Amid the advancements in real estate technology over the past years, many are wondering whether and how to invest in real estate online in 2023.
Although real estate is known for being traditional and conservative, no one can ignore the major tech developments that shaped the industry in the past decade. Combined with skyrocketing home values and mortgage rates, technological advances gave rise to another recent trend in real estate, namely, investing in real estate online.
Table of Contents
- Real Estate Crowdfunding
- Fractional Ownership in Real Estate
- Micro Flipping
- Airbnb Arbitrage
- Long Term and Short Term Rental Properties
- How to Find a Profitable Real Estate Investment Property Online
- Getting Started With Online Real Estate Investments in 2023
In this article, we will take a look at the five most popular ways of making money from real estate online. The strategies include a mix of approaches, entailing both buying an investment property and not buying a property at all. Moreover, they require varying levels of initial capital, which means there is something appropriate for every single investor.
While some of the ways to invest in real estate are more innovative, others are rather traditional and relate to buying a rental property with the help of the latest technology. Specifically, we will show you how the Mashvisor real estate investing app can help you find and analyze profitable long term and short term rental properties for sale in a matter of minutes.
So, without further ado, let’s dive into the five best strategies for online real estate investments in 2023.
Real Estate Crowdfunding
One of the most well-known ways to invest in real estate online that gained a lot of popularity over the past decade or so is real estate crowdfunding. It is a new twist to the old concept of real estate investment trusts (REITs) that was enabled through the emergence of the internet and social media.
Crowdfunding in real estate requires pulling together the financial resources of multiple individual, small-scale investors to buy and manage different real estate properties. The investors come together through social media channels or dedicated online platforms.
Like REITs, it is a passive investment strategy that is ideal for investors with a full-time job who’d like to make some extra money from real estate on the side. Unlike REITs, most real estate crowdfunding platforms come with very low initial capital investment requirements, making them more accessible, even for beginners.
REITs are usually reserved for accredited investors and require a minimum investment of several thousand dollars. Meanwhile, crowdfunding platforms allow just about anyone to get started with as little as a few hundred dollars.
Some of the most popular real estate crowdfunding platforms include Fundrise, RealtyMogul, and CrowdStreet.
Crowdfunding in real estate is expected to undergo significant growth in the coming years. The global real estate crowdfunding market size was estimated at $10.78 billion in 2021, forecast to grow at an annual rate of 45.6% until 2030.
Pros of Real Estate Crowdfunding
Crowdfunding comes with a few important benefits. What makes real estate crowdfunding one of the best real estate investment strategies for beginners is that it has no barriers to entry and extremely low initial capital requirements. In many cases, investors can invest in real estate online with just a few hundred dollars.
Furthermore, this strategy is as passive as real estate investing gets. When you crowdfund, all you need to do is to choose which platform to go for and how much to invest. All other aspects are handled by the platform team of real estate professionals.
As your investment is taken care of by professionals and because you invest a relatively small amount of money, real estate crowdfunding is a very safe investment strategy.
Moreover, crowdfunding gives even the smallest investors access to commercial and industrial real estate assets that they would not be able to invest in otherwise.
Cons of Real Estate Crowdfunding
Before you jump into this method of online real estate investing, you should be aware of the existing downsides. With crowdfunding, you have virtually no control over the investment property. All decisions are being made for you.
Furthermore, if the investment goes well, you will get only a small portion of the profit in proportion to your share of ownership. So, if you’re wondering, “Can you get rich from real estate investing?”, crowdfunding is not the best option for you.
Meanwhile, if the property loses value over time (depreciates), you will lose money, so making money online is not guaranteed with this strategy.
In addition, real estate crowdfunding dividends are usually paid off on a quarterly basis, not monthly, which means that you will need to wait a bit before you reap profit.
Fractional Ownership in Real Estate
Another way how to invest in real estate online in 2023 is fractional real estate investing. The concept is even more recent than crowdfunding and has been made possible through the synergy of blockchain technology and real estate.
In 2021, the global blockchain market size was valued at $6.1 billion, and it’s expected to reach $508.1 billion by 2030. A significant portion will go toward the real estate industry, where the potential to absorb blockchain technology is huge.
Online platforms like Lofty turn residential real estate assets into digital tokens that investors can purchase. In this way, fractional ownership allows even small-scale investors to own parts of various properties of different types and across different markets for easy portfolio diversification.
If you’re thinking, “Can I invest $100 in real estate?”, the answer is yes. Some fractional real estate investing platforms allow investors to get started with as little as $50.
Pros of Fractional Ownership in Real Estate
The advantages of online fractional real estate investing are very similar to the benefits of real estate crowdfunding. Most importantly, it is a passive real estate investment strategy that can be implemented with very little initial capital. Also, you only need minimal knowledge of US housing market predictions and trends.
Additionally, fractional real estate investing provides easy access to portfolio diversification, as you can buy tokens in various properties.
Cons of Fractional Ownership in Real Estate
The main drawbacks of fractional ownership consist of a lack of control over the management of the rental property and the relatively small ROI, corresponding to the size of the investment.
Furthermore, as the application of blockchain technology is a relatively new concept, it’s still a rather considerably high risk with an unclear future. So, we’d recommend that you invest only a small portion of your money in this strategy until there’s more clarity on its future path.
Micro Flipping
Yet another strategy how to invest in real estate online this year is micro flipping. It is similar to the more traditional strategy of fix and flip, also known as flipping houses, but is even easier and faster to implement.
Micro flipping refers to buying distressed properties in need of renovation and reselling them to end buyers without implementing any fixes and repairs. The latter part makes this approach to online real estate investing ideal for beginner investors with limited networks of contractors.
Related: What Is Distressed Property and How to Find One?
