Written by: Sarah Mitchell, CFP®
I’ll never forget the first time a client came to me frustrated about rental property ownership. Mark had bought a duplex three years earlier, convinced it was his ticket to financial freedom. Instead, he spent weekends fixing leaky faucets, chasing late rent payments, and fielding 2 a.m. calls about broken water heaters. “There has to be a better way to invest in real estate,” he said. “I want the returns without the headaches.”
He was right. There is.
Real estate has created more millionaires than almost any other asset class, but the popular image—buying properties, managing tenants, and dealing with repairs—is only one path. For most professionals and families, it’s not even the best path. Over my 15+ years working with clients to build wealth, I’ve found that the most successful real estate investors are often the ones who never pick up a hammer or advertise a vacancy.
They invest in real estate. They just don’t act as landlords.
If you’ve been curious about real estate investing but hesitant about the landlord lifestyle, you’re in the right place. What follows is a practical breakdown of how to gain real estate exposure, generate passive income, and build wealth—all without screening tenants or unclogging drains.
What Building Wealth Without Being a Landlord Really Looks Like
When people tell me they want to invest in real estate “the easy way,” I ask them to get specific. What are you actually trying to accomplish?
Real estate can serve multiple roles in a portfolio: income generation, inflation protection, diversification from stocks and bonds, and long-term appreciation. The strategies I’ll cover can deliver all of these. But they do it differently than direct property ownership, and understanding those differences upfront prevents disappointment later.
The Core Trade-Off: Control vs. Convenience
Direct property ownership gives you maximum control. You choose the property, set the rent, pick the tenants, and decide when to sell. That control comes at a steep cost in time, expertise, and emotional energy.
When you invest in real estate without being a landlord—through vehicles like REITs, real estate funds, or syndications—you trade some control for convenience and liquidity. You’re relying on professional management teams to make acquisition, financing, and operational decisions. In my experience, this trade-off works beautifully for busy professionals who want real estate exposure without a second job.
Realistic Return Expectations
A common mistake I’ve seen beginners make is expecting private real estate investments to consistently beat the stock market. That’s not the goal.
Real estate’s value lies in diversification and income. Historically, real estate investment trusts (REITs) have delivered average annual returns in the 9–12% range over long periods, with much of that coming from dividends. According to Nareit, equity REITs have historically provided competitive total returns with relatively low correlation to stocks and bonds.
Private real estate deals—syndications, private REITs, and debt funds—often target returns in the 6–15% range depending on the strategy and risk level. What makes these attractive isn’t necessarily higher returns, but income characteristics, tax treatment, and portfolio balance.
Time Horizons Matter
One factor that catches people off guard is liquidity.
Publicly traded REITs, which you can buy through any brokerage account, are highly liquid. You can sell shares the same day you decide to exit. But private real estate investments—crowdfunding platforms, syndications, non-traded REITs, and interval funds—often lock up your capital for 3 to 7 years or longer.
If you’re building wealth for retirement in 20 years, that’s usually fine. If you might need the money in 18 months, it’s a disaster.
I always tell clients: only invest in illiquid real estate with money you truly won’t need for at least five years. Build your emergency fund and short-term savings first. Real estate comes later in the wealth-building hierarchy.
Your Options Explained: REITs, Funds, Crowdfunding, and Real Estate Debt
Now for the practical part. What can you actually invest in if you want real estate exposure without direct ownership?
You have four main categories, each with distinct characteristics. I’ll walk through how they work, who they fit best, and what the real-world pros and cons are.
Publicly Traded REITs
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. By law, REITs must distribute at least 90% of their taxable income to shareholders as dividends, which is why they’re popular for income-focused investors.
The SEC defines REITs as companies that pool investor capital to buy and manage real estate, offering ordinary investors access to commercial property portfolios—office buildings, apartments, shopping centers, warehouses, healthcare facilities, and more.
Publicly traded REITs are listed on major exchanges (NYSE, Nasdaq) and trade just like stocks. You can buy shares through any brokerage account with no minimum investment beyond the share price.
Who they fit: Beginners, hands-off investors, anyone who values liquidity and transparency. Particularly useful for tax-advantaged accounts like IRAs, where you won’t pay taxes on dividends until withdrawal.
