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Unfortunately, many Americans blow their tax refunds on instant gratification: new gadgets, new clothes, and maybe even a flashier car. Spoiler alert: You’re making yourself poorer, not richer.
Instead, consider investing your tax refund in unfamiliar real estate investments to experiment and find the perfect investing strategy for you.
Try these hands-off real estate investments that require just $500 to $5,000, rather than the $50,000+ you’d need to buy a rental property or invest in private equity real estate by yourself.
1. Public REITs
Minimum investment: $20-$100
Typical returns: 8-11%
You’ve probably heard of real estate investment trusts (REITs). They come with their own pros and cons, just like all investments.
On the plus side, you can buy single shares for $20-$100, using your regular brokerage account or IRA. You can sell those shares at any time, for full liquidity. And they tend to come with high dividend yields.
They also come with their share of downsides. For instance, the dark side of liquidity is volatility: Any asset that you can buy and sell instantly (stocks, ETFs, cryptocurrencies) will inherently bounce all over the place in price.
But even worse than that, publicly traded REITs share a disturbingly high correlation with the stock market at large. This defeats the entire purpose of diversifying your portfolio to include real estate.
2. Private REITs
Minimum investment: $10-$1,000
Typical returns: 5-9%
Alternatively, you can invest in private REITs, such as those offered by Fundrise and Streitwise. They don’t have the volatility problem or the correlation with the stock market—because they have so little liquidity. You have to leave your money locked up for years on end if you don’t want to get hit with nasty penalties.
I could live with that lack of liquidity if these investments actually paid strong returns. And they had, for a little while (like the years leading up to 2022). But they just haven’t performed very well compared to other real estate investments such as public REITs, privately owned properties, or private equity real estate.
In 2022, Fundrise delivered an average annual return of 1.50%. In 2023, it lost investors money at -7.45%, and in 2024 delivered 5.75% annualized returns. Pardon me if I don’t shoot off all the confetti at once.
For full disclosure, I no longer invest in REITs at all. But I wanted to include them as options on the list if you weren’t familiar with them.
So, what do I invest in?
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3. Real Estate Secured Debt
Minimum investment: $100-$5,000
Typical returns: 6%-10%
You have plenty of options to invest in debts secured by real property.
The easiest way to get started is through platforms like Groundfloor. It issues hard money loans and funds them through investors like you and me. Groundfloor lets you pick and choose individual loans to fund, or you can invest in their Flywheel Portfolio, which includes many loans. Or you can lend money directly to Groundfloor, albeit at a lower interest rate.
Alternatively, you can invest in real estate debt funds. For example, 7e Investments offers a non-performing note fund that pays 8%-10% like clockwork. Expect a higher minimum investment, however, in this case $5,000.
4. Fractional Ownership in Rental Properties
Minimum investment: $100
Typical returns: 5%-8%
Platforms like Arrived and Ark7 let you buy fractional shares of single-family rental properties. That includes both traditional long-term rentals and short-term vacation rentals.
As a partial owner, you enjoy the full cash flow and appreciation of the property. Ark7 even features a secondary market for selling your shares early, and Arrived is launching one in summer 2025.
But I just haven’t been very impressed with the returns. My property shares on these platforms are worth less today than when I bought them:
These platforms offer a slick interface and gorgeous late-model homes—for full market value. They buy these properties because they’re low-maintenance and they look pretty in photos. But where’s the upside?
They’re not out there buying ugly houses off-market at a huge discount and creating equity through renovations. That’s too much work. But it’s how flippers and BRRRR investors score great deals and earn high returns.
And it’s why these platforms offer middling returns at best.
5. Real Estate Syndications and Equity Funds
Minimum investment: $50,000-$100,000 (solo), $5,000 (through an investment club)
Typical returns: 14%-30%
The “big bad wolf” of real estate investments, most middle-class investors are afraid of syndications—if they’ve heard of them at all.
I get why so many unfamiliar investors fear private equity real estate. It can go wrong and lose money, just like any investment. It comes with a high minimum investment if you invest by yourself—and these investments aren’t liquid at all.
Many don’t even allow middle-class investors to participate at all, only allowing wealthy accredited investors.
But when wealthy people invest in real estate, this is how they do it. Look no further than the latest UBS study of how billionaires have beaten the market over the last decade.
This is the main way I currently invest in real estate. Except I don’t invest by myself but as part of an investment club.
Every month, we meet online and vet a new passive real estate investment. Each member can invest $5,000 or more if they like the deal. This way, we collectively surpass the high minimum investment threshold.
Investors in private equity real estate syndications and funds get the full tax benefits, cash flow, and appreciation of owning real estate. But we get to skip the headaches of being a landlord.
6. Private Partnerships
Minimum investment: $50,000-$100,000 (solo), $5,000 (through an investment club)
Typical returns: 10%-30%
If there’s any real estate investment I love more than syndications and equity funds, it’s private partnerships.
I network with real estate investors all over the U.S. and sometimes partner with them on flips, new home construction, or some other project. I invest passively, but I get a cut of the profits.
This is another thing I work on through my investment club. For example, a few months ago, we went in on a series of house flips with a company that buys 70 to 90 properties a year. They’ll flip as many houses as they can with our funds over a period of around 18 months and then close out the investment, and we walk with our profit split.
We also partnered not long ago with a spec home builder that buys tear-down homes on huge lots, and subdivides them into three new lots and builds three homes on them.
Silent partnerships like these make a great way to invest in real estate out of state as well.
On both partnerships, the partner provided a guaranteed floor return for our investment. Even if something goes horribly wrong at one of these properties, we’re guaranteed a minimum investment. That’s the kind of downside risk protection we look for.
7. Private Notes
Minimum investment: Negotiable
Typical returns: 7%-14%
I’ve lent money to rental investors, house flippers, and other real estate investors through private notes. Sometimes, they’re backed by a lien (or several) against real properties. Sometimes not. But I’ve actually never had a note borrower default on me (knock on wood).
We occasionally invest in notes together in our co-investing club. For instance, we invested in a secured note paying 10% with a flexible term, which each investor could terminate at any time with six months’ notice. We’re currently exploring a secured note with a 15% interest rate, with a fixed term and moderately higher risk than the 10% note.
In fact, I invest in secured loans instead of bonds in my own portfolio.
Final Thoughts
There’s no one perfect way to invest in real estate. Use your tax refund to experiment with small amounts in these many ways to passively invest in real estate—without having to take on the side hustle of buying properties yourself.
