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Real estate options are contractual agreements that give buyers the exclusive right to purchase property at an agreed-upon price, and within a set timeframe. In order to secure this option, the buyer of the contract pays the seller a premium. The buyer, however, is under no obligation to buy the property.

Option agreements can give buyers time to evaluate a property or arrange financing during the span of the contract, while allowing sellers to receive compensation for keeping the property available during the contract period.

What Are Real Estate Options?

Real estate options are contracts between a potential buyer and seller. They grant the buyer the exclusive right to purchase a particular property within terms set in the contract. However, the buyer doesn’t have to purchase the property.

However, if the buyer decides to exercise the option and purchase the property, the seller is obligated to sell the property at the agreed-upon price. Once the agreement is entered into, the property owner can’t sell to anyone else within the time period set in the option.

Recommended: Call vs Put Options: Main Differences

How Do Options in Real Estate Work?

Generally, real estate options set a particular purchase price and are valid for anywhere from six months to one year.

The buyer pays what is known as a “premium” in options terminology to enter into the contract. If they decide not to buy the property, the property owner (the seller) keeps that premium.

Real estate options are most often used in commercial real estate, but they can be used by retail investors as well. They aren’t sold on exchanges, and each contract is specific to the property it represents. In many cases, a contract applies only to a single property, not multiple properties.

Real estate options are similar to stock options in that they set a specific price, premium, and period of time for a contract related to an underlying asset. Options may be exercised early or at the expiration date, if allowed by the contract. Some real estate option contracts may allow resale or assignment to another investor.

•   Real estate options may offer advantages to buyers, such as price control and limited upfront risk.

•   If the property value has gone up during the contract period, the buyer may choose to exercise the option or, if they decide not to exercise the contract, may sell it to another buyer at a potentially higher premium and pocket the difference (provided this isn’t prohibited by the agreement).

•   If the property value drops, the buyer can simply let the option expire — thus losing only the premium they paid, which can vary significantly depending on market norms, property type, and negotiated terms.

For the seller, there is the potential for them to make a profit if the buyer exercises their option to purchase the property. They may also profit if the buyer doesn’t exercise the option — at which point the seller can keep the option premium, and then sell the contract (or the property) to someone else.

Lease Options

In addition to real estate options for purchases, there are also lease options. These are rent-to-own agreements between a buyer and seller. They let someone lease a property with the option — but not the obligation — to buy it after a certain amount of time.

Generally with a lease option, some or all of the rental payment goes towards the purchase. Some lease options lock in a particular price, but others simply give the buyer the exclusive right to buy at whatever the market price is.

Although lease options may be useful for buyers, they are also more expensive than simply renting a property since they involve a premium. For this reason, it’s important for a buyer to carefully consider the contract and their future plans before entering into a lease option agreement.

2 Advantages of Real Estate Options for Buyers

Options are a common investing strategy for commercial real estate buyers. There are several reasons a buyer might enter into a real estate option contract with a seller.

It Can Allow Time for the Buyer to Amass Funds

One might choose a real estate option if they want to secure a piece of land or property at a certain price but need time to obtain the necessary financing.

A Real Estate Option Locks in a Price

If a buyer thinks the price of a property might go up, they can purchase an option to lock in the current market price. However, some real estate options may include pricing provisions that adjust based on future conditions. There may be clauses in the contract to determine what the final sale price may ultimately be.

2 Advantages of Real Estate Options for Investors

Investors interested in developing a property with other investors may also use options to their benefit.

It’s a Lower-Risk Way to Develop Property

For example, let’s say an investor finds a property they’re interested in developing into housing. The investor needs to create a plan for the property and get other investors involved before they can buy it, so they purchase a real estate option to give them the exclusive right to buy the land.

The investor might be able to realize a gain by bringing in investors willing to pay more than the agreed upon option price. They can then buy the land and sell it to the developers they brought in to make a profit.

If they aren’t able to get developers and investors involved before the contract expires then they can choose not to buy the land.

An Investor May Buy and Sell Real Estate Options

Investors may also make a profit solely from buying and selling real estate options contracts rather than the properties themselves. This is a much less capital-intensive way to get involved in real estate investing.

For instance, an investor might find a property they expect will appreciate in value in the coming months. They purchase a real estate option to buy the land at the current market rate within the next year, pay a premium, and wait.