Pros:
- Instant liquidity—buy and sell anytime markets are open
- High transparency—quarterly filings, public earnings calls, analyst coverage
- Low minimum investment (the cost of one share, often 50–50–200)
- Broad diversification available through REIT ETFs
- Professional management
- Easy tax reporting (you’ll receive a 1099-DIV form, not the more complex K-1)
Cons:
- Price volatility—REITs trade daily and can swing with market sentiment, not just property values
- No control over property selection or strategy
- Dividend taxation (more on this later)
- Performance can correlate with stock markets during crises, reducing diversification benefits
In my experience, publicly traded REITs work best as a core, long-term holding. I’ve watched clients panic-sell during market downturns because they focused on daily price movements instead of dividend income and long-term property values. Treat them like bonds that pay higher income, not like growth stocks.
Private REITs and Non-Traded REITs
Private REITs (sometimes called non-traded REITs) are structured similarly to public REITs but don’t trade on exchanges. You typically buy them through financial advisors, broker-dealers, or direct from the sponsor.
These funds invest in the same types of properties as public REITs but value their shares based on net asset value (NAV)—an appraisal-based estimate of what the underlying properties are worth—rather than daily market pricing.
FINRA warns investors that non-traded REITs come with unique risks, especially around fees, liquidity, and valuation.
Who they fit: Investors seeking stable, appraisal-based valuations and willing to sacrifice liquidity for potentially smoother returns. Often used by retirees or those who dislike stock market volatility.
Pros:
- Less day-to-day price volatility (valuations updated monthly or quarterly)
- Often focus on specific property types or strategies public REITs don’t offer
- May offer higher yields than public REITs
- 1099-DIV tax reporting (simpler than K-1s)
Cons:
- Illiquidity—most have limited or no redemption options; you may wait months or years to exit
- High fees—upfront selling commissions (often 3–7%) plus ongoing management fees
- Redemption gates—the fund can limit or suspend redemptions if too many investors want out
- Valuation risk—NAV is based on appraisals, which can lag real market conditions
- Less transparency than publicly traded REITs
I’ve seen non-traded REITs work well for clients who understand and accept the illiquidity. But I’ve also had clients discover too late that they couldn’t access their money when they needed it. Read the prospectus carefully and never invest emergency funds here.
Real Estate Crowdfunding and Syndications
This is where things get interesting—and more complex.
Real estate crowdfunding platforms (like Fundrise, RealtyMogul, CrowdStreet) and private syndications allow you to invest directly in specific properties or portfolios, often alongside other investors. You’re essentially pooling money to buy an apartment building, a portfolio of single-family rentals, a storage facility, or a development project.
These deals are usually structured as private placements under SEC regulations like Reg D. The SEC explains private placements as securities sold without a public offering, often with restrictions on who can invest.
Many syndications require you to be an accredited investor—meaning you earn at least $200,000 annually (or $300,000 with a spouse) or have a net worth above $1 million excluding your primary residence. The SEC defines accredited investor status here. Some platforms offer non-accredited options with lower investment minimums, but the best deals often require accreditation.
You’ll typically invest a minimum of $10,000 to $50,000 per deal (sometimes more). The sponsor (the team acquiring and managing the property) handles day-to-day operations. You receive quarterly or monthly distributions based on rental income, and a larger payout when the property sells (usually 3–7 years later).
Who they fit: Accredited investors with capital to deploy, a long time horizon, and comfort with concentrated bets on specific properties and sponsor teams.
Pros:
- Direct exposure to specific properties and markets (you choose an Austin apartment building, a Denver industrial project, etc.)
- Potential for attractive returns, often targeting 12–18% annualized (though not guaranteed)
- Preferred return structures (you get paid first, before sponsors take profit)
- Potential tax benefits through depreciation (more later)
- Alignment with sponsors who often co-invest their own money
Cons:
- Illiquidity—capital is typically locked up for 3–10 years
- Concentration risk—one property or small portfolio, not diversified
- Sponsor risk—your returns depend entirely on the sponsor’s competence and integrity
- K-1 tax forms—more complex than 1099s, may delay tax filing
- Minimum investments can be high
- Leverage risk—many deals use 60–80% debt, amplifying both gains and losses
- Less regulatory oversight than public REITs
What worked best for my clients was treating these as satellite investments, not core holdings. Invest in 3–5 different deals across platforms and sponsors to diversify. Never put more than 10% of your net worth into any single syndication.
