Real Estate Investment Options: 5 Ways to Invest in Real Estate Without Just Being a Landlord
Real estate investment options go far beyond buying a rental house and finding tenants. Being a landlord is one path, but short-term rentals, house flipping, REITs, and real estate crowdfunding all let you invest in property with very different amounts of cash, time, and risk.
This guide compares all five, including the tax rules and liquidity tradeoffs most overviews skip, so you can pick the option that actually fits your money and your schedule.
Option 1: Being a landlord
Being a landlord means buying a property and renting it out for monthly income, the most hands-on option on this list. You collect rent, pay the mortgage, taxes, and insurance, and keep what's left as cash flow, while tenants slowly pay down your loan and build your equity. The IRS also lets you depreciate the building over 27.5 years, which can shelter real rental income from tax on paper.
The tradeoff is real, ongoing work: tenant screening, repairs, vacancies, and the occasional late-night maintenance call, unless you pay a property manager 8% to 12% of rent to handle it. Landlording rewards people who run the numbers before they buy, not just people who like the idea of owning property.
ModernWallet already covers this option in depth. Run your own numbers with our rental cash flow calculator and cap rate calculator before you make an offer — a property with negative cash flow is a bet on appreciation, not an investment that pays you today.
Option 2: Running a short-term rental
A short-term rental is a home or spare room you rent out by the night instead of by the year, most often through Airbnb or a similar booking platform. It can earn more per night than a long-term lease in tourist or event-driven markets, but it also adds turnover cleaning, guest messaging, and dynamic pricing that a long-term rental never requires.
Most overviews skip the two traps that catch new hosts. First, many cities and HOAs now require a short-term rental permit, cap the nights you can rent per year, or ban them outright in certain zones — check your local ordinance before you list a property, not after. Second, the tax treatment can shift: rental income is usually reported on Schedule E and isn't subject to self-employment tax, but a short-term rental that provides hotel-like services (daily cleaning, breakfast, concierge) can be treated as a trade or business, taxed on Schedule C and hit with self-employment tax on top of income tax.
Model the income side with our Airbnb income calculator, then confirm the local rules and likely tax treatment before you commit a property to short-term use.
Option 3: Flipping houses
Flipping a house means buying a property below market value, renovating it, and reselling it quickly for a profit, usually within months rather than years. Experienced flippers often use the 70% rule as a first screen: pay no more than 70% of a property's after-repair value, minus your estimated repair costs, to leave margin for the unexpected.
The tax trap is the part most guides skip. Sell within a year and the profit is taxed as a short-term capital gain at your ordinary income tax rate, not the lower long-term rate — IRS Topic No. 409 covers the distinction. Flip houses often enough and the IRS may classify you as a real estate dealer rather than an investor, which adds self-employment tax on top of that and blocks a 1031 like-kind exchange, a tool that only applies to investment property, not inventory you're actively selling.
Flipping can pay well, but it's the most active, most tax-exposed option on this list — closer to running a small business than making a passive investment.
Option 4: REITs (real estate investment trusts)
A REIT, or real estate investment trust, is a company that owns income-producing property and must pay out most of its profit as dividends, so you get real estate exposure just by buying a share the same way you'd buy a stock. The SEC explains that publicly traded REITs trade on major exchanges and can be bought or sold on any trading day, while non-traded REITs are illiquid and can restrict how much you're allowed to redeem in a given period.
The tax tradeoff is the piece most beginners miss. Because a REIT avoids corporate income tax by distributing at least 90% of its taxable income, most REIT dividends are taxed to you as ordinary income instead of at the lower qualified-dividend rate — though the IRS does let individuals deduct up to 20% of that ordinary REIT dividend income, which softens the gap for many investors.
A REIT gives you real estate exposure with stock-market liquidity and zero landlord duties, the most passive option on this list — but you give up the direct control, leverage, and depreciation benefits that come with owning property outright.
Option 5: Real estate crowdfunding
Real estate crowdfunding lets you invest smaller amounts alongside other investors in a specific property or fund through an online platform, instead of buying a whole property yourself. Not every platform is open to every investor, and that distinction matters more than the marketing suggests.
Platforms raising money through Regulation Crowdfunding (Reg CF) must open the offering to non-accredited investors too, though the SEC caps how much a non-accredited investor can put in over a 12-month period based on their income and net worth. Platforms raising money under Regulation D are usually restricted to accredited investors — generally, individual income over $200,000 (or $300,000 with a spouse) in each of the last two years, or a net worth over $1 million excluding your primary residence.
Check which exemption a platform is using before you fund an account, since it determines both who can invest and how much disclosure you're entitled to see. Crowdfunding sits between a REIT and a direct rental purchase: less liquid than a REIT, but far less work than owning and managing a property yourself.
The bottom line: how the 5 options compare
The five real estate investment options trade off liquidity, active work, and tax complexity in a fairly predictable pattern. Being a landlord and flipping houses demand the most hands-on time and the most tax complexity, but they also offer the most control and, for landlording, the steadiest long-run cash flow. A short-term rental sits in between: less commitment than a long-term rental, but real day-to-day management and a local-ordinance risk unique to this option.
REITs and real estate crowdfunding sit at the more passive end. A REIT is the most liquid of the five — you can sell in seconds during market hours — while crowdfunding is less liquid but often lets you target a specific property or strategy a broad REIT fund wouldn't.
There's no single best answer. Want real estate exposure with no landlord duties and full liquidity? A REIT is the simplest starting point. Have more time than capital and want control over one property? Landlording or a short-term rental fits better. Want to test the waters with a small amount first? Crowdfunding is the middle ground. Whichever you choose, check your own net worth first, since your real estate allocation should scale with what you can actually afford to tie up or lose.
Frequently asked questions
What's the easiest real estate investment for beginners?
For most beginners, a publicly traded REIT is the easiest option because it requires no property management, trades like a stock, and can be bought with any amount of money. Being a landlord or flipping houses both require far more capital, time, and tax planning to do well.
Are REITs a good investment?
REITs can be a good investment for hands-off real estate exposure, since the SEC requires them to distribute at least 90% of taxable income as dividends. Most of that income is taxed as ordinary income rather than at lower qualified-dividend rates, though a deduction on ordinary REIT dividends softens that gap for many investors.
How much money do I need to start real estate crowdfunding?
It depends on the platform and which SEC exemption it uses. Platforms using Regulation Crowdfunding are open to non-accredited investors with online investment limits based on income and net worth, while platforms restricted to accredited investors require you to meet the SEC's income or net worth thresholds first.
Is house flipping profit taxed as ordinary income?
Yes, if you hold the property for a year or less, the profit is taxed as a short-term capital gain at your ordinary income tax rate. Flip houses often enough and the IRS may also classify you as a dealer, adding self-employment tax on top and blocking access to a 1031 exchange.
Do I need a permit to run a short-term rental?
Often yes. Many cities and homeowner associations require a permit, cap the nights you can rent per year, or restrict short-term rentals to certain zones entirely. Check your local ordinance before you list a property, since rules vary widely even between neighboring cities.
Which real estate investment option has the best returns?
There's no single option with the best returns for everyone; it depends on the leverage, work, and risk you're willing to take on. Flipping and landlording can post the highest returns because of leverage and active management, but REITs and crowdfunding trade some upside for far less time, work, and concentration risk.
Sources
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