At any point during the period of the agreement the investor may either act on the contract and buy the property, or they may sell the contract to someone else (if permitted to do so). Let’s say the value of the property increases three months into the contract. The investor may find another buyer who wants to purchase the contract from them for a higher price than the premium they originally paid.

Whether any investor buys the property or not, the seller of the property keeps the premium.

The Takeaway

Real estate options are a way for investors to get involved in real estate investing without necessarily directly purchasing properties. As with any other kind of options, the investor buys the right to purchase a property at a certain price, but is not obligated to do so. That said, there are also key differences between real estate options and equity options trading.

Real estate option agreements may offer flexibility for buyers while helping sellers generate revenue through the contract’s premium. Understanding how premiums, timelines, and contract terms work can help both parties weigh the potential benefits and limitations before moving forward.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

FAQ

What is the difference between a real estate option and a traditional purchase agreement?

Traditional purchase agreements obligate both buyer and seller to complete a transaction. A real estate option gives the buyer the right, but not the obligation, to buy the property.

Can a real estate option contract be extended?

Parties may renegotiate and extend the option period in some cases. However, extensions are not automatic and must be agreed upon in writing.

Do I need a real estate agent to use an option contract?

It’s not required to work with a real estate agent to purchase a real estate options contract. However, working with a real estate professional or attorney can help ensure that the contract terms are fair and enforceable.

Is the premium refundable if I don’t buy the property?

No, the premium paid to secure a real estate option is typically non-refundable, even if the buyer decides not to exercise the option. The premium is a fee paid to the seller in exchange for the exclusive right to purchase the property for a set price within a fixed time period.

Photo credit: iStock/Melpomenem

Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC. For a full listing of the fees associated with Sofi Invest, see our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

This article is not intended to be legal advice. Please consult an attorney for advice.

SOIN-Q425-031

Each year brings new challenges for investors in terms of their investment strategies. Given the level of uncertainty in the U.S. and globally in 2026 so far, investors may want to ensure their portfolio can ride the waves for the coming months and beyond.

While it’s smart to keep an eye on the current economic and market climate — e.g., inflation, interest rates, the impact of certain technologies, tariffs — it’s just as important to anchor your investing strategy in time-tested principles of good investing: by knowing your current financial situation, your goals, time horizon, and risk tolerance.

With those as a base, here are eight investments to consider now, as well as some different types of investment accounts to know about.

Before You Invest Your Money

If you’re wondering where to invest right now, there are several answers and investment opportunities out there. But before you do anything, though, you’ll need to make some key decisions.

Your Current Financial Situation

No one invests in a vacuum, and your current financial situation will not only inform your goals, but potentially your timeline, risk tolerance, and how much money you have to invest.

Your age, your income, how much money you hope to invest each week or each month, whether you’re in debt — these personal factors are important to consider as you begin the self-directed investing process.

Goals

When deciding where to invest your money, the next step is to understand your goals: Whether you hope to earn additional income, or you’re saving for college, or planning for your retirement, it’s essential to know the main purpose of your investment plan.

Knowing your investing goals will help determine your timeline, and from there your risk tolerance — which can help you narrow down the investments you finally choose for your portfolio.

Your Timeline and Risk Tolerance

The time frame in which you hope to accomplish your goal is also important. For example, a longer time horizon might allow you to take on more risk with your investments. A shorter time horizon, where there’s a smaller margin to recover from any volatility, could inspire you to select lower-risk investments.

However, these choices ultimately depend on your personal tolerance for risk. If you can stomach a greater possibility of losing money when you invest, you likely have a higher risk tolerance. If you dread the idea of losses, you may have a lower risk tolerance.

There’s no right or wrong way to make these decisions. It’s important to take each factor into account in order to decide where to invest your money right now.

Learning About Investment Options

Once you’ve identified the main ingredients in your investment plan, you can begin to consider the type of investment account that makes the most sense for you, as well as exploring the various asset classes you can invest in.

A Few Types of Accounts

Your goal will likely help you decide what type of investment account is best for you.

•   If your goal is to earn additional income … you may want to consider an online investing account or taxable brokerage account.

•   If your goal is to save and invest for retirement … you may want to open an IRA, or fund your workplace retirement account, if you have one. Sometimes it’s possible to do both.

•   If you’re thinking about college for your kids … a 529 college savings plan might be the way to go.

Those are just a few of the choices to think about. Again, knowing your personal goals will guide you.

Understanding Asset Classes

Stocks, bonds, cash, money market funds, and real estate are just a few of the asset classes available to investors.

