Real estate investing is a common strategy for generating passive income. However, buying a rental property is more proactive and often involves higher costs to make the purchase and prepare it for rent.
Easy way Creating passive income in real estate Investing in real estate investment (REITs). These entities own and operate income-producing real estate and must distribute 90 percent of their income to investors as dividends. While most REITs pay dividends quarterly, many pay their investors monthly. Because of this, you can simulate the recurring rental income you get from owning a rental property.
For example, if you have $12,500 to invest, you can generate about $50 in annual passive income by spreading that across high-paying REITs. Monthly installments. You don’t need that much to begin with as you can buy a few stocks as you have the money, allowing you to work towards your steady income goal.
Become a REIT mogul
There are over 200 REITs that invest in over 12 asset classes. Few pay monthly dividends, limiting options for investors looking for a source of income that can balance recurring expenses. However, you can build a diverse real estate portfolio from that grouping.
Five main options to consider:
|
Dividend Stock. |
Initial investment |
Current income product |
Annual passive income |
Monthly |
|---|---|---|---|---|
|
Realty income (O 1.64%) |
2,500.00 dollars |
4.5% |
111.50 dollars |
9.29 dollars |
|
Characteristics of EPR (E.C 1.56%) |
2,500.00 dollars |
8.1% |
202.50 dollars |
$16.88 |
|
Gladstone Land (Land -0.46%) |
2,500.00 dollars |
2.7% |
68.25 dollars |
$5.69 |
|
Stag Industrial (STAG 0.29%) |
2,500.00 dollars |
4.2% |
105.50 dollars |
8.79 dollars |
|
Realty agreed (A.D.C 0.24%) |
2,500.00 dollars |
3.8% |
$96.00 |
8.00 dollars |
|
Total |
$12,500.00 |
N/A |
583.75 dollars |
$48.65 |
Data sources Google Finance and author’s calculations.
As that table shows, $12,500 invested in those five REITs would yield $50 per month in dividends.
Realty Income is a diversified REIT with over 11,700 properties in retail, industrial and other sectors (including office, agriculture and gaming). Most of the portfolio is prime retail properties such as grocery, convenience, dollar and drug stores. It leases these properties in triple net deals (N.N.N) responsible for building tenant insurance, maintenance and real estate taxes. Those rental contracts provide a steady rental income.
EPR Properties has more than 350 experiential properties such as theaters, dining and entertainment venues and other attractions. It also has a small education portfolio. EPR leases these facilities back to the operator under triple net agreements.
Gladstone Land a Farmland REIT. The company owns 169 farms covering over 115,000 hectares that it leases back to its farmers.
Stag is industrial. Industrial REIT The owner of warehouses and light manufacturing facilities. It has more than 560 buildings that it leases to tenants.
Finally, Agree Realty a Retail REIT. It owns more than 1,700 properties, which, according to Realty Income, are primarily leased to major retailers. Agree Realty has a big one. Land lease Portfolio, owning the land underlying an important retail property.
Growing monthly income stream
Another thing that stands out about these REITs is that they all have a history of increasing their monthly dividend payments. Because of this, investors can expect their monthly income stream to grow steadily throughout the year.
Realty Income will lead the way. It has increased its dividend for 101 straight quarters, growing its payout at a 4.3% compound annual rate since its public market listing in 1994. In the year It has increased its payout at a 6.1% compound annual rate over the past decade. Meanwhile, Gladstone Land has increased its payout 29 times over the past 32 quarters, while EPR Properties and Stag Industrial have increased their investor support in recent years.
REITs should be able to continue to grow their dividends in the future. All can increase the rent with clauses added to their leases. In addition, each has a long history of acquiring real estate that generates additional income. Those drivers should help increase their rental income so that they can increase their dividend payments.
A passive way to generate income from real estate
REITs make it easy to start earning passive income. You don’t need a lot of capital because you can buy REIT shares as soon as you have the cash, allowing you to grow your income to the level you want. Many REITs help you reach your goal faster by constantly increasing their dividends. This makes them a great way to start earning money from your money.
Matthew Dillalo He has positions at EPR Properties, Gladstone Land, Realty Income and Stag Industrial. He has positions in the Motley Fool and recommends Gladstone Land and Stag Industrial. The Motley Fool recommends EPR Properties. The Motley Fool has Disclosure Policy.