Real Estate Investing Options for Millennials Who Can’t Afford to Buy a Home

By Josefin Gatsby on 11/29/2023.
Reviewed by Michelle Clardie .
Homeownership is a critical step in gaining financial freedom. In fact, a 2021 report by the National Association of REALTORS found that homeowners gained around $225,000 in wealth from 2011 to 2021 simply by owning a home. 

But, let’s be real. With higher-than-normal interest rates and the price increases of the last few years, homeownership has become less accessible for many millennial buyers.  

Many of us can’t afford to buy a home, even though we’re well aware of the many benefits of property ownership, like appreciation and tax breaks

In this article, we’re exploring three real estate investing options for millennials who can’t afford to buy a house. We’ll also give you the benefits and considerations of each of these options. 

Who knows…with some smart real estate investing, you might build enough wealth to purchase your own home sooner than you think!

3 Real Estate Investing Options for Millennials Who Can’t Afford to Buy a Home

No down payment? No problem. Here are three ways you can invest in real estate without shouldering the financial burden of direct ownership alone. 

1. House Hacking

If your heart is set on owning your home but can’t quite swing the mortgage payments alone, house hacking might be your ticket to affordable homeownership. House hacking is when you generate passive income from your own home. This can be done by renting out a spare room, storage space, or parking spots. 

Some enterprising house hackers are even purchasing multi-family properties and using the rental income from the other units to cover the full mortgage payment, including the unit they live in! The purchase price and down payment may be higher on a multi-family property, but with the rental income potential, this could still be financially favorable over buying a single-family home. Plus, if you qualify for a VA or USDA loan, you might be able to purchase a property with up to four units for 0% down as long as you live in one of the units.    

Benefits of House Hacking

The advantages of house hacking for millennial investors include:

  • A path to homeownership. House hacking could help you get on the property ladder. 
  • Lower personal housing costs since your mortgage payments can be offset by rental income.
  • An education in property management. 
  • Favorable financing compared to buying an investment property that you don’t live in. 
  • Potential for rental income growth over time. With each passing year, you may be able to charge a bit more.

Things to Consider Before House Hacking

Before you purchase a property with the intention of house hacking, consider the following:

  • Are you comfortable sharing your space?
  • Is there a demand for the space you’re planning to rent out?
  • Will you be disciplined enough to set aside a portion of the rental income for future repairs or vacancies?

2. REITs

REITs (Real Estate Investment Trusts) allow you to invest in income-generating real estate without actually owning property. REITs are companies that own income-producing properties (like apartments, offices, storefronts, etc.). You can purchase shares in a REIT, which entitles you to a percentage of the company’s profits.

Benefits of REITs

There are several advantages to investing in REITs, including:

  • Low minimum investment amounts. You may be able to get started with around $500. 
  • Greater flexibility than direct ownership, since it’s easier to sell shares of a REIT than to sell a property.
  • Very little time commitment. You only need to spend a bit of time researching REITs to choose the one you want. Then place your investment and check in on it periodically. 
  • Automatic diversification. Since a REIT owns multiple properties, your investment is spread among different assets. This protects your portfolio from the underperformance of any one asset.

Things to Consider Before Investing in REITs

Before you purchase shares in a REIT, consider the following:

  • Are you comfortable not knowing exactly which properties are owned by your REIT or how the individual assets are performing?
  • Will you be happy with the rates of return? Or would you rather look for another investment with higher return potential?

3. Real Estate Crowdfunding/Syndication

Real estate crowdfunding and real estate syndication are very similar models of real estate investing. Both methods pool funds from multiple investors to finance specific real estate projects. The primary difference between crowdfunding and syndication is the ownership structure. With syndication, you get a more stable structure in which all investors become members of the LLC or trust that owns the property. This means you have an ownership stake in the underlying real estate.

Crowdfunding and syndication cover a wide range of real estate projects including:

In most cases, you get to choose the specific property you wish to invest in, giving you more control than you would have in a REIT.

Benefits of Crowdfunding/Syndication

The main benefits of crowdfunding and syndication include:

  • Access to bigger, more valuable projects than you could finance alone.
  • Flexibility. You can choose from short-term flips or longer-term rental holdings. 
  • Deal-by-deal control. You typically get to choose individual projects to invest in.
  • Competitive Returns. Depending on the projects you choose, you can potentially outperform the market. 

Things to Consider Before Investing in Crowdfunding/Syndication

Before you buy into a crowdfunded or syndicated deal, consider the following:

  • Which crowdfunding platform should you use? Make sure to read up on the key factors to consider when choosing a crowdfunding service
  • Can you commit to the project timeline? Your investment may be tied up for 6-24 months for a renovation or development project. Long-term rental investments may require a commitment of 5-10 years. 

Start Your Real Estate Investment Journey

Every big adventure starts with one step. So take your first step today!

You can call a local real estate agent to ask about small multi-family properties that might qualify for a 0% down USDA loan, for example. Or research REIT options. Or choose a crowdfunding service to invest with.

Then keep investing, learning, and growing until you’re exactly where you want to be.

Investment opportunities