3 Ways To Invest In Real Estate Without Buying A House

Ladies and gents, boys and girls, Ryan Daniel Moran here. And what I'm going to share with you in this video is how to invest in real estate without ever buying a house or any property at all. There are three ways to do it, so let's dive in. What most of you may not know is that I got my love for entrepreneurship out of real estate. And my love for real estate came from my love and desire for investing in general. When I was nine years old, I was a subscriber to a children's magazine called Zillions. And Zillions was Consumer Reports for kids. And when I was nine, I flipped open a page that was talking about summer jobs for kids. And one of the kids that was being interviewed didn't get a summer job. He learned how to buy stocks, the stock market. I had never heard of what a stock market was. I went to my mom, I think she was in the shower. I was at the door and I said, mom, can I buy stocks? And I heard her say, I think that would be a great idea. Which blew my mind, because somewhere in my brain I thought everyone, everything that made money had to be a get rich quick scheme. So the fact that my mom was endorsing the fact that I could buy stocks was a revolutionary idea for me. It was like a new goal unlocked. I have room to run. I have something to discover. And that led me to discover investing as a whole. So I had a mentor when I was in middle school and high school who taught me a little bit about stock trading, mostly investing for the long term and using things like covered calls to produce income strategies that I still have now and things that I still teach now for more passive income that isn't really passive, it has to be managed. But anyway, this developed my love for passive income, my love and desire for money while you sleep, if such a thing can even exist, which I have mixed feelings about. Mostly I say that it does not exist because there has to be a business behind the investment. And that's where I'm going with this. Because my studies of going to late night real estate conferences and shadowing real estate investors in my hometown of Cleveland, Ohio, all of the books that I read, you know, I wasn't popular in high school. I read real estate books on Friday. I didn't go to parties. I was active in my church and I read real estate books. That was what I did. So when I became an entrepreneur, I became an entrepreneur because I wanted to make a few bucks so that I could be an investor. And specifically a Real estate investor. And the Internet paid off. And I made my money on the Internet mostly through the development of physical products, brands. And I now invest into other places that give me the passive income, which we'll talk about now specifically, I started buying up single family real estate as soon as I was seeing decent money from my Internet businesses. So When I was 22 to 26, I bought up a nice portfolio of single family houses right at the bottom of the crash, which was a really good time to get into real estate. So 2009 to 2014, I was buying a house a year, sometimes more, and I was paying cash for them, which was not the best way to do it, but. But it allowed me to do it faster and sometimes get better deals on the property and I would rent them out. I'd have a management team doing it for me so that it would be automated and passive, or as passive as it could be. And now after doing that, I say it's a mistake to invest in real estate if you are an entrepreneur, specifically going out and buying single family houses or even multi family real estate, putting your money there. Here's why. There's a quote from a friend of mine named Jay Massey. He's been on my podcast, which is called Freedom Fast Lane. And Jay said, behind every investment there's a business. And an investment is only as good as the business behind it. So even if we're looking at one single family house, one single family house still needs to be managed, still needs to have a customer, it's the tenant. It still needs to have maintenance, customer service, it still has upkeep. And yes, you can give that to a property manager who can do a great job. I have had some great property managers make my life a lot simpler and easier and more profitable, but there's still a little bit of maintenance that makes it not truly passive. And what really changed my mind on this was looking at the deals that were available from 2015 until now and looking at the boom market that has happened and seeing, you know, the cash flows that I used to get aren't available anymore. And if I can't get 1% of my money every month, then what's the point in investing in real estate? That's when I said I've got to find a better way. I've got to find a different way for me to invest in real estate that does not require me to manage it like a business. This isn't even my primary income stream. I make my money in business. I want to be running businesses. I love business. I am an entrepreneur at heart. I want to be pursuing new opportunities, not scouring the markets looking for fixer uppers. When all of these other flippers and speculators are ahead of me because it's their full time thing, you really think that I'm going to have a competitive advantage buying more single family or multi family real estate when it's not my primary business? Probably not. So I need to go all in on my primary business and I need to take my cash and put it into other areas that are going to give me that passive income and that wealth without me having to think about it. So here's the distinction. Income can be passive for you, but the source of it is never passive. Whether you are investing in dividend paying stock, which I'm a big fan of, there's still a company behind that. So the income can be passive for you, but income is never automatic. It doesn't grow somewhere. It comes from other people's bank accounts and those need to be happy bank accounts in order for the money to keep coming in. So I now take the strategy of investing in real estate in other ways that make it just as profitable in a lot of cases, sometimes has the same tax advantages and is truly passive. And I will sacrifice some profit margin in order to get the passivity so that I can live my life and double down on my business, which is ultimately where the greatest ROI comes from. Your business is ultimately going to be your best source for tax write offs, your best source for wealth, your best source for cash flow, your best source for freedom. Whatever your business is going all in on that is going to be where your greatest ROI comes from. And then you take your money and you put it into other sources like real estate. So I invest in three types of real estate that don't require me to buy a house. The first is real estate investment trusts. These are a little bit controversial, but they're really easy to participate in. They're publicly traded companies and, and they're a great way for you to explore the possibility of having skin in the real estate game and getting the upside and the passive income without you having to participate in the business of real estate. So for example, there are a couple of REITs as they're called, real estate investment trusts that I track that because of the way they are taxed and structured, they have to pay out the majority of their profits as dividends. So the dividends are higher, sometimes they're as high as 12% per year and sometimes they come out monthly as. So if you're getting a monthly dividend which ends up being 1% per month. 