In order to determine the asset classes that might work for your investment plan, it helps to understand the risk profile of a given investment. For example, stocks are generally considered higher-risk assets because they’re more volatile, compared with bonds, CDs, or money market accounts, which are lower risk.

The advantage of higher-risk investments is the potential for seeing bigger returns (a.k.a., profits). The downside, though, is the risk of losing money. Conversely, investing in less risky assets can help minimize potential volatility and losses, but the gains here are typically smaller. As the saying goes: High risk, high reward; low risk, low reward.

8 Ways to Invest Your Money Now

As noted, there are many different assets that investors can add to their portfolio. Some make more sense in certain situations than others — again, depending on your goal, timeline, and risk preference. That said, the following eight investments are worth considering now.

1. Stocks

What it is: Investing in stocks means having shares of ownership in a company or companies. When an investor buys a share in a company, they own a small portion of that company. Shareholders may even receive voting rights. This is why stocks are sometimes referred to as equities; investors now own equity in that company.

How it works: A stock can earn money in two ways. The first way is through the value of shares appreciating over time; this is called capital appreciation. The second is through periodic cash payments made to shareholders, called dividends.

Stock prices can be influenced by both internal and external factors, such as a new product launch or broader national or global events like a political event or natural disaster. Because the nature of business is highly unpredictable, stock prices can be volatile.

2. Bonds

What it is: When buying a bond, investors essentially loan money to a government, company, or other entity for a set timeframe. The bond guarantees that the investor will get regular interest payments and a return of their principal when the bond matures.

How it works: Investors buy bonds for a specific amount (i.e., the face value) and for a certain time period, called the bond’s maturity. The bond pays a fixed amount of interest, the coupon rate, typically every six months or year, and the principal is repaid at the maturity date.

Bonds are generally categorized as fixed-income investments. And while there are bonds with different levels of risk, bonds are considered conservative because they are less volatile than stocks.

•   Government bonds, also known as Treasury bonds, bills, and notes, are considered lower risk because they’re backed by the full faith and credit of the U.S. government.

•   Municipal bonds, or muni bonds, are a type of local government bond: States, cities, and counties issue munis to finance capital projects like hospitals, schools, and roads.

•   Corporate bonds, which are issued to do research, develop products, and other aims. These can pay higher interest, but corporate bonds can also be higher risk.

Generally, though, bonds are often considered a safer, more stable investment that may be more appropriate for investors who aren’t as comfortable with the volatility of the stock market. That said, bonds are not completely without risk, and it is possible for bonds to lose value.

Recommended: How the Bond Market Works

3. Mutual Funds

What it is: Investing directly in stocks or bonds isn’t the only option available to investors. Mutual funds, which are pooled investments, present another way to invest in certain markets.

How it works: Think of these funds as baskets that hold an assortment of investments, such as stocks, bonds, real estate holdings, and much more. Funds provide investors with a basic level of diversification, and can be more affordable than buying individual securities. That said, mutual funds charge investment fees that can impact returns over time.

Some mutual funds only invest in stocks, or equities. Some only invest in bonds. Some invest in a mix of asset classes. There are thousands of mutual funds, and many brokerages or online investing platforms offer special screening tools to help you find the types of funds that suit your needs.

4. Index Funds

What it is: A common type of mutual fund is something called an index fund. These are investment funds that track an index, which is usually a specific part of the broader market. For example, there are index funds that track the S&P 500 index or the Russell 2000 index of small U.S. companies — and thousands of other indices, as well.

How it works: Because index funds mirror market indices, and aren’t managed by live portfolio managers, they’re usually among the less expensive types of funds. This style is called passive management, and some investors like to include passive investments in their portfolio because, over time, these securities can add to portfolio returns.

That said, there is always a risk of loss, as market indices can also decline, bringing down the corresponding funds.

5. Exchange-Traded Funds (ETFs)

What it is: Exchange-traded funds, or ETFs, are similar to mutual funds in that they’re effectively a basket of different investments, combined into one security. Investors can buy shares of the fund, but unlike mutual funds, it’s possible to trade ETF shares throughout the day.

How it works: ETFs are a type of pooled investment fund, but owing to the way the underlying assets in the fund are created and redeemed, these funds can be more liquid than mutual funds. ETFs tend to be passively managed, and there are thousands of ETFs investors can choose from, encompassing all sorts of different market indexes, sectors, and asset classes.

