How to Invest in Real Estate

You can be actively involved in real estate in big, medium, and small ways. Starting small lets you walk before you run, learning the ropes before deciding whether to get more involved. Options range from online room rentals to buying and managing commercial properties.

• Room sharing: While renting out your second bedroom on a room-sharing marketplace is considered more of a side gig than an investment, it can also be rewarding. In a recent survey, nearly half the people putting rentals on one room-sharing platform said they made over $500 a month.¹
• House hacking: Wading deeper into real estate investing, you could buy a duplex or other multifamily home, live in one of the apartments, and rent the other one to cover your own mortgage payments. Like room sharing, this can provide relatively low-risk experience in being a landlord – from marketing your property to screening tenants, fixing their problems, and collecting rent.
• House flipping: Here’s where you get out that tool belt – or set up a network of painting, electrical, plumbing, and other contractors. Flipping means buying a house, renovating it, and then selling at a higher price. By one national estimate, house flippers sold at a price that was 27.5% higher than they’d paid, on average, in the second quarter of 2023.² That figure doesn’t factor in the cost of improvements, though, which vary widely.
• Renting out houses: Investing in single-family rental homes can pay off in two ways: First, home values tend to increase over time and, second, you’re collecting rent from your tenants. Investment returns vary by location, which is true of many real estate transactions. On average, though, a 2023 analysis of single-family house rentals showed that rent payments alone represented a 7.5% annual return on the purchase price of the house.³ Your actual profit could be higher or lower because that analysis doesn’t take into account any upside in the home’s market value nor any downside from the costs of managing and maintaining the property.
• Multifamily buildings and apartments: You could choose to manage these yourself or outsource many of the management responsibilities. Returns from investing in these properties were reported to be down about 1% in the second quarter of 2023.⁴
• Commercial and industrial real estate: Office buildings, storefronts, and warehouses also present opportunities for people looking to invest in a big way.