Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

Real estate investing for beginners

Benefits, drawbacks and different ways to get started.

Real estate can have numerous benefits for investors. Carefully selected properties can provide considerable returns, regular cash flow, diversification and various tax benefits. But like any investment, real estate investing has its risks.

Let’s look at some of the reasons you might want to invest in real estate, your options and what to consider as you look to get started.

3 reasons to invest in real estate

People invest in real estate for all sorts of reasons, but many find it appealing for these reasons:

1. Diversification

Real estate has low correlation with stocks and bonds, which can help diversify a portfolio. If you diversify within real estate itself, there are several ways to gain exposure to the market.

2. Tangible, appreciable assets

Real estate is a popular tangible asset among investors because it consistently increases in value over time and outperforms many other investments.

3. Flexibility

Real estate is a flexible investment that offers not only many ways to invest your money but also flexibility in what you can do with your property. You can:

  • Sell it
  • Rent it out
  • Rezone it for different purposes
  • Subdivide it into multiple residential units

Real estate investing pros and cons

Like any investment, real estate has its upsides and drawbacks.


  • Can provide an additional and steady source of cash flow
  • Real estate has unique tax benefits
  • You can leverage borrowed money to make money through appreciation
  • Portfolio diversification


  • Physical property requires upfront cash, and potentially lots of it
  • You may have to deal with unruly tenants or issues with your property
  • Physical property is often a long-term investment with poor liquidity
  • Carrying costs, such as property taxes and mortgage payments

5 ways to invest in real estate

There are five main ways to invest in real estate, each with its benefits and drawbacks.

1. Rental properties

Rental properties allow you to build equity while earning an additional income. While the majority of rent payments will likely go toward property expenses, any amount left over is profit. This is a passive income source that requires relatively little effort.

Owning a rental property also positions you to benefit from property value appreciation and various tax benefits. While rental income is taxable, expenses you incur on your rental property can be deducted from your rental income. These expenses may include mortgage interest, property tax, depreciation and repairs.

  • Consider if you want to own physical real estate and build equity while earning an additional income.
  • Look elsewhere if you want more liquidity in your real estate investment or want to avoid the headache of property management and the possibility of a difficult tenant.
  • How to invest: Secure a down payment, calculate how much house you can afford and get preapproved to jump on a good deal at a moment’s notice. You’ll also want to find the right location — low property taxes, decent schools and plenty of amenities.

Banking platform for landlords


Finder score

Go to site

Get started by connecting your existing bank account or by opening a Baselane banking account.

  • $0 monthly fee
  • 4.19% APY and up to 5% cashback
  • Banking, bookkeeping & rent collection

2. Invest in a real estate investment trust (REIT)

A REIT is a company that owns or operates income-producing commercial real estate, such as office buildings, apartment complexes and shopping malls. REITs allow investors to earn income produced from commercial real estate without having to actually go out and buy commercial real estate.

Since many of these trade on the market like stocks, specifically public REITs, this keeps the buy-in cost similar to buying stocks.

Investors can benefit from long-term capital appreciation, and REITs are required to distribute at least 90% of their taxable income to shareholders to maintain their status as a REIT.

  • Consider if you want exposure to commercial real estate, potentially high dividend yields and good liquidity but don’t want to own and manage physical properties yourself.
  • Look elsewhere if you want the greater tax efficiency of owning and managing property.
  • How to invest: Many REITs are publicly traded on stock exchanges and can be purchased or sold similarly to stocks or ETFs. These are known as publicly traded REITs. Others are registered with the SEC but aren’t publicly traded. These are known as public nontraded REITs and can be purchased through brokers like Fundrise or DiversyFund that participate in public nontraded offerings.

3. Real estate investing platforms

Real estate investing platforms are generally crowdfunding platforms that allow investors to pool their money together to fund real estate projects. These can include REITs, multifamily units and individual commercial properties.

Real estate investing platforms have taken off in recent years as they have made real estate investing much more accessible to the public. Many offer low investment minimums and simple fee structures and the ability to easily invest in real estate projects throughout the country. Note that some platforms are only available to accredited investors. But nonaccredited investors still have several options.