6. Options

What it is: An option is a derivative contract that’s tied to an underlying asset, such as a stock. An option contract represents the right, but not always the obligation, to buy or sell a security at a fixed price by a specified date.

How it works: Instead of buying actual shares of a stock, trading options allows the investor to potentially profit from price changes in the underlying asset without actually owning it.

Options are used with leverage, and are a more sophisticated type of investment than, say, stocks or bonds. Options are fairly easy to trade, but they are complex and high risk.

You’d likely want to discuss options trading or investing with a financial professional before you get into it.

7. Real Estate

What it is: Real estate investing can include buying and managing physical property — houses, commercial buildings, etc. — or certain real estate-oriented investment vehicles.

How it works: While many investors may not have the capital laying around to buy a house for investing purposes, they can buy real estate stocks, mutual funds, ETFs, or consider REITs, or real estate investment trusts to get real estate exposure into their portfolios.

Real estate is sometimes considered an alternative investment, and as such it can be higher risk, but because real estate values don’t move in the same direction as the stock market, investing in real estate can provide diversification and a hedge against inflation.

8. Certificates of Deposit (CDs)

What it is: Certificates of deposit, or CDs, should also be on investors’ radar as part of the cash or cash-equivalent part of their asset allocation. CDs are bank products, and are somewhat like savings accounts, in which investors “lock up” their funds for a predetermined period of time in exchange for interest rate payments.

How it works: Functionally, CDs are similar to bonds in that you get a fixed rate of interest until the CD matures, at which time you get both principal and interest. But you may owe fees if you need to pull your money out of a CD before the maturity date.

On the upside, because these are bank products, when you open a CD at an FDIC-insured bank or NCUA-insured credit union, your deposits are covered up to $250,000, per depositor, for each ownership category (e.g., single, joint, etc.), at each insured institution.

Understanding Cash in Your Portfolio

In some instances, it may make the most sense to keep the money for a particular goal in cash, for easy access, and to minimize risk. Here are some traditional options that are generally available through banks and credit unions.

As such, these accounts are typically FDIC-insured at a bank, or NCUA-insured at a credit union. This means deposits are covered up to $250,000, per depositor, for each ownership category (e.g., single, joint, etc.), at each insured institution.

Savings accounts at a traditional bank or credit union: This is likely the most familiar option. Traditional and commercial banks remain popular for their large geographical footprint. Note that many traditional banks tend to pay a relatively low rate of interest on any cash holdings.

Online-only checking and savings accounts: Online-only banks and banking platforms may offer a slightly higher yield than a savings account at a commercial bank. Additionally, many do not require minimums or charge monthly maintenance or account fees.

Money market accounts (MMAs): A money market account (MMA) is a type of deposit account, like a savings account, typically offered by banks and credit unions. MMAs may offer higher interest rates than standard savings accounts, and they usually include some checking account features, i.e., a debit card or check-writing.

When considering cash as an asset class, consider the risk and reward tradeoff, just as you would for any other investment type. Although cash might not be risky when considered in terms of volatility, it does carry the risk of losing value over the long-term due to the effects of inflation, or prices rising over time.

Beginner-Friendly Places to Invest

If you’re a beginner investor looking for places to put your money, it may be beneficial to revisit some basic investing rules or guidelines. For instance, you’ll likely want to build an emergency savings fund before focusing on your stock portfolio.

But assuming you’re ready to put your money in the market, or otherwise start building your investment portfolio, many beginners start with some basic investment funds. ETFs are a popular choice, as are mutual funds — but your choices will depend on your goals and financial situation.

If you’re not sure where to turn or what to do, consider speaking with a financial professional for advice.

Creating a Goals-Based Strategy

Contrary to the way some new investors are encouraged to think about investing, it rarely makes sense to try to pick “hot” stocks right out of the gates.

Instead, take a step back and consider the bigger picture of your life and finances in order to identify one or more investing goals. Now that you have a better understanding of the investing process and some solid investment choices, you can start to connect the dots to make your own investment plan.

For example, if your goal is to save for retirement, you might want to think about using lower-cost investments like mutual funds or ETFs, and using a mix of equity funds and bond funds in your portfolio. If you have many years until you retire, and you can stomach a little extra risk, you may want to tilt your portfolio toward equities to maximize potential returns.

But if the volatility of such a mix makes you uncomfortable, consider a different balance that includes more fixed-income and/or cash, which could help mitigate the risk of equities.

