REIT Dividend Investing: Buying Rental Income For Less than $100 Per Month! REIT Pros and Cons πŸ’°

REIT Dividend Investing: Buying Rental Income For Less than $100 Per Month! REIT Pros and Cons πŸ’°


what is up Internet family? It is so good
to see you! If you’re new to reinvesting or you just want to have a better
understanding of how REITs or real estate investment trusts work this video
is for you I’m going to show you how you can participate in these type of
investments and collect rental income every single month for usually less than
a hundred bucks at a time in this video I’m going to be providing you the key
takeaways when it comes to real estate investment trusts what you need to know
be aware of I’m gonna be discussing the pros and cons of these type of
investments and lastly at the towards the end of the video I’m going to
discuss what my personal experience has been investing in REITs over the last
four to five years and I’ll give you guys just a few basic examples with that
being said let’s get started with reminder if you like the video today and
you want to support the channel drop a like and leave a comment down below and
consider subscribing if you’re brand new to the channel I got to tell you guys
investing in real estate has never been easier than it is a day you can begin to
purchase rental income every single month without being a landlord without
having to go hunt down properties and without getting yourself stuck into a
large mortgage it was in 1960 when President Dwight d Eisenhower signed
legislation that created a new approach to income producing real estate
investments a manner in which the best attributes of real estate and stock
based investments merged together so you’re saying that the real estate
market and the stock market made a lovechild uh yeah sort of and that
lovechild is known as a REIT or real estate investment trusts so real estate
investment trusts gift investors in particular small investors access to
income producing real estate assets and this investment model has been so
popular now it’s been around for about 50 years and has flourished throughout
35 different countries in my personal opinion this is by far the easiest way
to invest in real estate or income producing real estates more than any
other option available but like any investment it does have its drawbacks
which we’re gonna discuss shortly later in the video there are two primary types
of real estate investment trusts the first type is known as an equity
REITs the second type is known as a mortgage REIT now roughly 80 to 90
percent of REITs available today are equity REITs so let’s start there equity
REITs invest in hard real estate assets equity real estate investment trusts
revenues are mainly generated from rental incomes from their rental real
estate holdings mortgage REITs on that other hand invested mortgages only so
you’re you have ownership of you have a partial ownership of the mortgage and
they make up less than 10% of the REIT market
mortgage REITs mainly generate their revenues from the interest that is
earned on those mortgage loans for the purpose of this video I’m primarily
focusing on equity REITs because that’s the most common form and the ones people
most are more likely to invest in but just know that mortgage REITs do exist
and they are an option and I will tell you in some circumstances some real
estate holding companies are some of these real estate investment trusts may
have a mix of equity REITs or equity holdings and also mortgage plays as well
so they do exist there are some hybrid REITs out there but they’re not as
common it’s usually one or the other now there are all there are so many
different kinds of REITs blew my mind when I saw this chart so the chart
you’re seeing on screen depicts many of the REITs that are available to you
today in terms of what type of properties these real estate holding
companies own there’s properties that stem from retail so use your commercial
shopping you can have a part there could be apartment buildings they could be
medical facilities such as hospitals they could be retirement or senior
living homes it could be billboards banking or bank
buildings they could own entertainment properties such as like top golf hour
movie theaters and things like that you kunia even ones for prisons I cannot
believe that there you can actually hold an investment that rinse out or utilizes
prisons and you can make money from it it’s options are fully available and
seems to be that there will be more real estate holding options in the future
based on this chart here are a few of the key takeaways and the things I think
you really need to don’t understand before diving in to
investing the reefs with your hard-earned money equity REITs are
responsible for acquiring managing building renovating and selling real
estate bottom line here is you’re not the one managing that property you’re
not a landlord you don’t have to deal with the headaches a landlord has to
deal with but you do get the benefit of collecting that a rental income and that
rental income comes to you in the form of a dividend and that dividend might be
monthly or it might be quarterly depending on the type of real estate
investment trusts you’ve invested it read companies receive favorable tax
treatment but one of the primary requirements for a company to be
considered a real estate investment trust is they must pay out ninety
percent of their earnings to their shareholders and this is not just an
option this is actually required by law so that tax benefit they they receive is
is when they actually can deduct from their earnings the amount of the rental
income they distribute out to their shareholders but of course with that tax
break comes the responsibility of actually paying that money out whenever
it comes due generally speaking the income from these REITs is generally
paid out on a quarterly basis or on a monthly basis
half my REITs are paid I receive dividends quarterly and half of my rates
pay dividends to me on a monthly basis it’s a common misconception that reads
it can avoid taxes altogether because that’s not true REITs actually are
subject to income taxes like any other operating business but they function
more as a pass-through entity what’s the pass-through need a pass-through entity
basically earns it earns its money and after after expenses the net earnings
are then passed out to the shareholders so in this case the REIT is distributing
ninety percent of its earnings they’re passing those earnings out to the
shareholders where the they will be taxed those earnings will be taxed at
this shareholder level at their personal return level not the company level of
