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If you’re like me, you’re contemplating the best ways to invest your money in 2020. After all, the stock market might not be the best option, after a 10-year bull run and global trade tensions. But, from my vantage point as a real estate startup founder, there are real estate trends that are on the rise right now — and that you can capitalize on in the coming year.
1. Invest in a digital REIT.
One of the easiest ways to passively invest in real estate is to be part of a digital real estate investment trust. With this strategy, you’ll share the risk and reward with a group of people who have pooled capital to purchase a diverse selection of property assets. New technology has made it easier than ever for firms to provide investors with digital, high-quality fund updates. Now, we’re able to pull out our phone and view the performance of our REITs, similar to a stock, and receive push notifications with photos and specific property developments, for instance, profits on a recently sold apartment complex. This layer of transparency helps investors make more informed investing decisions.
This trend toward digital REITs will stick around, and I recommend you find a plan that’s right for you. There are numerous options to be found with a web search, and some will allow you to get started for as little as $500.
2. Build a tiny home in your backyard.
In fast-growing cities like Austin, Texas, where my firm is based, land prices are at a premium, yet millennials want to live close to downtown. There’s simply not enough affordable inventory for renters. To serve this renter segment, urban homeowners with extra backyard space are setting up tiny homes to earn extra income.
Companies are starting to specialize in the design, construction and installation of these prefabricated tiny homes. Most are small, only 300–500 square feet. Prices can range, but since the structure is so tiny, they can be affordable, which makes cash-flowing the property easier.
To capitalize on the opportunity, check your local regulations to learn if you can set up a backyard money-maker. I think this is a trend that’s here to stay, but cities are going to have to evolve their zoning laws for the movement to scale.
3. Purchase a property for co-living.
Another way property owners are profiting from urbanization is through the co-living movement. Investors are purchasing properties that normally would be difficult to rent, like four- and five-bedroom homes. Instead of renting the property to one household, they are renting by room for a higher overall amount.
Co-living appeals to many millennial renters as a good way to get situated in a new city and make friends. Not to mention, the rent per person is more affordable than a one-bedroom. A number of companies have raised large funds to capitalize on this trend and offer value-added services like complimentary Wi-Fi, laundry and furnished units.
It’s uncertain how large of a renter audience will be interested in this dorm-like life, but it’s gaining traction. Similar to the tiny homes, be sure to look into local zoning rules before purchasing a property.
4. Angel invest in a proptech startup.
This year, billions of dollars have been invested in property technology aimed at transforming the industry through pointed technologies that solve a specific problem. The U.S. residential real estate market is a gorilla sitting at $27 trillion, so it’s no wonder why investors are trying to get in on the action.
Nearly everything involved in both leasing and home sales is getting rebuilt from the ground up. Many of the hottest models are trying to delight the consumer with a more streamlined process. Several companies are trying to re-define ownership through a concept called fractional ownership. I’m excited about a few companies that are trying to change security deposits by using surety bonds. Some startups have been getting traction with variations of iBuying. It’s uncertain yet which concepts will stick, but the real estate industry as a whole is going to see extreme transformations over the next year.
Finding the right startup and riding the wave could be a way to receive a huge return. It can be difficult to get involved, but try to source seed deals through a business accelerator program or by asking your network for introductions.