Understanding Indirect Real Estate Investment

As an asset class, real estate investing offers a wide range of opportunities. To ensure you get the best return on your investments, you need to understand the details of the different investment options available to you, across a number of different investment structures, and in opportunities that satisfy the needs of most investors.

Investing in real estate without directly purchasing properties can be a great way to diversify an investor’s portfolio. Commercial real estate investing need not be stressful with down payments, financing, repairs, or even holding the title yourself.

The indirect real estate market is explained in the following.

Indirect Real Estate Explained

Shares in a publicly traded company or in a privately held company are indirect real estate investments. In recent years, this type of business has grown rapidly. In simple terms, this type of business involves investing in real estate without actually owning any property.

Real estate investing and diversification can be accomplished in several ways without the burden of managing properties and down payments. These include, but are not limited to:

Exchange-Traded Fund & Mutual Funds

Investing in stocks and funds in real estate-related industries is one of the simplest ways to invest in real estate without holding the property. Through this system, investors can reduce the risk associated with being assigned a broker, thereby diversifying their equity portfolios.

Real Estate Investment Trust

A real estate investment trust (REIT), refers to a fund that invests in the said market. The program allows even the smallest investors to contribute.

These REITs are listed on the stock exchange as traded funds.


In recent years, crowdfunding has become a popular way of investing in real estate because the method is simple and straightforward.

Several crowdfunding platforms are available to invest directly in real estate. This way, investors can have a diversified portfolio across a variety of properties.

Peer-to-Peer Lending or Crowdlending

It is possible to obtain loans from individual to individual through peer-to-peer (P2P) lending, where borrowers and investors are connected directly—filling the gap made by middlemen.

The P2P method is an alternative to traditional financing. These investments are intended for investors who want to increase their returns on cash.

Pros of Indirect Real Estate Investment

Investing in indirect real estate offers many benefits that can help you improve your financial situation and accumulate wealth. Accredited investors and self-directed investors are among those who can maximize indirect investment’s benefits and make the most of what it offers.

Can you invest in real estate with little money? Indirect real estate investment offers this advantage. Due to the fact that investors do not have to operate or finance properties, entry-level ones can invest as little as they like. 

Additionally, you will receive a higher dividend than average. There is a law that requires indirect investors to pay 90% of their taxable income to shareholders, and dividend yields of 5% are not common. Capital appreciation can also occur over time as assets gain value.

The asset also has the advantage of being liquid and shares can be easily exchanged or sold in a quick and easy manner. If you need cash in an emergency, you can exchange it effortlessly.

Cons of Indirect Real Investment

Since most dividends from indirect real investments are not classified as qualified dividends, they are typically taxed at a higher rate. You will not get any tax benefits if you hold real estate shares in a taxable brokerage account.

It should also be noted that indirect real investment is very susceptible to interest rate fluctuations. Any type of share, traded or not, is adversely affected by rising interest rates.

The share price and share yield are inversely related, so when one goes up, the other goes down.

Making Informed Investment Decisions

There is no right or wrong way—making trade-offs and deciding what does and doesn’t work for you are always part of real estate investing. A sense of control, liquidity, diversification, and ease of getting started must all be considered when investing in real estate.

Investment portfolios that are successful are built on knowledge, experience, and choosing a trusted company. You can expect a diversified and consistent portfolio of real estate assets when you choose to work with our experts.Interested in learning more about our indirect real estate or commercial real estate investing services? Contact us at 949-881-7128 at Saint Investment Group today!