A million-dollar home often conjures images of a mansion, but in Silicon Valley, things can be a bit different.
At 10036 Carmen Road in Cupertino, California, sits a one-bedroom, one-bathroom home with 384 square feet of living space. The tiny home recently went viral due to its $1.7 million listing price.
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The tiny house received an “insane amount of attention,” listing agent Faviola Perez told SF Gate. But she insists the key to the property’s value is in its land.
The description on Zillow highlighted the property’s location as being in a top-tier school district, its 7,841-square-foot lot surrounded by $4 million to $5 million homes and its close proximity to major commuting routes, underscoring the land’s significant investment potential.
The property was also labeled as “a powerhouse of possibilities” and a “canvas waiting for your personal touch.”
According to NBC Bay Area, the small abode was originally built in 1948 as a hunting lodge.
Despite the substantial listing price, Perez told SF Gate the property received eight offers and was sold for “considerably over asking.” The sale was expected to close in May.
This story showcases the soaring values in certain real estate markets, but it’s important to remember that investing in real estate doesn’t always require buying a house. Here’s a look at three alternative strategies that don’t involve hefty upfront investments.
Invest in publicly traded REITs
Real estate investment trusts, or REITs, are companies that own income-producing real estate like apartment buildings, shopping centers and office towers.
You can think of a REIT as a giant landlord: it owns a large number of properties, collects rent from the tenants and passes at least 90% of its income to shareholders in the form of dividend payments.
It’s easy to invest in REITs because many are publicly traded.
Unlike buying a house — where transactions can take weeks and even months to close — you can buy or sell shares in a REIT any time you want throughout the trading day. That makes REITs one of the most liquid real estate investment options available.
Also, there’s no limit as to how much — or how little — your investment can be. While buying a house usually requires a hefty down payment, you can buy shares in a REIT with as much money as you are willing to spend.
Read more: Jeff Bezos and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
Invest on a crowdfunding platform
Crowdfunding has become a buzzword in recent years. It refers to the practice of funding a project by raising small amounts of money from a large number of people.
These days, many crowdfunding investing platforms allow you to own a percentage of physical real estate — from rental properties and commercial buildings to parcels of land.
Because of the greater risks involved in real estate crowdfunding, some platforms are targeted for accredited investors, sometimes with minimum investments that can reach into the tens of thousands of dollars. To be an accredited investor, you need to have a net worth of over $1 million or an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the past two years.
If you’re not an accredited investor, many platforms let you invest small sums if you like — even $100.
Such platforms make real estate investing more accessible to the general public by simplifying the process and lowering the barriers to entry.
Sponsors of crowdfunded real estate deals usually charge fees to investors as well.
Invest in ETFs
Picking the right REIT or crowdfunded deal requires plenty of due diligence on your part. If you’re looking for an easier, more diversified way to invest in real estate, consider exchange-traded funds.
You can think of an ETF as a portfolio of stocks. And as the name suggests, ETFs trade on major exchanges, making them convenient to buy and sell.
Investors use ETFs to gain access to a diversified portfolio. You don’t need to worry about which stocks to buy and sell. Some ETFs passively track an index, while others are actively managed. They all charge a fee — referred to as the management expense ratio — in exchange for managing the fund.
There are many ETFs that focus on real estate. Options such as the Vanguard Real Estate ETF (VNQ) and the Real Estate Select Sector SPDR Fund (XLRE) could provide a starting point for further research.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