Real Estate Debt Funds
Real estate debt funds take a different approach: instead of owning properties, you’re lending money to developers and property owners, earning interest.
These funds might invest in:
- First mortgages on commercial properties
- Mezzanine debt (riskier, subordinated loans with higher interest)
- Bridge loans for short-term financing
- Hard money lending
You earn fixed or floating interest, typically 6–10% annually, with less volatility than equity real estate. If the borrower defaults, the fund can foreclose and sell the property (though this is time-consuming and uncertain).
Who they fit: Conservative real estate investors prioritizing income and downside protection over appreciation.
Pros:
- More predictable income than equity investments
- Lower volatility
- Priority claim over equity investors if properties underperform
- Often lower correlation with stock markets
Cons:
- No upside participation—you earn interest, not property appreciation
- Still illiquid in many cases (private debt funds may lock up capital for 2–5 years)
- Credit risk—borrowers can default
- Interest rate risk—rising rates can hurt bond-like investments
- K-1 or 1099 tax reporting depending on structure
I’ve recommended debt funds to clients nearing retirement who wanted real estate exposure with less volatility. They’re not exciting, but they can provide steady income with some protection if property values fall.
Comparison: Your Real Estate Investment Options
Here’s how these options stack up side by side:
| Investment Type | Liquidity | Minimum Investment | Typical Fees | Tax Form | Time Horizon | Best For |
|---|---|---|---|---|---|---|
| Publicly Traded REITs | Daily (high) | 50–50–200 per share | 0.05–0.75% (ETFs) | 1099-DIV | Any (1+ years) | Beginners, liquidity-focused investors, tax-advantaged accounts |
| Private/Non-Traded REITs | Low (quarterly/annual redemptions with limits) | 1,000–1,000–25,000 | 1–3% annual + 3–7% upfront | 1099-DIV | 3–7 years | Income seekers who dislike volatility, willing to sacrifice liquidity |
| Crowdfunding/Syndications | Very low (locked until sale) | 10,000–10,000–50,000+ | 1–2% annual + 20% profit share (sponsor) | K-1 | 3–10 years | Accredited investors, long horizon, comfortable with concentration |
| Real Estate Debt Funds | Low to medium (depends on fund) | 5,000–5,000–50,000 | 1–2% annual | K-1 or 1099 | 2–5 years | Conservative income investors, downside protection focus |
Keep in mind these are generalizations. Individual funds and deals vary widely. Always review offering documents before committing capital.
Build Your Plan: Allocation, Taxes, Due Diligence, and Action Steps
Now that you understand your options, how do you actually build a real estate portfolio without becoming a landlord?
Start With Allocation
A question I hear constantly: “How much of my portfolio should be in real estate?”
There’s no universal answer, but here’s what I’ve seen work well:
- Conservative allocation: 5–10% for beginners or those who already own a home (your residence counts as real estate exposure)
- Moderate allocation: 10–20% for investors seeking meaningful diversification and income
- Aggressive allocation: 20–30% for experienced investors comfortable with illiquidity and complexity
Remember, if you own your home, you already have significant real estate exposure—often 30–50% of your net worth. Don’t over-concentrate.
Begin with publicly traded REITs or REIT ETFs to establish a liquid, transparent core. Once you’re comfortable and have capital you won’t need for 5+ years, consider adding private investments.
One client started with $10,000 in a broad REIT ETF inside her Roth IRA. After a year, she added a $25,000 investment in a real estate crowdfunding deal focused on multifamily properties in the Southeast. Two years later, she allocated another $15,000 to a private debt fund. This phased approach let her learn as she went without overcommitting.
Account Placement and Tax Considerations
Where you hold real estate investments matters—a lot.
Publicly traded REITs in tax-advantaged accounts:
REIT dividends are typically taxed as ordinary income (your top marginal rate, potentially 22–37%). That’s higher than the 15–20% rate on qualified stock dividends.
For this reason, I usually recommend holding REITs inside IRAs, 401(k)s, or other tax-deferred accounts. You avoid annual dividend taxes and let the income compound.
