7 Low-Risk Real Estate Investment Options for Beginners

Thinking about diversifying your investments? Real estate offers a lot of benefits that draw even novice investors. To help you dip your toe into them, here are 6 low-risk real estate investment strategies that you can step right into.

Main Takeaways

• Low-risk real estate strategies like REITs, crowdfunding, and ETFs let investors earn income without directly owning or managing property.
• Owner-occupied options such as house hacking or renting out an ADU/room offer passive income with minimal upfront costs.
• Turnkey rental properties provide near-instant rental income with little renovation needed—ideal for investors seeking a quick start.

6 Top Low-Risk Real Estate Investment Strategies

In our years of experience as a home rental management company, we have worked with hundreds of investors, new and seasoned alike. These 6 low-risk real estate investment strategies are the ones that they have succeeded in the most.

That said, we owe it to you to be transparent: there is no such thing as a completely, 100% risk-free real estate investment strategy. Yes, the ones we’ll share tend to come with lower risks, but that doesn’t mean there is no risk at all. Some level of risk is part and parcel of investing in anything, period–it’s all about how you prepare for and mitigate those risks that matters.

1. Invest in REITs (Real Estate Investment Trusts)

When it comes to low-risk real estate investment strategies, one of the safest ways is to buy real estate investment trusts (REITs). But what are REITs exactly?

REITs work by allowing investors to buy small shares of the company that owns commercial real estate. When we say commercial real estate, these are the properties that are built to generate income, such as office buildings, retail spaces, hotels, apartment complexes, and the like.

From what we’ve witnessed, what makes REITs a particularly low-risk real estate investment is that you’re not actually buying or managing any of the property. Instead, you simply earn revenue through dividends, which REITs are known to yield significantly high. That tends to be far safer, financially.

2. Real Estate Crowdfunding Platforms

If you want to start investing in real estate without putting a huge investment upfront, crowdfunding can be the answer. This investment strategy involves multiple investors pooling their resources in order to fund the construction of a real estate project.

The best part of crowdfunding is that you can invest in multiple crowdfunding platforms to diversify your portfolio and minimize the risk of loss from a single real estate project. Not to mention that crowdfunding has a significantly lower capital requirement, so more people can start investing without the need for a loan.

3. House Hacking 

House hacking is the practice of renting out a portion of a property you already live in. It’s generally low-risk, especially if you already own the house. Since you’ll be living in one unit and renting out the other, you get to generate income while being close enough to manage the property yourself, effectively.

4. Rent Out a Room or ADU (Accessory Dwelling Unit)

Accessory dwelling units (ADUs) have been increasingly popular over the years, especially in Texas, where ADUs are highly encouraged to help with the growing demand for housing. The same goes for renting out a room on a property that you own.

Leasing is considered a highly lucrative and lower-risk real estate investment option since you already own the property. Having tenants live in the space you do not occupy allows you to generate passive income with minimal upfront investment. You can gain enough income to cover mortgage, utilities, and other living expenses. Not to mention that renting a room or an ADU offers flexibility where you can benefit from short-term leases and long-term agreements.

5. Real Estate ETFs

Exchange-traded funds (ETFs) work similarly to REITs in a way that they typically offer high-yield dividends. Similar to REITs, real estate exchange-traded funds provide investors with an opportunity to step into the real estate market without having to deal with the risks of home ownership or the stress of property management.

So, what is an ETF, and how does it work? A real estate ETF is a collection of companies in the real estate market – typically REITs that own commercial real estate properties. It’s viewed as a passive real estate investment strategy, since most of what you do is investing through a brokerage to gain access to a diverse group of real estate companies. Then, you receive the dividends every couple of months.

6. Turnkey Rental Properties

If you’re looking for a low-risk real estate investment opportunity that can offer quick return on investment, then a turnkey rental property may be the answer. Turnkey properties are those that are ready for occupancy off the bat. They are meant to be fully-furnished and fully-operational, making them virtually ready for occupancy with just a turn of a key. Investing in a turnkey property means that, upon purchase, you ideally can place it for rent and generate rental income almost immediately. Just remember that you may want or even need a real estate holding company to do this.

Jumpstart Your Real Estate Journey with Bay Property Management

When done right, a low-risk real estate investment can be highly lucrative. You have the opportunity to generate passive or rental income – whether it’s through REITs, house hacking, or leasing. The most important consideration is to minimize the potential risk with every investment strategy you take.

If you’re interested in owning a property and becoming a landlord, partnering with a reliable property management company, like Bay Property Management Group, is key to a positive real estate experience. We offer comprehensive property services, from tenant screening, repair coordination, and even rent collection.