  • Consider if you want geographic diversification, low investment minimums and the ability to passively invest in real estate.
  • Look elsewhere if you want greater control over your investments and don’t want to pay fees.
  • How to invest: Decide on a platform after comparing fees, required minimum investments and investment options. Then, fund your account and invest. Some examples of real estate investing platforms are Ark7 and Yieldstreet.

4. Rent out a room

If you’re not ready to commit to buying a full-fledged rental property, you might consider renting part of your home. There are a few ways to do this. You could rent out a room through a site like Airbnb, though this would likely be on a short-term basis and wouldn’t necessarily provide a steady source of income as tenants move in and out. You could also offer a finished basement as a rental unit, which would provide more separation and make it easier to secure a long-term tenant. If you have a detached guest house, even better.

  • Consider if you want to dip your toe into real estate investing and have a spare room or living space but don’t want to commit to buying a separate property.
  • Look elsewhere if you’re not comfortable sharing your space with a stranger or you don’t want to give up the freedom to use your space as you please.
  • How to invest: If you go the Airbnb route, create an account and set up your listing. But before you do, check your city’s zoning laws. There might be conditions to renting out a room.

5. Flip a property

Investors who flip houses have no intention of holding onto them. Flippers buy properties, fix them up and quickly resell them for a profit. Since it takes time to renovate, list and sell a property, “quickly” can mean anywhere from a few months to a year. But an ideal flip is a property in a good location that has the potential to increase in value after renovations.

While flipping houses has the potential to deliver fast, strong returns, there are plenty of unique risks. Namely, the property turns out to be less easily repairable than you thought and you end up dumping more money into it than you had planned. Or the market shifts and you’re stuck paying for a property you had no intention of holding on to.

  • Consider if you understand the local market and want to make a quick profit.
  • Look elsewhere if you don’t have the capital for unexpected expenses or you want to be more passive with your real estate investing.
  • How to invest: Research your local market, set a budget and get funding for your flip. Hiring a realtor with flipping experience can help provide the market knowledge you need to find a suitable flip.

Compare platforms to invest in real estate

1 - 5 of 5
Name Product Eligible investors Annual fee Average return
Ark7 Real Estate Investing
Not rated yet
Ark7 Real Estate Investing
4% to 7%
Invest in income-producing rental homes with as little as $20 per share (Ark 7 charges a one-time 3% sourcing fee and a monthly management fee of between 8–15% of the rental income).
Finder Score: 3.5 / 5: ★★★★★
7% to 15%
Invest in art, real estate and commercial offerings all in one place.
Finder Score: 2.8 / 5: ★★★★★
Accredited only
Real estate investing platform that gives investors direct access to individual commercial real estate investment opportunities
Not rated yet
Invest directly in commercial real estate through this crowdfunding platform. But you’ll pay variable fees depending on the investment type.
Arrived Homes
Finder Score: 3.3 / 5: ★★★★★
Arrived Homes
5.21% to 6.42%

Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.

Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

Bottom line

Real estate investing is a great way to diversify your investments and potentially create extra income. Invest in real estate passively through REITs or crowdfunding platforms — or invest actively by owning physical properties.
But investing in real estate has unique risks you should clearly understand before you jump in. Spend some time researching the different ways to invest in real estate and see which approach is best for you.

More guides on Finder

  • What is a REIT?

    What is a REIT and should you invest in one?

  • ArborCrowd review

    Looking to invest on ArborCrowd? Here’s what to know before you apply.

  • Groundfloor review

    This platform connects investors with house-flipping investment opportunities with low minimums and no platform fees.

  • DiversyFund review

    Pros, cons and feedback to consider before you sign up for DiversyFund.

  • RealtyMogul review

    Invest in large-scale real estate through this crowdfunding platform.

  • Cardone Capital review

    Invest in real estate with as little as $5,000.

  • Roofstock review

    A marketplace to buy and sell rental properties.

  • Patch of Land review

    This real estate investment platform can bring solid returns, though there’s concern over loan defaults.

  • Fundrise review

    A real estate investment platform accessible to anyone.

Ask a Question provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site