prices. 

4. Fractional ownership in commercial properties

Commercial real estate includes multifamily properties (such as apartment complexes) and the full range of non-residential real estate, from office buildings to industrial to self-storage and more. 

Average Joe would have a hard time coming up with the millions of dollars needed to buy a commercial property by himself. Fortunately, he doesn’t have to — he can buy fractional ownership in one. 

The traditional way to do this is through private real estate syndications. They can pay huge returns, often 15-50 percent or higher, but they often require a minimum investment of $50,000 — $100,000. That still doesn’t suit Average Joe very well.

However, you can pool funds with other like-minded investors in a real estate investment club to tackle these together. For example, clubs like ours offer these kinds of group real estate investments for $5,000 per person. That’s not trivial for middle-class investors, but it’s not $50,000, either. 

These investments come with outstanding tax advantages that you don’t get through real estate crowdfunding, such as accelerated depreciation. Investors typically show a loss on paper for the IRS, even while collecting healthy passive income streams. 

5. Partner on properties

No one says you have to buy an investment property by yourself. You can always go in on one with a partner or two, dropping that down payment to a more manageable cost. 

In fact, if you volunteer to do the grunt work, you might negotiate to own a disproportionate chunk of the property with a relatively small down payment. Instead of investing much cash, you invest your labor in finding the deal, securing financing, overseeing contractors, managing tenants, and so forth. 

If direct ownership and control over the investment appeal to you, consider partnering up on investment property deals.

6. House hack

What if you could buy an investment property with an owner-occupied mortgage — and score free housing in the process?

Enter: multifamily house hacking. You buy a duplex, triplex, or fourplex, all of which qualify for conventional mortgage loans, move into one unit, and rent out the other(s). The rents from the neighboring units ideally cover your mortgage payments, letting you “live for free.”

And it doesn’t require a 20-30 percent down payment like you need for a rental property loan. You can use an FHA loan with 3.5 percent down, or even a VA loan or USDA loan with 0 percent down. 

Under the terms of your mortgage loan, you must live in the property for at least one year. Then you can rinse and repeat to keep growing your property portfolio with tiny down payments and free housing. 

Final thoughts

Don’t get me wrong, REITs come with their share of advantages. But like any other type of investment, they have pros and cons, which are different from the pros and cons of real estate syndications, crowdfunding and direct ownership. 

If you want the best diversification possible in your real estate investments, don’t invest in REITs alone. Look no further than last year’s 25.10 percent drop in average REIT values to understand why. 

G. Brian Davis is a real estate geek and co-founder of SparkRental.

Get Inman’s Property Portfolio Newsletter delivered right to your inbox. A weekly roundup of news that real estate investors need to stay on top, delivered every Tuesday. Click here to subscribe.

recession | websites
Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription