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March 2, 2020

3 Real Estate Investing Strategies for Minimalists

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For years now, my wife and I have been sitting on the sidelines of real estate investing. We’ve been watching people grow their wealth, expand their portfolio and grow their passive income. 

We have the money to jump into the single-family rental property game. In fact, we saved up over $100,000 over the past few years to buy our first property in cash. 

Our family is convinced that owning rental properties would help us build wealth and we’re financially prepared to do it. But still, we sit waiting and waiting to make it become a reality. 

I didn’t realize the reason until recently … We’re strapped for time and we have a deep desire to maintain a minimalist lifestyle. 

As young parents, our lives are crazy right now. 

  • We have two kids under 10
  • Nicole just started a new job (that she loves) but she’s still getting used to
  • I transitioned from my career to work on my small business full-time
  • We have a desire to be present, loving and involved parents (it’s always a work in progress)
  • Oh, and when we have time, we want to take care of our health, being there for family, make and keep friendships and be involved in our community

With all those responsiblities, desires and goals, managing a rental property has fallen to the bottom of the list of our priorities. We know how important it is to plan today so we can have a better tomorrow, but we’re just looking to survive today lately!

Less is More For Us Lately

After reading the book Essentialism by Greg McKeown, I came away with a mantra of “If it’s not a ‘Hell Yeah’, then it’s a ‘No’”. And right now, researching, finding, buying, fixing up, maintaining and managing a rental home does not feel like a “Hell Yeah”. 

It feels good to say “no” to buying a rental property right now actually. Actually, it feels like a relief.

I’ve had visions of leaky toilets, unruly tenants and late rent payments when I’m having an already busy week at home. The comfort that comes from realizing I don’t have to deal with it warms my minimalist heart. 

So where does our family go from here? We’ve eliminated all of our debt, paid off our mortgage early and now we want to build wealth, but not become busy landlords. 

I may not have the answer today, but here are 3 minimalist approved real estate investing strategies that are intriguing me lately.

1. Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) are an excellent way to get into real estate without physically buying your own rental property. I think REITs are the ultimate minimalist real estate investing option. 

What is a REIT?

A REIT is a company that owns and operates real estate. This can be commercial real estate like malls, office buildings and warehouses and also single-family rentals as well. Instead of owning one property, you would essentially own a small fraction of a lot of properties. This is a great way to stay diversified!

How do you invest in a REIT?

Just like stocks, bonds, mutual funds and index funds, you can invest in a REIT by purchasing shares. A huge advantage to this process is that you can get into real estate investing for a fraction of the price. 

I started investing in REITs through Vanguard in my retirement portfolio and in my taxable brokerage account. I chose the Vanguard Real Estate ETF (VNQ) because of its strong performance history, the ability to grow comparably alongside the stock market and the low fees associated with the fund. 

If you are into online trading apps like M1 Finance or Robinhood, you may also have access to REIT ETFs as well.  

investor app

What are the advantages of investing in REITs?

The first and most important advantage of REITs for me is that you can invest in real estate without physically buying or managing a property. That’s a nice feeling. Since I’m all about the minimalist approach to investing lately, having less responsibility with a strong upside is a beautiful feeling. 

Secondly, the results are pretty impressive without doing a ton of legwork. Results will vary, of course, but since it’s inception in 2001 VGSLX (Vanguard Real Estate Index Fund Admiral Shares), VNQ’s index fund equivalent, had an average annual return of 10.65%. So $10,000 invested 10 years ago would be $29,141.90 today. For an asset that requires little to no management and no debt to hold, that screams “minimalism” to me. 

What are the disadvantages?

When you’re not investing your own physical property, you have a lot less control of what happens with your investment. REITs can fluctuate just as the stock market does and you may experience some uneasiness with that. 

With broad REITs like VGSLX or VNQ, you also lose the ability to invest locally in your community or in certain geographic areas of the country. This may be a sticking point for some. 

2. Partnering with a Property Manager

My next favorite option is working with a trusted property management company for single-family rentals. This way, I can enjoy all the financial benefits of owning real estate with less daily responsibility. 

I’ve been inspired by the real estate investors I’ve interviewed on my podcast that leave the property management up to someone else and they just get sent checks. Yes, they have to pay 8-12% of rents to the property management company, but man, that sounds completely worth it to me. 

