Thinking of Buying a Rental Property? Consider These Five Proven Alternatives


One of the most proven and true ways to build wealth is to invest in real estate. Real estate can be an effective investment to cover inflation, provide tax benefits, and pass on wealth to heirs. Having a rental property can provide a monthly cash flow and the value of the home can be appreciated over time.

Rental real estate is not a perfect solution, especially because real estate costs are skyrocketing. Some alternative and cheaper investments for rental properties include the use of short-term rental sites such as Airbnb Inc. (NASDAQ: ABNB), real estate investment funds (REIT), car rental or small homes and sale of purchase options.

Airbnb / VRBO Short Term Rentals

Short-term rental sites like VRBO and Airbnb offer unique opportunities as the properties listed there can be rented at higher prices than regular long-term rentals. In some tourist areas, nightly rates can be especially high during peak periods.

One way to start earning passive income with these sites is to find a long term rental and list it on these sites. If you follow this route, confirm that your lease and neighborhood rules allow for subletting.

Another strategy to benefit from short-term rentals is to join a vacation rental franchise. With a deductible, you have the opportunity to make money with a proven system. Franchises can provide training and support by shortening their learning curve. Budget in the cost of initiation fees and cut the management of their profits.

REIT and REIT ETF

Another way to invest in real estate without dealing with tenants, maintenance costs or large prepayments is through REIT and REIT Listed Funds (ETFs). Both REITs and REIT ETFs offer access to diversified holdings of real estate investing companies.

REITs come in different varieties, including capital and debt REITs. Capital REITs earn income primarily from tenant rents, while debt REITs earn income by investing in mortgages and mortgage-backed securities. REITs and REIT ETFs may also specialize in certain sub-niches such as office buildings, healthcare, and mobile homes.

Not all REITs are listed on public stock exchanges, but REIT ETFs do. REIT ETFs trade as shares and, because their prices change on the day, they can be bought on margin and sold short. Many REIT ETFs mimic popular benchmarks such as the MSCI US REIT index. As a result, they may have spending ratios as low as 0.12%, which can save you thousands of dollars in the long run.

Van rental

Real estate is not the only physical asset that can be rented and sold for profit. With the increased life of vans, vans and other vehicles are promising options.

The vans transform the vans into livable apartments on wheels. The lifespan of vans can start at $ 5,000 and exceed $ 100,000. Start-up costs vary depending on the make of the van, the model and the interior comforts. Some vans add mini kitchens, running water and heaters to their vans.

One potential way to get passive income with vehicles is to rent lifetime vans on a site like Outdoorsy. This site is similar to Airbnb or VRBO in that you can set your own rates and use online transactions. Prices also vary depending on the area, amenities, and peak demand around special events.

Small Houses

With traditional homes becoming more expensive, people are looking for alternatives like small houses. Small houses are houses that are between 100 and 400 square meters. These homes usually come with standard appliances and kitchens and can be transported with a trailer.

Prices range from $ 30,000 to $ 60,000 depending on amenities, type of home, and materials. It may be easier to buy and rent these homes as they cost much less than a typical home. It is also possible to get financing for a small home, as long as they meet the minimum loan requirements. Most lenders have minimum loan value requirements to ensure profitability before offering financing.

Another option to take advantage of small houses to rent one and list it for more than your monthly rent payment on vacation rental sites. If you follow this route, you can also hire a manager to manage the tenants and the maintenance of a fraction of a traditional rental company.

Real estate crowdfunding

Buying rental property used to be the easiest and cheapest option to invest in real estate. However, the growing number of real estate crowdfunding sites offers several new ways for retail investors to reap the benefits of real estate investing without having to own a physical property.

Real estate crowdfunding allows investors to share their money with others to buy or develop a property. The asset is managed by the sponsor of the deal while investors simply collect passive rental income and hopefully make a profit when the property is finally sold. You can check out current real estate crowdfunding offers across all major platforms and sponsors at the Benzinga Alternative Investment Center.

Bottom line

Owning and renting real estate is one of the oldest and most effective ways to create multiple sources of income. It can be especially profitable as it offers many tax rebates, can be inherited and sold for considerable profits.

Renting real estate is not perfect, especially because even average homes in many markets are worth $ 1,000,000 or more. Short-term rental sites such as Airbnb, REIT, car rental platforms, small homes, and sell covered calls may be more affordable alternatives for creating multiple sources of revenue.

Photo by Peter Thomas on Unsplash

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