If I Don't Own a House, How Do I Invest in Real Estate?

You've crunched the numbers and taken a long hard look at your budget and lifestyle, and owning a primary residence just isn't for you. And this is perfectly okay! Childfree and permanently childless people can forge their own paths and avoid that pesky life script, and for some, it likely means that homeownership isn't the right choice. If you opt to stay a renter, you'll need to plan for rent increases over time, but this can be done.

But isn't investing in real estate the number one path to wealth? It is a path to wealth, but it isn't the only one. And plus, in many cases, when you're investing in real estate via buying and owning actual properties (primary residences and otherwise), you're using leverage to do so. This means you're borrowing money and are therefore carrying debt with the hopes that your future profits will end up being much more than the cost of borrowing. Remember, homes don't always appreciate in value, and if they do, it might take longer than you're expecting, based on local market conditions as well as the economy as a whole. And do you really want to take on any more debt than necessary?

Let's take a look at a few potential ways to invest in real estate that don't involve buying your own primary residence.

Owning Tenant Properties

Becoming a landlord is something that looks far easier and more straightforward on paper than it is in reality. Residential landlords have their share of horror stories (although I'm betting a lot of renters also have stories of nightmare landlords; rental homes come with their fair share of potential pitfalls, whether you're the owner or the renter). You're trusting someone with your investment, and this means that if there's a water leak or another maintenance issue, you're relying on your tenant to report it to you so you can address it. If they neglect to do so, you could be looking at a high water bill or even more costly damage.

Buying property to rent out is also quite different from buying a primary residence, in that you're not considering what you might like as a resident. Instead, you're looking for features that will attract the right tenants and a chance to earn a return on the purchase. If this is something you want to take on, great. If not, there's another way to invest in real estate that you can consider.

Real Estate Investment Trusts (REITs)

Another option to consider is investing in real estate investment trusts (REITs). This is essentially like buying a company that owns, operates, or finances income-generating real estate. They must pay at least 90% of taxable income out to shareholders as dividends per year. You can buy many different kinds, in all sectors of the economy. They're like stocks for the real estate industry.

In terms of commercial real estate, one type to consider is public storage facilities. Wherever you live, there's likely one nearby, and they make a ton of money per square foot. It's likely not feasible to buy one of these facilities because of the cost, but you can buy a REIT that includes a small piece of them.

You can buy REITs that consist of commercial or residential real estate, health care facilities, travel properties, and so on. This gives you a chance to diversify your portfolio, and invest in real estate – without needing to buy properties and become a landlord. So even if buying a home of your own isn't for you, you can still own a cut of property.
Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.
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