Top 5 Alternative Investments for Real Estate Investors in 2024

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This article is presented by ATM Investors. Read our editorial guidelines for more information.

Maybe you’re looking to diversify your investment portfolio, or maybe you’ve done your research into real estate investing and just realized you don’t have the time and energy required. Real estate investing is almost never truly passive, and it is not immune to problems like reduced cash flow during between-tenant periods. 

Whether you are a seasoned real estate investor looking for additional revenue streams or you’re looking for opportunities that are less hands-on but still lucrative, these are the top alternative investments to consider in 2024. 

1. Automated Teller Machines (ATMs)

It may sound surprising in the age of digital payments, but cash is still king. You may have read about the pandemic killing off cash, but this is actually far off from what’s really happening. 

Cash usage did experience a significant dip during the pandemic when people were wary of touching physical money. It is also true that cash as a method of payment is not preferred by younger people (18-24) or the wealthy, who prefer to use credit cards. 

But here’s another thing: While cash usage may be declining, cash holdings are not. In fact, according to recent research, average cash holdings in the U.S. have increased by $5 per person since 2021, including in younger age groups. People like having cash as a backup method of payment—which means they need ATMs. 

ATMs are a great investment opportunity because they are always in high demand by people who like having cash. The average ATM is used 300 times per month, with the average amount per withdrawal $40. Given that the average ATM surcharge is $3.50 and this money goes directly to the owner of the unit, you’re looking at $1,050 per month in gross revenue from just one ATM. Now imagine you own hundreds or even thousands of them.

But the beauty of investing in ATMs does not end there. If ever there were a truly passive form of investment, this is it. You can own hundreds of ATMs anywhere in the country without ever needing to worry about maintenance or replacing a faulty or vandalized ATM: The ATM maintenance company does all of it for you, which includes insuring your ATMs. This is where ATM Investors come in. ATM Investors builds, manages, and operates ATM businesses on behalf of Accredited Investors.

Think about it this way: You get a steady stream of passive income from what essentially are multiple tiny businesses that already have a guaranteed, steady client base.   

2. Car Washes

A car wash is another alternative to real estate worth considering, although there’s quite a bit more research to do than if you’re investing in ATMs. Overall, a car wash is a profitable business, but the profit margin will vary considerably depending on the type of car wash you choose to invest in and its location. 

The biggest consideration with car washes is the initial investment in the equipment, which can be considerable. Generally, the more you spend, the more profit you’ll generate over time. For example, you can spend $8,000 to $10,000 on self-serve car wash equipment and generate around $40,000 a year. Or you can spend $30,000 to $50,000 on a fully automated tunnel car wash and generate an average of $686,250 per year with just a single car wash business. 

Although you’ll avoid the expenditure on staff with automated car wash investments, you will need to factor in maintenance costs. When buying car wash equipment, you’ll need to do a thorough audit of its age, typical lifespan, and projected maintenance costs over that period of time, as these will eat into your profits. 

You also will need to research where to invest carefully. Typically, locations in the Snow Belt and the Sun Belt are the most lucrative, as people need to wash their cars more often where there’s extreme weather. However, the flip side of that is other people who have the exact same idea—to the point where some towns are enacting car wash bans because they have too many. Ideally, look for a local market that is not oversaturated with existing car washes. 

3. Self-Storage

Self-storage units are our third potentially lucrative alternative investment. There are a number of reasons self-storage units can be more attractive than traditional real estate investing. The most obvious is that it’s a low-risk, high-demand investment. You’re still investing in real estate, but there are almost no operating costs and fewer seasonal fluctuations. 

All this means that you lose less money than if a traditional real estate unit stands empty. You’re also protected against self-storage users not paying because you can put a lien on their possessions against the unit. 

There’s a lot of flexibility with self-storage businesses, so you can be as hands-on as you like. You can be a completely passive investor, paying a self-storage management company. You can also manage the business yourself, offering lucrative add-ons like a valet service that helps tenants while moving.

