Purchasing rental properties is one of the most popular ways to generate passive income. A good rental property will provide you with enough income each month to cover your expenses with ease.
However, there are pitfalls to renting properties. Income is not entirely passive, as you often need to actively manage the property, such as finding the right property, securing tenants, and dealing with maintenance and other issues.
On the other hand, it can be expensive, with a high initial investment and potentially large unexpected expenses. Therefore, most people would be better off forgetting about buying a rental property.
Investment in real estate investment trusts (REIT) is a better option. These companies own income-producing rental properties and distribute a portion of the proceeds to investors. dividend payment. Let's see how much income he would earn each year if he invested $50,000 in five high-quality REITs.
|
dividend stocks |
investment |
current yield |
Annual dividend income |
|---|---|---|---|
|
Camden Property Trust (CPT 2.46%) |
$10,000 |
4.4% |
$440 |
|
invitation housing (INVH 1.47%) |
$10,000 |
3.25% |
$325 |
|
real estate income (oh 1.28%) |
$10,000 |
5.91% |
$591 |
|
sun community (Sui 1.10%) |
$10,000 |
2.84% |
$284 |
|
WP Carry (WPC 0.84%) |
$10,000 |
6.12% |
$612 |
|
total |
$50,000 |
Average 4.5% |
$2,252 |
Data source: Google Finance.
The great thing about REITs is that you don't need to invest a lot of money to get started, as many REIT stock prices are less than $100. This way, you have money to invest and can slowly build your real estate empire (and passive income).
Let's take a closer look at why these REITs are great options for those looking to make money. passive income from real estate.
Camden Property Trust
Camden Property Trust Residential REIT Focusing on apartment management. The company currently owns 172 communities and 58,634 apartment units in 15 high-growth markets, primarily in the Sunbelt region. These properties generate steadily increasing rental income, supporting Camden's growing dividend.
REITs also invest funds in the construction and purchase of apartment communities. The company is currently investing $546 million in five projects that will build more than 1,550 new homes (including the construction of its first two single-family rental housing communities).
Meanwhile, the company has land available to develop more than 3,350 additional homes at an estimated cost of $1.4 billion. Camden also plans to purchase an operating community and developable land when the opportunity arises. These investments can help you grow your portfolio, rental income, and dividends.
The REIT pays a quarterly dividend of $1.03 per share ($4.12 annually). Annual dividends have increased by about $1 per share since 2018, including a 3% increase earlier this year.
invitation housing
Invitation Homes is a residential REIT that focuses on single-family rental homes. The company owns more than 80,000 homes in 16 high-growth markets. These units provide steadily increasing rental income, supporting dividend growth.
REITs acquire new rental housing on a regular basis. We have multiple acquisition channels including construction partnerships, joint ventures and other sources. The company has signed a deal with a major national home builder to acquire approximately 1,800 homes over the next few years for $700 million.
The company also recently launched a third-party management platform that provides increased management revenue and a pipeline of future acquisition opportunities. These drivers also support dividend growth.
Invitation Homes currently pays a quarterly dividend of $0.28 per share ($1.12 annually). Dividends have increased every year since going public in 2017, with an 8% increase at the end of last year.
real estate income
Realty Income is a diversified REIT that owns retail stores (81.8% of annual rent), industrial buildings (12.7%), gambling venues (3.9%), and other real estate (1.6%). It owns 15,450 properties in the United States and several European countries.
These properties will be leased on a long-term basis to quality commercial tenants. net lease, making tenants responsible for building insurance, property taxes, and maintenance. These contracts provide his REIT with very stable income that increases each year at a fixed rate or indexed to inflation.
The company invests billions of dollars each year to grow its portfolio. We plan to acquire other REITs and purchase real estate from operators. Sale-leaseback transaction, and invest in opportunities to build accordingly. Realty Income expects adjusted funds from operations to increase due to increased rents and new investments (FFO) 4% to 5% per share per year.
Real Estate Income currently pays $0.2565 per share. monthly dividend ($3.078 per year). The REIT has increased its dividend 123 times since going public, including an increase of about 3% over the past year.
sun community
Sun Communities is a residential REIT focused on owning manufactured home (MH) communities, RV parks, and marinas. We currently have 296 MH communities in North America, 55 holiday parks, 179 RV communities and 135 marinas in the UK. These properties generate stable and growing income.
Sun Communities invests funds to expand existing properties and purchase new properties. Last quarter, the company expanded its existing community by 30 sites and delivered more than 75 sites in one ground-up development. We also purchased land to support new MH development.
Sun Communities currently pays a quarterly dividend of $0.94 per share ($3.76 annually). The amount paid in 2024 has increased steadily over the years, with his payment increasing by 1.1%.
WP Carry
WP Carey is a diversified REIT that owns industrial and warehouse land (59%), retail stores (21%), office buildings (5%), self-storage units (5%), and other real estate (10%) . We currently have 1,413 net lease properties and 86 active self-storage properties. However, it has withdrawn from the office sector. The company sells real estate and reinvests the proceeds into new properties, primarily in the industrial and warehouse sectors.
REITs offer properties to tenants on long-term net leases with fixed interest rates or rent increases linked to inflation. We also regularly acquire income-generating properties. These catalysts should boost rental income once the company completes its strategic exit from the office sector.
WP Carey reset its dividend to reflect lower earnings after selling most of its office properties. It currently pays $0.86 per share ($3.44 per year). However, investments in new properties that expand cash flow should increase dividends in the future.
Truly passive income
Unlike rental properties, REITs provide truly passive income. They pay a fixed dividend and try to increase it every year. Another great thing about REITs is that you can start small and slowly build your real estate portfolio and passive income as you buy stocks. This makes REITs perfect for novice investors looking to walk the path to financial freedom through passive income.