The Section 199A deduction:
If you do hold REITs in a taxable account, you may qualify for the Section 199A qualified business income deduction, which lets you deduct up to 20% of REIT dividends. The IRS provides guidance on 1099-DIV forms and how REIT dividends are reported.
This deduction, part of the 2017 Tax Cuts and Jobs Act, significantly reduces the tax bite on REIT income. But rules are complex and income limits apply. Consult your tax advisor.
Private real estate syndications in taxable accounts:
Here’s where things flip. Private deals often generate paper losses through depreciation in the early years, shielding cash distributions from taxes. You might receive $5,000 in cash but report a $2,000 loss on your K-1.
These tax benefits work only in taxable accounts, not IRAs. So if you’re investing in syndications, your taxable brokerage account or a self-directed IRA (complex, not for beginners) makes sense.
You’ll receive a K-1 form instead of a 1099. K-1s are more complicated, often arrive late (March or even April), and may require a tax professional’s help. Budget for that.
The bottom line on tax strategy:
- Public REITs → Tax-advantaged accounts (IRAs, 401(k)s)
- Private syndications with depreciation → Taxable accounts
- Real estate debt funds → Depends on structure; check with the fund
Tax planning around real estate can save you thousands annually. It’s worth a conversation with a CPA who understands real estate investments.
Your Due Diligence Checklist
Before you invest a single dollar in private real estate—whether crowdfunding, syndications, or non-traded REITs—work through this checklist.
1. Understand the sponsor or platform
- How long have they been operating?
- What’s their track record? (Ask for historical performance data)
- Have they returned capital to investors on prior deals?
- Do they co-invest their own money?
- What happens if the deal underperforms—do they have a backup plan?
2. Review offering documents carefully
For syndications, you’ll receive a Private Placement Memorandum (PPM). For non-traded REITs, a prospectus. These are dense, legal documents. Read them anyway, or have an advisor review them.
Look for:
- Fee structures (acquisition fees, management fees, profit splits)
- Redemption terms and gates
- Leverage (how much debt the deal uses)
- Projected vs. guaranteed returns (spoiler: nothing is guaranteed)
- Conflicts of interest (Is the sponsor also the property manager? Are fees layered?)
3. Evaluate the property and market
- What type of property? (Multifamily, industrial, retail, etc.)
- Where is it located, and what are the local market fundamentals? (Job growth, population trends, supply/demand)
- What’s the business plan? (Buy and hold? Renovate and reposition? Development?)
- What’s the exit strategy and timeline?
4. Assess risk and liquidity
- Can you afford to lose this capital entirely? (Private deals are risky)
- Do you genuinely not need this money for 5+ years?
- What’s your backup plan if the deal fails or the sponsor suspends redemptions?
5. Diversify, don’t concentrate
Never put all your private real estate capital into one deal or one sponsor. Spread across multiple investments, property types, and geographies.
I once worked with a client who invested $100,000 into a single syndication because the projected returns looked amazing. The sponsor mismanaged the property, and the deal failed. He lost 60% of his capital. That pain could have been avoided with diversification.
Your First 30 Days: A Simple Action Plan
You’re convinced real estate makes sense. What do you actually do this month?
Week 1: Educate and clarify goals
- Read SEC guidance on REITs and private placements (links above)
- Define your goals: Are you seeking income? Diversification? Tax benefits?
- Determine your time horizon and liquidity needs
Week 2: Assess your accredited investor status and available capital
- Calculate whether you meet accredited investor criteria (if interested in syndications)
- Review your budget and determine how much you can allocate to real estate without compromising your emergency fund or short-term needs
- Decide on starting allocation (5%, 10%, 15% of investable assets)
Week 3: Open accounts and research options
- If investing in public REITs, ensure you have a brokerage account (Fidelity, Vanguard, Schwab, etc.)