With low operating costs and flexible options, self-storage provides you with an opportunity to monetize real estate with a higher return. The average ROI on self-storage is 20.87% or a typical cash-on-cash return of 14.5%. This cash-on-cash return rate is way better than the standard 8% to 12% you’ll get on a standard real estate investment. 

The only thing to be mindful of with self-storage is where you choose to invest. While it’s true that self-storage demand is not seasonal, some locations reached peak demand during the pandemic, especially relocation hot spots in the Sunbelt, like Phoenix and Atlanta. Demand in those locations has reportedly dropped, so as a self-storage investor, you’ll need to do some of the same market research you would if you were investing in residential real estate. Look for up-and-coming urban areas with a lot of population movement and rentals. 

4. Gold, Silver, and Other Metals

Let’s imagine a slightly different scenario, where you’re less focused on generating cash flow and more on the preservation of the value of your existing capital. You want zero maintenance costs and involvement, which pretty much rules out real estate investing—even turnkey investing will eat into your capital.

If long-term stability in value is your primary goal, go for gold. The fact is that the high value of gold and other precious metals hasn’t gone anywhere. If anything, the prices of precious metals are continuing to grow. 

Gold prices alone were up 13.5% as of early June 2024—this doesn’t mean that gold is necessarily too expensive to buy right now because when the price has been adjusted for inflation, it’s still affordable for an investor. What the figure shows is how reliably gold shoots up in price during times of economic and/or geopolitical uncertainty. If you own gold, you can count on it in turbulent times.

But gold is only part of the vast field of opportunity for investing in precious metals. Silver, traditionally seen as less lucrative than gold, is currently trending at its highest prices since 2013. Silver is used in everything from LED chips to semiconductors, which makes it incredibly valuable in the long term. The same is true of copper, which is a key metal in green energy, used in solar panels, EV charging stations, and cables. 

Aluminum is the third metal to watch. Aluminum is crucial for the transportation, construction, and electric sectors, making it a worthwhile investment. 

All these metals are extremely low-risk investments because demand for them will continue growing over time, albeit for different reasons for each one. This investment will give you no cash flow, but it will give you security.   

5. Private Equity and Venture Capital

The most successful investors have what’s known as a well-balanced investment portfolio. Some investments will be low-risk, while others will be medium- or even high-risk. High risk can be a very good thing: As you probably have heard, high risk can also come with high rewards. You just need to pick well.  

As a private equity investor, you invest in private companies not listed on the public stock exchange. Essentially, you’re investing in startup businesses. You gain an ownership stake in their company in exchange for your investment. 

The high risk comes from the fact that you may strike proverbial gold by investing in the next Apple, or you could end up losing all of your investment in a business that fails within the next two years, as the vast majority of them do.

There’s only one way to mitigate this high risk of failure: investing in an industry you know and understand. It may seem like a fail-safe thing to invest in the next cool-sounding artificial intelligence (AI) company, but if you don’t know anything about AI, you will very likely invest in a dud. Every industry will have true pioneers alongside many mediocre businesses that have nothing truly new to offer to the market. 

You’ll need to do a lot of research into an industry to understand where it’s headed and where the lucrative opportunities are. Alternatively, if you don’t mind parting with a bit of cash in exchange for sound advice, hire an investment or financial advisor.  

Final Thoughts

There are many alternative investment opportunities. Want the safest, lowest-risk place to park your funds? Consider investing in metals; just don’t expect any cash flow. Want a ton of easy cash flow with minimal involvement? An ATM will give you that, and ATM Investors is the perfect company to get you started. Additionally, if you have a healthy appetite for risk and an in-depth knowledge of an up-and-coming industry, a private equity investment could potentially give you huge returns in only a few years.

It’s all about assessing where you stand on those main vectors of risk, involvement, and desired cash flow. Once you’ve decided what kind of investor you are, you’re ready to start researching the right opportunities in your chosen niche.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.