Risk vs Reward

The asset allocation decision really boils down to an examination of an investment’s risk and reward characteristics in order to determine whether it’s a good fit for you and your goals.

Risk and reward are two sides of the same coin. Investors cannot have one without the other. For more reward potential, an investor will have to take more risk. There is no such thing as an investment that produces returns with no risk.

Let’s consider two hypothetical investment goals: $1,000 for a down payment and $1,000 for retirement. How do goals lead one down the path of where to invest?

•   First, the $1,000 for a down payment. If the money is designated for use in the next few years, the risk of losing any money in a volatile investment may outweigh the potential to earn investment returns. Therefore, it might be best to keep this money in a lower-risk investment or cash equivalent.

•   Next, the $1,000 for retirement. Many retirement investors have the goal of seeing growth over the long-term. Because of this longer time horizon, there should be enough time to recover after spates of volatility. Therefore, it may be suitable to create a portfolio that is primarily invested in the stock market or a combination of stocks and bonds.

Retirement investors close to retiring may opt to consider some exposure to bonds for both diversification purposes and to lower the overall volatility of the portfolio.

Ultimately, a person’s comfort level with risk vs. reward will determine their specific allocations. And it’s worth noting that an investing strategy isn’t stagnant. As a person ages, their goals and investing strategy will likely need to evolve, too.

Opening the Right Account

Knowing how to invest your money is one step, knowing where to invest your money is the next.

Retirement Accounts

It is not uncommon to hear someone refer to a 401(k) or an IRA as if one of those is itself an investment. But retirement accounts are not investments — they are tax-advantaged accounts that can hold investments.

You contribute money to a retirement account, and then those funds are used to purchase investments: e.g., stocks, bonds, mutual funds, and so on.

While retirement account holders can select the investments for their account, in a plan sponsored by your employer like a 401(k), the investing might be automated — and your money could be invested by default into a money market fund or a target date fund. Hence the confusion about the 401(k) being an investment itself.

Retirement accounts offer a tax benefit, like tax-free growth on your investments, which make them suitable vehicles for long-term goals. But because they offer a tax benefit, they come with more restrictions. For example, some retirement accounts, like 401(k) and traditional IRAs, levy a 10% penalty on money withdrawn before age 59 ½, with some exceptions.

Also, there are limits to how much money can be contributed annually to retirement accounts.

Brokerage Accounts

It is also possible to invest in an account that is not designated for retirement. At a brokerage firm, these are often simply referred to as brokerage accounts.

Brokerage accounts are considered taxable accounts. You pay taxes on realized capital gains — meaning, when you sell investments and actually reap a gain or loss. Because dividends are typically paid in cash periodically, you would owe tax on the dividend amount.

In contrast, tax-advantaged retirement accounts only involve paying taxes when you make a contribution or withdraw your money, depending on the type of account.

Recommended: How to Open an IRA: Beginners Guide

Weighing Your Options

It all comes down to the individual. You’ll need to look at your risk tolerance, time horizon, and personal preferences to determine the most suitable investing path or accounts.

For short-term goals that require more flexibility, a non-retirement account may be a better choice. Because there are no special taxation benefits, there are generally no rules about when money can be withdrawn or how much can be contributed. Because of this, non-retirement accounts can also be a good place to invest for those who have met their maximum contribution amount for the year in their retirement accounts.

The Takeaway

At any given time, there are a plethora of potential investments for your money. You can invest in stocks, bonds, real estate, commodities — the list is long. But each has its own considerations and risks that must be taken into account. Overall, your goals and financial situation are the most important things to keep in mind when deciding where to invest your money.

As for where to open an account, new investors may want to focus on an institution or platform where they are able to keep costs low. There’s not a lot that investors can control, like investment performance, but how much they pay in fees is one of them.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

Which investment gives the highest returns?

Higher-risk investments tend to deliver the highest returns, but they can also deliver the biggest losses. These can include certain stocks or investment funds, particularly those focused on market segments that are risky or volatile. It’s important to invest with an eye to how much risk makes sense for you.

Where can you invest your money as a beginner?

Beginners can choose a number of investment vehicles to invest their money. Some choices include investment funds like ETFs or mutual funds, which tend to be lower cost and provide some basic diversification.

Where can you invest money to get good returns?

There are numerous investment vehicles that might provide returns, but those returns are never guaranteed, and can be thwarted by down markets. It might be wiser to consider an overall strategy that can help your money grow, so you can reach your goals, rather than looking for a single investment that might hit the jackpot.