- Research 2–3 REIT ETFs or individual REITs (look at Vanguard Real Estate ETF (VNQ), Schwab U.S. REIT ETF (SCHH), or individual names like Prologis, Realty Income, AvalonBay)
- If interested in private investments, research crowdfunding platforms (Fundrise, RealtyMogul, CrowdStreet) and read reviews
Week 4: Make your first investment
- Start small—invest in a public REIT or REIT ETF with an amount you’re comfortable with (1,000–1,000–10,000)
- Set up automatic dividend reinvestment if building long-term wealth
- Track your investment in a simple spreadsheet (date, amount, vehicle, fees, expected return)
Month two and beyond: Monitor performance, continue learning, and consider adding private real estate once you’re confident.
The key is to start. Real estate investing without being a landlord doesn’t require a real estate license or a construction background. It requires patience, due diligence, and a willingness to let professionals handle the hard work while you reap the benefits.
The Bottom Line
Real estate remains one of the most reliable paths to building wealth, but direct property ownership isn’t the only way—or even the best way for most people.
Whether you choose the liquidity and transparency of publicly traded REITs, the steady income of real estate debt funds, or the targeted exposure of private syndications, you can gain meaningful real estate exposure without fixing toilets or chasing rent checks.
What matters most is matching your investment choices to your financial goals, time horizon, and risk tolerance. Start with liquid, transparent options. Build knowledge and confidence. Diversify across strategies and sponsors. And never invest capital you might need in the next five years into illiquid deals.
The clients I’ve seen build the most wealth through real estate are rarely the flashiest or most aggressive. They’re the ones who invest consistently, think long-term, and resist the temptation to chase the highest projected returns without understanding the risks.
You don’t need to be a landlord to build wealth through real estate. You just need to be a thoughtful, patient investor.
Frequently Asked Questions
Do I need to be an accredited investor for these strategies?
Not for all of them. Publicly traded REITs, many private REITs, and some crowdfunding platforms (like Fundrise) are open to non-accredited investors with minimums as low as 500–500–1,000.
But many of the highest-quality private syndications, real estate funds, and crowdfunding deals are restricted to accredited investors. The SEC defines an accredited investor as someone earning 200,000+annually(200,000+annually(300,000+ with a spouse) or holding a net worth above $1 million excluding their primary residence.
If you’re not accredited, focus on public REITs, non-accredited crowdfunding platforms, and interval funds open to all investors. As your income and net worth grow, more options will become available.
How are REIT dividends taxed, and what is the 199A deduction?
REIT dividends are generally taxed as ordinary income, meaning they’re taxed at your marginal income tax rate (10% to 37% federally, depending on your bracket). This is less favorable than qualified stock dividends, which are taxed at 15% or 20% for most investors.
But there’s a silver lining: the Section 199A qualified business income deduction allows many taxpayers to deduct up to 20% of REIT dividends, effectively reducing the tax rate. The IRS provides details on Form 1099-DIV, which you’ll receive from your REIT or brokerage.
If you’re in the 24% tax bracket and claim the full 199A deduction, your effective tax rate on REIT dividends drops to about 19.2%. Income limits and other factors apply, so work with a tax advisor to maximize this benefit.
For simplicity and tax efficiency, many investors hold REITs in tax-advantaged accounts like IRAs, where dividends grow tax-deferred or tax-free (Roth IRAs).
Private syndications are different—they often generate K-1s with depreciation benefits that can shelter cash distributions from taxes in the early years. These work best in taxable accounts.
How much of my portfolio should be in real estate if I’m not a landlord?
A reasonable range for most investors is 10–20% of your total investment portfolio, though this depends on your goals, risk tolerance, and whether you own your home.
If you already own a home, you have substantial real estate exposure (often 30–50% of your net worth). In that case, limiting investable real estate to 10–15% makes sense to avoid over-concentration.
If you rent and want meaningful real estate diversification, 15–25% might be appropriate.
From experience, I’d suggest:
- Start with 5–10% if you’re new to real estate investing
- Scale to 10–15% once you’re comfortable with how REITs or funds perform and fit your cash flow needs
- Consider 15–25% if you’re experienced, have long time horizons, and want significant exposure
Never allocate so much to illiquid private real estate that you’d be forced to sell at a loss in an emergency. Liquidity and diversification matter more than chasing the highest potential returns.
Build slowly, learn as you go, and adjust based on what works for your financial situation.
Disclaimer: This content is for educational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Real estate investments carry risk, including potential loss of principal. Consult with a qualified financial advisor and tax professional before making investment decisions.