One real estate investor I interviewed on my show was named Rich Carey. He owns 20 rental properties outright, and most of them he never even saw before buying them. He served in the military in Japan and Germany and partnered with a real estate agent and property management company to buy them and manage them on his behalf. He’s now able to retire early because of his investments.  

Buying sight unseen sounds incredibly uncomfortable to me, but I suppose with a little risk comes some major reward. 

How do you find a good property manager?

There are stories like Rich’s where the property management solution he found was an awesome success. And then there are real estate horror stories that leave you completely freaked out about trusting anyone. 

Like most things in life, finding a good property manager boils down recommendations from friends, family or trusted resources.

BiggerPockets is a great resource for all things rental real estate and even finding a property manager. They are quick to point out that it’s important to always ask questions before choosing your partner. Here are some good ones they reference:

  • Are you a licensed property manager?
  • How do you screen potential tenants?
  • How do you collect rent?
  • Do you have references?
  • How do you handle maintenance work?

Roofstock is also an option that can make the process easier. They have a marketplace of vetted properties that are already filled with occupants. Additionally, their network helps you to find a trusted property manager in the area you’re searching in. 

3. Real Estate Crowdfunding

After interviewing Sam Dogen, the young multi-millionaire from San Francisco, he piqued my interest in real estate crowdfunding. Since 2016, he has earned 15% per year from his 18 real estate crowdfunding equity investments around the country. 

What is Real Estate Crowdfunding?

According to Dogen, “Real estate crowdfunding is an effective way for investors to pool their financial and intellectual resources to invest in properties and projects much bigger than they could afford or manage on their own.”

This sounds like another minimalist real estate investing tool to have in your back pocket. This time, you have the ability to invest in commercial real estate for a fraction of the price and with a fraction of the resources. 

What are the advantages of real estate crowdfunding?

Before the JOBS Act in 2012, crowdfunding was only available to accredited investors. Those are folks who are typically making more than $200,000 per year or have a net worth over $1,000,000. 

After the passage of the act, that opened up the door to more investors. So one of the major advantages is that you can now get into commercial real estate with as little as $1,000. Dogen suggests checking out companies like Fundrise for non-accredited investors and Crowdstreet for accredited investors. 

Real estate crowdfunding definitely has a minimalist touch to it as well. In fact, Dogen recently sold his physical rental property because it became too much of a hassle as a young father and opted to invest in real estate crowdfunding more. With his real estate crowdsourcing investments, he has spent “zero” time managing properties or tenants and as a young parent, that makes him feel great. 

Related Interview: How This Stay-at-Home Dad Makes $200,000 Per Year in Passive Income

What are the disadvantages of real estate crowdfunding?

As opposed to REITs, you are usually investing in a single asset when it comes to real estate crowdfunding. When you’re investing a large amount of money in any single asset, that can be risky. 

Also, real estate crowdfunding has very low liquidity. So, if you want to sell your investments soon, it’s going to be difficult and may even take years to get your capital returned. The return is higher than REITs is because you can’t get your money out quickly. 

It makes sense though. If you want a higher return, you’re going to have to risk a bit more. The same goes for buying your own rental property too. 

Final Thoughts on Investing in Real Estate the Minimalist Way

For now, REITs are a great way for me to jump into the real estate game without making any major commitments. 

As a young parent, this is exactly where I want to be right now. Fewer commitments and more flexbility while still investing for the future. 

As more time and capital free up, I may look into partners like Roofstock for single-family rentals or Fundrise for commercial real estate crowdfunding. But, for now, REITs are my minimalist real estate investing tool of choice. 


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What are your thoughts on investing in real estate the minimalist way?

Please let us know in the comments below.


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Andy Hill

Andy Hill is the host of the Marriage, Kids and Money Podcast which focuses on helping young families build wealth. This 5-star rated podcast was nominated as "Best New Personal Finance Podcast" by Plutus. Andy's advice and personal finance experience have been featured in major media outlets like Business Insider, MarketWatch and NBC News.

2 Comments

  • This is a timely list for us! After a frustrating run with our single family rental, we’re actually moving into it for a bit to rehab and get the two years for tax purposes. Then, we’ll decide whether to sell or not. We’re leaning toward the sale, but want some real estate exposure still. I think we’ll go the REIT route too.

    Reply
    • It’s tough … a friend of mine said it the other day. “It’s tough to be a successful business owner, investor, father AND husband … You can’t do it all.” It’s a realization I’m coming to. So if REITs help me get into real estate, for a lot less stress, I’m in.

      Reply

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