Alternative Real Estate Investment Options for Gen Z

Gen Z is facing a giant YIKES. At least when it comes to the housing market. 

According to data from the Federal Finance Housing Agency, the median home price rose by 74% from 2010 to 2022. During that same period, average wages rose by just 54%. How is the next generation of homebuyers supposed to afford a home under these conditions? This doesn’t even account for the crippling student loan debt that many college grads enter adulthood with ($37,338 on average). Oh, and then there are the recent interest rate hikes that have diminished buying power by around 25%.

But there is some good news for this up-and-coming generation of would-be homebuyers: tech advances have made it easier than ever to place alternative real estate investments. These investment types allow you to gain the benefits of traditional real estate investing without the excessive upfront and ongoing costs. Even better: you may be able to earn enough money from these investments to eventually buy a home of your own!

Here are the top 5 alternative real estate investment options for Gen Z (in no particular order).

REITs (Real Estate Investment Trusts) are companies that invest in income-producing properties (like apartments, retail storefronts, or industrial spaces). Many REITs are publicly traded, which means that anyone can buy a stake in the company and earn a share of the profits. 

Stakes are typically offered for as little as $1,000 and can provide reliable, passive returns. 

Virtual real estate is a plot of land in the digital world. Certain tech circles are all-in on “Web 3,” which theoretically allows users to own digital assets in the Metaverse. These digital spaces can then potentially generate income in the same way as tangible real estate (for example, buying low and selling high, or renting the space to those who want to use it for a set period. 

This is a highly speculative investment with extreme risk, so you should tread lightly. Don’t invest more than you can afford to lose.  

House hacking is when a homeowner generates income from their property, and it’s one potential path to make homeownership more accessible for Gen Z. Imagine if, instead of buying a single-family home, you purchased a four-unit property. Then, you live in one of the units and rent out the others. Depending on your local market conditions, some house-hackers are able to use the rental income to completely cover their mortgage. 

But there’s a hurdle: you need to be able to afford the upfront cost to purchase the property. And the upfront cost of a four-unit property will likely be more than that of a comparable-quality single-family home. But some home loans are designed to help buyers without a large down payment. Conventional loans may offer down payments as low as 3% of the purchase price, and FHA loans may be available with a down payment as low as 3.5%. 

Crowdfunding is when multiple investors pool their money to finance a real estate project. This hyper-flexible investment type can allow you to invest in projects like single-family home flips or multi-family developments.

With such varied opportunities, there really is an option for everyone. You can find short-term or long-term projects and deals with low investment minimums. Plus, because crowdfunded projects are professionally managed, your investment income is passive. Zero hassle!

Real estate syndication takes crowdfunding a step further. Syndication creates a formal legal structure in which you become a member of the LLC that owns the property. This gives you an interest in the underlying real estate, which can increase the stability and transparency of the deal. Plus, you benefit from the same advantages of crowdfunding projects: low minimum investments, unique deals, and professional project management.

The deck may seem stacked against Gen Z in terms of investment opportunities. But with these five alternative real estate investment options, Gen Zers can earn the benefits of real estate investing and start building wealth!