Nontraditional Real Estate Investment Options
There are nontraditional investment options in real estate. If you like the idea of “buy and forget” and dislike 1 AM calls from tenants but still want to become a real estate investor, the nontraditional route might be your perfect path to wealth.
REITs
REITs trade on major exchanges with tickers like VNQ (Vanguard Real Estate ETF) or individual REITs like Prologis (PLD). A $10,000 investment in a REIT can provide exposure to billions in real estate assets across multiple sectors. The average REIT dividend yield ranges from 2-16%, which isi often higher than the S&P 500’s CAGR of around 10%.
Crowdfunding Platforms
Platforms like Fundrise and Groundfloor allow entry investments as low as $10, while CrowdStreet typically requires a $25,000 minimum. Historical returns vary by investment type — debt investments often yield 8-12% annually, while equity investments target 15%+ IRR. For example, an industrial property deal on these platforms can have a 5-year hold period with a projected 17.3% IRR through a combination of 6% cash flow and expected appreciation.
Platforms charge various fees: Fundrise’s asset management fee is 0.85% annually, while others may charge 1-2% plus performance fees. Each platform also has different accreditation requirements—some accept all investors, while others require $200,000+ annual income or $1 million net worth excluding primary residence.
Real Estate Syndications
Now, suppose you want to get into the bigger real estate deals without the headache of direct ownership; explore real estate syndications—pretty much like a cousin of traditional real estate investing.
However, unlike crowdfunding platforms where 10 bucks would do, you’ll need some cash for syndications—$50,000 and up as a minimum. Scary, I know, but hear me out: these deals typically target 15-20% returns, in line with historical averages documented by the University of Pennsylvania.
The process is also pretty straightforward: investors usually get first dibs on an 8% preferred return, and after that, the profits are split 70/30 between the investors and the deal sponsors.
Now, let’s say there’s a $20 million apartment available. The syndication might raise $5 million from 40 investors and then leverage the rest through lenders like Fannie Mae (usually about 65-75% of the purchase price). The sponsors aren’t doing this for free, of course—they typically charge a 1-2% acquisition fee upfront, 2-3% for annual management, and might tack on a 1% fee when the property sells.
The deal usually includes property upgrades, too: $5,000 to $15,000 per unit to increase rents by $200-300 monthly. That’s how you juice both the income and property value. Most of these deals run for 5-7 years, and you can expect quarterly rental payments giving you 6-8% annual cash-on-cash returns. And when the property sells, you’d multiply your money by 1.8x to 2.5x—not too shabby.
SparkRental’s Co-Investing Club
Don’t have $50 grand sitting around? Not an accredited investor? SparkRental’s Co-Investing Club has you covered.
In the investing club, we as a group, discuss potential real estate investment deals together. These include private partnerships, notes, syndications, funds, and more.
Best yet, any member (yes, that’s you too) can invest with as little as $5,000. This is markedly less than the $50,000 or $100,000 you might need in a traditional syndication deal.
At the end of the call, we decide if we’re going to invest as a group, and then you can decide if you’re going to participate or not.
And no, you do not need to be an accredited investor to participate in SparkRental’s Co-Investing Club.
Real Estate or Stocks Investment?
At the end of the day, there’s no universal “best” choice between the two. Your path to wealth depends on who you are as an investor—your financial goals, timeline, or how hands-on you want to be.
You might even find that mixing both gives you the best of both worlds – I’ve seen plenty of successful investors do that.
Whatever route you choose, remember that consistency is your best friend, but if you’re willing to learn some real estate investing strategies, which we happen to specialize in, feel free to reach out!
