The Best Alternative Real Estate Investment Options in 2026
By Michelle Clardie on 12/14/2025.
Reviewed by Dan Gatsby.
Are you looking to invest in real estate without the hassle and expense of traditional direct ownership?
In 2026, there are several alternative real estate investment options that allow you to capitalize on the growth, resilience, and cash-flow potential of real estate withoutbecoming a landlord or shouldering the cost of buying a property on your own.
In this article, we’re breaking down the best alternative real estate investment options for 2026 and explaining the pros and cons of each one so you can decide which option(s) are right for you.
1. REITs
REITs (Real Estate Investment Trusts) are companies that invest in income-producing properties (like apartments, retail storefronts, or industrial spaces) and share the profits with investors via dividends.
Many REITs are publicly traded, which means anyone can buy shares in a REIT just like you would buy stocks through the stock market. But there are also private REITs, which are not offered to the general public, and often have higher investment minimums and strict holding periods.
Pros and Cons of REITS
The benefits of investing in REITs include:
Passive income. REITs typically pay out dividends quarterly, giving you recurring passive income to help with living expenses or reinvest for exponential growth.
Automatic diversification. A single REIT might hold dozens or even hundreds of properties, spreading your risk to avoid extreme losses on a single underperforming asset.
Liquidity. Publicly traded REITs can be bought and sold on major stock exchanges, allowing you to purchase and liquidate as you like.
Financial accountability. REITs are accountable to shareholders, and the SEC requires publicly traded REITS to submit regular financial reports.
Stronger dividend yields. Because REITs are backed by real estate, which has a history of strong returns, REITs often outperform other securities.
Professional management. REITs are managed by professionals, so you don’t have to take on any property management responsibilities.
The possible drawbacks of REITs include:
Market exposure. Like all investments, REITs can be affected by market swings, interest rate changes, and broader economic conditions.
Limited liquidity for private REITs. Non-traded REITs aren’t as easy to buy or sell as publicly traded ones, which can make it harder to access your money quickly.
Less favorable tax treatment. While REITs don’t pay corporate income tax, the dividends you receive are typically taxed as ordinary income, which is nearly always higher than long-term capital gains rates.
Management fees and expenses. Management fees and operating costs can eat into profits, potentially lowering your overall returns.
Lack of control. Investors have no control over which properties are included in the REIT’s portfolio. In fact, with this type of whole fund investing, you might not even know which assets are included in a portfolio.
2. Real Estate ETFs
Real estate ETFs (exchange-traded funds) are investment funds that hold a basket of real estate-related assets. Instead of buying individual properties, you’re buying stock market shares in a fund that typically invests in REITs, real estate operating companies, or real estate–focused securities.
Real estate ETFs often focus on a specific sector, such as:
Residential or commercial REITs
Industrial and logistics properties
Data centers and cell towers
Healthcare and senior housing
Retail and office real estate
Global or regional property markets
Because many real estate ETFs invest in REITs (which are legally required to pay dividends), the ETFs often pay dividends.
Pros and Cons of Real Estate ETFs
Benefits of real estate ETFs include:
High liquidity. You can buy and sell shares instantly during market hours, unlike physical real estate.
Low barrier to entry. Many ETFs let you invest for the price of a single share (which can be under $100 in some cases).
Diversification. One ETF can hold dozens or even hundreds of real estate companies or REITs.
Passive ownership. No tenants, repairs, or property management required.
Transparent pricing. Prices are updated in real time on the stock market.
Easy portfolio integration. ETFs fit neatly into brokerage accounts, retirement accounts, and other investment portfolios.
Low fees. Fund management fees are typically low compared to other alternative real estate investment options.
Possible downsides of real estate ETFs include:
Market volatility. Because they trade like stocks, real estate ETF values can swing up and down daily, even if the underlying properties are stable.
Less direct real estate exposure. You’re investing in companies that own real estate, not the properties themselves.
No control over assets. You can’t choose specific properties, locations, or strategies.
Dividend taxation. Real estate ETF dividends are typically taxed as ordinary income rather than at lower capital gains rates.
Fees. While usually low, ETFs still charge expense ratios that can slightly reduce returns.
Correlation with stock markets. During market crashes, real estate ETFs often fall alongside stocks, even if property fundamentals remain strong.
3. Virtual Real Estate
Virtual real estate refers to digital parcels of land and buildings that exist inside online virtual worlds or metaverse platforms rather than in the physical world.