1% per month is the same thing that I would aim to get if I was buying single family real estate. Now I don't get to borrow against it. I don't get the same tax advantage. I don't necessarily have the same upside wealth, but it's a source of income that I don't have to think about. So I get into debates sometimes with my buddy Jason Hartman who is all in on single family real estate. He says it's the best asset class in the world. And he might be right. But I'm never going to make that my business. I'm going to keep making millions of dollars in the businesses that I control. So what I want to do, give my money to the Real Estate Investment Trust, a publicly traded company that specializes in things like single family houses. And those exist. So a quick Google of common real estate investment trusts, R E I T S IS R I REITs will pull up a list of the companies that you can invest in that are publicly traded that with a click of a button you, you can have money invested in these real estate investment trusts in that business and participate in the upside of those businesses. So that's where I got my first entry point into using my money to be a part of real estate without me having to buy a house. It's not, however, my favorite source, my second source is being a hard money lender. So this is directly going to the person who is doing all the work, all of the fixing, all the managing, all the flipping and being the lending source for that person. You're the source of capital. Now I do this in business. So for example, in 2013 I started three physical products brands at the same time, which probably wasn't very smart. One was a yoga brand called Zen ActiveSports. One was a nutritional supplement company called Body Vega, which is now called the Healthy Fats company, and a fitness line called Sheer Strength Labs. And what I did was I was already an entrepreneur. So I partnered with three of my buddies, one on each business. I funded and advised those businesses. When one of them, Sheer Strength took off like a rocket ship, that became my primary focus and my primary business. So I went all in on the thing that was creating the highest roi. And I continued to advise the other businesses. I sold the yoga company and I continue to own and to advise the nutritional supplement company which is called the Healthy Fats co. Now I tell you this because you can take the exact same model in real estate if you are an Entrepreneur. But you have these other business models, like flipping houses or like multifamily real estate. And you have somebody who is someone you want to work with, somebody you want to invest in. You can be the backer, the capital piece behind their hustle. They become the business owner. And you are the 50 or 70% owner of that business because you brought the capital, the network to the table. That is indeed a business that you can build without you having to personally buy the house or buy any real estate the business can, or your partner can. And you are simply the bank behind that which allows you to participate in all the benefits of real estate without having to do the work yourself. But that's not my favorite source to invest in real estate. My favorite source is source number three, and that is simply participating in real estate syndications and funds. I like syndications and funds because they are truly passive for me as the investor. For example, I do participate in one hard money lending fund where I don't need to know much about the portfolio except standing by on their quarterly calls to hear about how the fund is doing. And I get my quarterly check. So when I sold my last company, I got an eight figure check. So I had a few million dollars sitting around and I wanted to turn that into passive income. The best source for me to do that was to go give it to the people who are active in business, actively pursuing the opportunities and hard assets like real estate and just sending their investors checks. And the way that funds are structured is often a way to protect the investor as long as you're confident in the underlying business and people that are driving that business. And I would never invest in a fund where I didn't trust the business model and I didn't trust the people. And so that is all about networking, that is all about who you know to get access to those. So here in Austin, there is a real estate investment company called Thrive that invests in a lot of commercial properties here. And that's their full business. So when they open it up for investors, I want to be on their investor list. And there is a company that I have, I personally advise, full disclosure, they're a client and we transact together. Company called Four Peaks, they invest in high yield real estate. So things like mobile home parks, that type of high yield investment where they're gonna pass on the tax benefit and you're gonna get the cash flow from participating in the fund. And they have basically an investor sheet, say these are the terms of this investment. Do you want this one or do you not Want this one? I have a buddy here in town whose brother flips houses and he partners with people like me who have capital and he pays them a fixed rate of return and it's his job to get the return. It's your job to take the capital and put it to work when he needs or wants it. Those types of funds and syndications that are predictable, meaning you can put the money in, it's gonna have a predictable rate of return. That's the type of passive income that I'm truly after. There's one other really cool thing. This was a braingasm I got from a real estate guru named Ken McElroy. We were on the phone a few months ago and he was telling me about how he structures his real estate investments, which I thought was really smart. I had never heard of this before. They buy stressed assets, they buy stressed pieces of real estate, they take investor money, fix it up, get the value high, and then they use bank debt to borrow against it and they pay back their investors, but the investors maintain their a cash flow piece and an equity piece. I'm really fascinated by that type of a model. So when I'm looking at real estate syndications and funds, I'm often inquiring over that type of a structure to see if I'm going to get my principal back quickly and have ongoing passive income and wealth for years to come. That way I'm going to get a tax benefit, I'm going to have income coming in all the time, I'm going to have potential upside in the future, and I don't have to worry about anything in real estate. That, to me, is being an investor. You make your money in one specific business and you invest the profits into other businesses that you're confident in. That, I think is the fastest route to freedom. Build a business and invest the profits. And I used to invest in real estate on my own. Buying the houses, having the management team fix them up, managing the profit and loss statement. And it was great. I made money doing that. But now anything that takes me away from my business is a distraction from my highest form of roi. And so I'm looking at real estate investment trusts. I look at hard money lending and I look at funds and syndications to get the same benefits from real estate without ever having to buy a house. Hope you found this video valuable. Let me know in the comments and if you want more on this. I teach a lot of investment strategy and advice on my podcast, which is called Freedom Fastlane. And you can find the link in the comments. Thanks for watching.