1. Invest in rentals
Commonly one buys and rents out an entire investment property. Try to find one with combined expenses lower than the amount you can charge in rent. However you can also rent out a basement or the like in a house you live in as well. Just make sure it can exist as a separate space with it’s own entrance, kitchen, bathroom etc.
2. Fix up and resell
Purchase a cheap home that needs a little love, renovate it as inexpensively as possible and then resell it for a profit. It’s called house flipping, and it’s harder than it looks.
There’s risk, because so much of the math behind flipping requires a very accurate estimate of how much repairs are going to cost. Try to find an experienced partner to help. Also, the longer you hold on to the property, the less money you make because you’re paying a mortgage without bringing in any income.
REITs, or real estate investment trusts, let you invest in real estate. Just without the physical real estate. Often compared to mutual funds, they’re companies that own commercial real estate such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, which makes them a good investment in retirement.
REITs do vary. Some trade on an exchange like a stock; others aren’t publicly traded. The type of REIT you purchase can be a big factor in the amount of risk you’re taking on, as non-traded REITs aren’t easily sold and might be hard to value.
4. Rent out a room
Finally, to dip the very edge of your toe in the real estate waters, you could rent part of your home via a site like Airbnb. It’s real estate for those scared of commitment: You don’t have to take on a long-term tenant, potential renters are at least somewhat prescreened by Airbnb, and the company’s host guarantee provides protection against damages.