These spaces are typically bought and sold using cryptocurrency or platform-specific tokens, and ownership is often recorded on a blockchain.
You might, for example, buy:
Virtual land plots
Digital storefronts
Event spaces
Billboard or ad locations
Virtual homes or galleries
You can earn money by renting out your virtual real estate or buying low and selling high. However, virtual real estate is a speculative investment with extremely high risk. Don’t invest more than you can afford to lose.
Pros and Cons of Virtual Real Estate
Benefits of virtual real estate include:
Low barrier to entry. Virtual plots typically cost far less than physical real estate (although Republic Realm reportedly spent $4.3 million on a virtual land acquisition in The Sandbox).
Global accessibility. Anyone with internet access can participate.
No physical maintenance. You don’t have to worry about repairs, insurance, or property taxes.
Instant transactions. Buying and selling can happen in minutes.
Programmable income. You can monetize through ads, events, games, or digital commerce.
True digital ownership (in some cases). Blockchain-based ownership can be transparent and transferable.
Possible downsides of virtual real estate include:
Extreme speculation. Value depends almost entirely on platform popularity and user adoption.
No intrinsic value. Unlike real-world real estate, virtual land doesn’t provide shelter or a physical space on which to build.
High risk of total loss. If a platform fails, your land may become worthless.
Liquidity can disappear. If buyers aren’t interested, you can’t liquidate, no matter how easy transactions may be to facilitate.
Regulatory uncertainty. Laws around NFTs, digital ownership, and taxation are still evolving.
Security risks. Hacks, wallet theft, or platform shutdowns can erase value.
Some technical skill is required. Simply purchasing and accessing virtual real estate requires knowing how to navigate tech platforms. And maximizing the value of your virtual plot often requires active development, marketing, or community building.
4. Tax Lien Investing
Tax liens are legal claims placed on a property when the owner fails to pay their property taxes. Instead of the government waiting years to collect the back taxes, it sells the lien to an investor.
To invest in tax liens, you typically attend a local tax lien auction, at which investors bid down the interest rate they’re willing to accept for the lien. The lowest bidder pays the owner’s past-due taxes, and is now owed the debt plus interest (and any penalties) from the property owner. If the owner fails to repay the debt as scheduled, you have the right to foreclose on the property, seizing ownership and possession.
Only around 2% of tax liens end in foreclosure. The rest of the time, the owners repay the debt as scheduled, and the investor earns passive income from real estate without ever owning the property.
Important: Tax lien investing is often confused with tax deed investing, but they are not the same. With tax deed investing, properties with past-due taxes are auctioned off to the investor who bids the most for the property. The investor then pays the purchase price (typically in cash), files the paperwork to clear the title, and takes possession of the property in as-is condition, often evicting the former owner in the process. The option to invest in liens or deeds depends on the laws in the state in which the property is located.
Pros and Cons of Tax Lien Investing
The benefits of tax lien investing include:
High interest rates. Some local markets offer double-digit returns.
Debt priority. Tax liens usually take top priority, so if the property is sold or foreclosed, you would be paid out before the mortgage lender or other lienholders.
Asset-backing. The lien is secured by the real estate.
Short-term potential. Many liens are repaid within months.
Low cost of entry. Some liens start at just a few hundred dollars.
The possible downsides of tax lien investing include:
Complex legal rules. Laws vary widely by location.
Redemption uncertainty. You don’t know if or when you’ll get paid.
Property risks. If you are forced to foreclose, you should know that the property could be in poor condition with deferred maintenance issues.
Some active management is required. You need to track deadlines, payments, and legal steps
5. House Hacking
House hacking is when a homeowner generates income from their primary residence. And there are many ways to do this.
You could, for example:
Rent out a room in your home to a college student for the school year.
Rent out parking or storage space on your property.
Rent out an outbuilding (like a garage or barn) to a local artist or inventor who needs a space in which to create.
The project is professionally managed by a real estate sponsor, so you don’t have to worry about overseeing construction, managing tenants, or shouldering ongoing property expenses. The sponsor handles every detail. In fact, you don’t even have to scout properties. Crowdfunding sponsors thoroughly review dozens of properties to find the opportunities with the greatest upside to present to investors. So you get to choose from pre-vetted deals.