Unlike traditional house flipping, which requires work on the ground, most of the work associated with micro flipping can be done online. All that’s required is finding a good source of distressed houses. Reliable sources include online auction websites and homebuyers or real estate investors with limited budgets who need to resort to them.
While the majority of micro flippers in the US housing market are iBuyers, this strategy is accessible and feasible for individual investors as well. To give you some context, iBuyers purchased 1.3% of the total US market in 2021, and the number is expected to continue increasing in the coming years.
Pros of Micro Flipping
The major benefit of micro flipping is that it is a short term real estate investing strategy. It means that beginners can get a flavor of the world of real estate investments without long term commitment to a rental property. Moreover, it doesn’t require dealing with tenants or guests, unlike long term and short term rentals for sale.
Cons of Micro Flipping
On the negative side, micro flipping cannot turn into a source of reliable monthly income and cannot bring long term profit through real estate appreciation. Once you’ve sold a property, you’ll no longer make money from it. Furthermore, it is a rather active strategy that requires full-time dedication, albeit for a short period of time.
Airbnb Arbitrage
The fourth way to make money from real estate online that’s ideal for 2023 is what is known as Airbnb arbitrage. This strategy allows savvy investors to draw financial benefits from real estate without owning a property. This makes it perfect for those with a low credit score or otherwise limited access to financing.
Related: 7 Best Loans for Investment Property in 2023
Airbnb rental arbitrage refers to renting a property as a tenant and then renting it out as a host on a short term basis.
However, before doing that, you need to make sure that your city, HOA, and landlord allow subletting your rental on a short term basis. Moreover, you need to conduct sufficient investment property analysis to ensure that you will make more money from vacation rental income than you pay for rent.
Pros of Airbnb Arbitrage
Most importantly, the arbitrage strategy allows you to invest in real estate online and start an Airbnb business without buying and owning an actual property. If you’re just getting started in real estate, it can be an excellent test drive. You can check if it is really the right field for you without a long term commitment to an income property.
Another benefit is the potential return on investment. Following a recovery after the COVID-19 pandemic, global revenue in the short term rental industry market is expected to reach $96.85 billion in 2023. So, if implemented right, Airbnb rental arbitrage can bring you excellent cash on cash return.
Cons of Airbnb Arbitrage
The main disadvantage of this strategy is the severe legal limitations on vacation rentals in the majority of major tourist destinations across the US. Before getting into this way of investing in real estate online, you must check the local short term rental regulations. You can visit Mashvisor’s short term regulations page for more information.
Long Term and Short Term Rental Properties
Last but not least, you can invest in rental properties online in 2023. The plethora of online marketplaces and investment analysis tools allow investors to do most of the work related to buying and managing long term and short term rentals online.
In the following section, we will discuss in detail how you can implement this strategy from the comfort of your desktop or mobile. But before that, let’s take a look at the pros and cons of investing in rental properties.
Pros of Long Term and Short Term Rental Properties
The most important advantage of this way to invest in real estate online is that it is a proven strategy with a long history and strong results. As long as you perform diligent real estate market analysis and investment property analysis, you can make a lot of money with rental properties.
Experts expect an 8.4% year-on-year increase in rents in the US market by May 2023, while profits in the short term rental market are also forecast to be significant, as highlighted above.
Furthermore, with rental properties, investors can make money both in the short term (through rental income) and the long term (through appreciation).
Cons of Long Term and Short Term Rental Properties
The main drawback of investing in rental properties is that you need to manage them, which can be a lot of active work, especially with vacation rentals. However, hiring a professional property manager can help solve the problem.
Another challenge that beginner investors face is the need to cover a minimum 20% down payment, as well as monthly mortgage payments. Of course, savvy investors are able to find alternative financing options.
Related: 3 Best Investment Property Lenders for 2023
How to Find a Profitable Real Estate Investment Property Online
The key to success with rental property investments is finding a good market and a good property with a high potential for income and ROI. Usually, the process takes three months. But here, we’ll show you how Mashvisor can help you locate the best opportunities to invest in real estate online in 15 minutes.
The Mashvisor real estate investing platform can help you in the following regards:
- Find the best markets for real estate investing: The Mashvisor real estate blog provides up-to-date information and data ranking the top locations for both rental strategies. Rankings are based on various factors like ROI, rental income, property prices, and occupancy rate.
- Locate the top neighborhoods for rental properties: The Mashvisor real estate heatmap shows you the areas with the most positive real estate metrics for either rental strategy. The neighborhood analysis pages provide you with all the data you need to ensure that an area offers good opportunities for investing.
- Search for long term and short term rental properties for sale: The Mashvisor investment property search engine allows you to find the top-performing properties in any market based on your specific requirements.
- Analyze the investment potential of properties online: The Mashvisor real estate ROI calculator conducts detailed rental property analysis for each property available on the platform. All numbers and figures are provided for both rental strategies so you can choose the best option for each property.
To figure out the full power of Mashvisor to find the best long term and short term rental properties for sale in any US market, sign up for a 7-day free trial today.
Mashvisor’s real estate heatmap allows you to search for top-performing locations for both long term and short term rental strategies.
Getting Started With Online Real Estate Investments in 2023
While there are different ways to invest in real estate online in 2023, long term and short term rentals remain the optimal strategy. In addition to being a proven investment strategy, they can bring solid returns both in the short term and long term. Moreover, they offer significant diversification options as there are endless property types and markets to choose from.
In case you’re a new investor without access to real estate data and analytical tools, there’s nothing to worry about. With Mashvisor, you can turn three months of real estate research and analysis into 15 minutes. Find the best markets and the best properties for short term and long term rental investing.
To learn more about how Mashvisor can help you make 2023 your most profitable yet, schedule a demo with our team of real estate experts.
