The 4 main entry paths
Real estate investing entry paths at a glance
| Path | Capital required | Active management | Liquidity |
|---|---|---|---|
| Direct ownership (rental) | High — typically 15–25% down on investment property (15% for 1-unit, 25% for 2–4 units) | High — landlord responsibilities | Low — illiquid asset |
| REITs (publicly traded) | Low — any brokerage account amount | None — passive | High — trades like a stock |
| Crowdfunding platforms | Low to moderate — varies by platform | None — passive | Low to moderate — lock-up periods common |
| House-hacking | Moderate — primary-residence financing may apply | Moderate — live-in landlord | Low — tied to your home |
1. Direct ownership — rental property
Direct ownership means purchasing a property and renting it to tenants. This is the path most people picture when they think 'real estate investor.' It offers the most control — and the most responsibility. You are responsible for tenant screening, maintenance, property taxes, insurance, and vacancy periods. Returns are generated through rental income and, over time, potential appreciation. This path requires the most upfront capital and the most active involvement.
2. REITs — Real Estate Investment Trusts
A REIT is a company that owns income-producing real estate. Publicly-traded REITs are bought and sold on a stock exchange — you can buy a single share through a brokerage account. Non-traded REITs are similar in structure but not listed on exchanges, which affects their liquidity. REITs are required by law to distribute at least 90% of taxable income to shareholders as dividends. They offer real-estate exposure without landlord responsibilities, but you own shares in a company — not property directly.
REITs — regulatory and structural facts
- To qualify as a REIT, a company must distribute at least 90% of its taxable income to shareholders annually as dividends. — IRS — Real Estate Investment Trusts (REITs)
- Publicly traded REITs are regulated by the SEC and are subject to registration requirements and ongoing disclosure obligations. — SEC — Investor Bulletin: Real Estate Investment Trusts (REITs)
3. Crowdfunding platforms
Real estate crowdfunding platforms pool capital from multiple investors to fund specific properties or portfolios. Some platforms restrict participation to accredited investors only; others are open to non-accredited investors under SEC Regulation Crowdfunding or Regulation A+. Lock-up periods are common — your capital may not be accessible for months or years depending on the deal structure. The SEC's accredited investor definition applies: a net worth exceeding $1 million (excluding primary residence) or annual income exceeding $200,000 ($300,000 joint) for the prior two years.
SEC accredited investor thresholds
- Under SEC rules, an 'accredited investor' is generally an individual with annual income exceeding $200,000 (or $300,000 combined with a spouse or spousal equivalent) in each of the two most recent years, or a net worth exceeding $1 million (excluding the value of the primary residence), individually or jointly with a spouse or spousal equivalent. — SEC — Accredited Investor Definition
4. House-hacking
House-hacking means purchasing a property as your primary residence and renting out a portion of it — extra bedrooms, a basement unit, or a multi-family property where you occupy one unit and rent the others. Because you're living in the property, you may qualify for primary-residence financing (lower down payment, lower rate) rather than investment-property terms. The rental income offsets your housing cost. The tradeoff: you're a live-in landlord, managing tenant relationships while occupying the same property.