Because you’re pooling funds with other investors, you get to buy into a deal for far less than you’d have to pay to fund the project alone (even if you assumed mortgage financing to cover 80% of the purchase price).
Pros and Cons of Real Estate Crowdfunding
The benefits of real estate crowdfunding include:
Comparatively low investment minimums. Crowdfunding lowers the barrier to entry by pooling investor capital, with some multi-million dollar projects offering buy-ins starting at around $25k.
Easy investing. Simply review pre-vetted deals to find those that align most closely with your goals.
Access to unique deals. You might not have the time, experience, knowledge, or desire to build a multi-family structure from the ground up. But with crowdfunding, you can passively invest in this type of complex project.
Leveraging the sponsor’s resources. Experienced sponsors often have systems, suppliers, and other industry connections that reduce costs and increase margins.
Diversification potential. Lower minimums make it easier to spread your money across multiple properties or markets.
Flexibility. With many projects available, you can choose investments that match your budget, timeline, and goals. Some deals focus on quick flips with faster payouts, while others are designed for long-term income through rental properties.
Passive income. Unlike traditional rental property investing, crowdfunding doesn’t require you to find deals, manage renovations, or handle tenants. Your sponsor will disburse returns periodically from rental income and/or in a lump sum after the sale of the project. Either way, the returns are completely passive.
Possible downsides of real estate crowdfunding include:
Limited control. You don’t make decisions about the property, timeline, or exit strategy. Those choices are made by the project sponsor.
Lower liquidity. Your investment is typically held for the duration of the project.
Market risk. As with any investment, crowdfunded projects can be impacted by market downturns.
Fees and profit sharing. Sponsors take management fees or carried interest, which can reduce your net returns. However, it’s worth noting that sponsors who are paid in accordance with financial performance are incentivized to maximize return potential, which can net more for investors.
Real estate syndication follows the same general model as crowdfunding. In fact, syndication and crowdfunding are often confused as being the same thing, though there are a few important differences. While both models allow investors to pool funds to buy into a professionally-managed project, syndication creates a formal legal structure in which you become a member of the LLC that owns the property. This means you hold equity in the underlying real estate, which increases the stability and transparency of the deal.
Because you become an equity investor (as opposed to a debt investor, who serves more as a lender than an owner), syndication is typically limited to accredited investors who meet the SEC’s income or net worth requirements.
Pros and Cons of Real Estate Syndication
The benefits of real estate syndication include:
All the same benefits of crowdfunding. You get low minimum investments, ease of investing, unique deals, access to the sponsor’s resources, flexible offerings, diversification potential, professional project management, and passivity.
A stable ownership structure. As a limited member of the LLC that owns the property, your stake in the project is secure.
Tax benefits. You’re entitled to your share of the depreciation deduction and operating expense deductions, as well as lower capital gains tax rates. Plus, shares in a syndication project can often be held within self-directed retirement accounts for additional tax benefits.
Competitive returns. Your returns are based on the performance of the property, rather than set at a lower, fixed rate. This is why some real estate syndication investors earn average annualized returns in the double digits!
The potential downsides of syndication match those of crowdfunding, including:
Lack of direct control. As with many of the other options on this list of alternative real estate investments, you give up control over the details of the property in exchange for passivity.
Limited liquidity. You typically need to keep your money invested for the full project term.
Market risk. Like all investments, syndication deals can be affected by economic slowdowns, interest rate changes, or local market conditions.
Fees and shared profits. The sponsor will take a share of the profits for their work on the project. But again, when this is tied to financial performance, incentives are aligned to maximize your returns, often netting you more.
For accredited investors, real estate syndication is perhaps the best alternative real estate investment option in 2026. With greater potential upside and fewer drawbacks than most other options, syndication has exploded in popularity in recent years and continues to grow more quickly than other investment models.
Gatsby Investment makes it easy to invest in real estate syndication. Based in Beverly Hills, Gatsby focuses on developing small multi-family structures in the most in-demand neighborhoods in Los Angeles. Through local zoning law changes and extreme demand caused by the persistent housing shortage, Gatsby has carved out a highly-lucrative niche, benefiting investors while adding sustainability to the high-value LA market.
With a 100% profitable track record and average annualized returns of 22.3% to investors, Gatsby is among the highest performers in the real estate syndication sector.
Welcome to the Gatsby AI assistant. I am here to answer your questions about investing, our investment products or other helpful information about our company.