the read itself but on your own individual tax return if you’re
investing within our reach what is quite amazing to me as I dived into it as I
learned more about these wreaths is that many of them owned not only hundreds but
some of them thousands of properties thousands so
you’re when you’re buying into a REIT you’re you’re buying into a diversify
the portfolio of real estate so for example that portfolio could own
hundreds of apartment units it could opened zuv units of residential real
estate it could own undreds or thousands of units of commercial property etc real
quickly let’s run through that list of pros and cons for these types of
investments let’s start with the pros the first Pro my list is that in my
opinion this is the easiest way to invest in real estate all you do is
purchase shares of the REIT company and wait for the dividend check to come in
your that’s literally all you do is you find the REIT the stock or ETF you buy
it and you wait for your money to come in that’s it the next thing this REITs
are a great way to begin replacing your income or supplementing your income
slowly over time whether you’re wanting to retire or whether you’re wanting to
supplement your income right now a REIT is a fantastic way to begin doing that
Mike don’t forget to tell them about the Roth IRA they’re gonna wanna know about
thanks for the reminder chipper when investing in a REIT
you’re not gonna avoid taxes but there is a way you can avoid taxes at least to
an extent is that when if you want to invest in this type of investment you
can purchase that investment this real estate investment trust purchase it
within a Roth IRA that way you’re gonna collect the dividend income or the
rental income essentially and it’s gonna come to you completely 100% tax-free so
as much as possible if you’re a long-term investor if you don’t plan on
retiring any time soon and you want to build up a nice tax-free income for
retirement or REIT is a fantastic option to look into in order to accomplish that
another great thing about races they’re very liquid unlike a holding an actual
piece of real estate you can actually because it’s a stalker or an index fund
you can actually sell that REIT anytime you want and get out of it and that’s
been your hands-free there’s no mortgage to deal with like I said you don’t have
tennis villa with you can just get in and out of these reeds as you please
another pro of REITs is that I think it’s really easy to diversify now you
might think well Mike didn’t you say they owned thousands of properties
already is there really a need to diversify actually
there is so many of the rates you will come across they usually hold hundreds
or thousands of units of property but that’s typically all concentrated in one
type of property it could be all like be like entertainment properties or it
could be all commercial properties or industrial properties so you can
actually diversify so think of think of your portfolio and think of just rates
in general you can actually get a diversified portfolio of REITs by
purchasing REITs that hold different types of property units and I think
you’re gonna want to do that because there’s always a chance that one type of
unit can be impacted if the economy takes a plunge or if the economy takes a
big hit so that’s something to be mindful of when exercising your options
to invest in REITs the last two pros I think is that I want to mention is reach
have a much higher yield than the average dividend yield on other types of
stocks lastly not only do you get this consistent yield you get consistent
returns or income every year but you you do have a chance for capital
appreciation as well now let’s dig into some of the cons of these REIT
investments one of the biggest cons of Reese is that you’re stuck paying
attacks especially if you’re investing in these REITs within a taxable standard
brokerage camp you’re not going to be able to avoid the tax now unlike other
dividends from like let’s say coca-cola or Pepsi or you know like a normal
company that’s not considered a REIT you can get qualified dividend treatment
which means you pay taxes at capital gain rates which are lower and I’ve
discussed this in many of my other videos with a REIT however you’re stuck
Payne ordinary income rates are your marginal tax rate now for most people
that’s anywhere from 10 to 22 percent depending on your marginal tax rate but
the fact of the matter is is that you cannot avoid tax on these things if
they’re in a taxable brokerage account and you’ll always pay tax at the highest
at your highest marginal tax rate on these investments something you have to
consider there tax in other words they’re taxed just like your wages at
your job what you’ll notice if you dive into the dividend history of a lot of
these rates because they’re required to pay out so much of their earnings
shareholders you’re you’re not always gonna get this same amount of dividends
I mean you likely will but there’s a possibility you won’t so what I’m saying
is there’s some income fluctuations that might come into play so just be aware of
that another another con is read can be sensitive to fluctuating interest rates
especially as interest rates rise since these companies these rate they rely
heavily on capital in order to borrow in order to purchase these different
properties it’s because they are short on cash because they’re constantly
distributing out cash through their shareholders piggybacking on this last
one because they are passing out so much of their cash to shareholders they
really don’t have a lot of extra money to develop the company because they’re
stuck with the 10% that remains of their earnings so they have to be careful
about how they grow the business and so you you do have a good chance of
appreciation capital appreciation in addition to that vivid and yield but
it’s not as likely as I mentioned earlier most read specialize in a single
property type so in order to achieve true diversification with your REITs it
may be necessary to own several types of REITs that hold different kinds of
properties another con is you have virtually no control over the way the
property’s held within the real estate investment trusts are managed so that
that’s a downside so what you can what you’ll often find and I’m not gonna go
into detail here but I think if you actually owned a piece of real estate a
property of your own are like let’s say it’s a single family unit or a
commercial property and you were renting that out you could often achieve much
higher returns by being a landlord so I think in general the returns are much
higher on owning an actual piece of real estate versus investing in real estate
through a stock like a REIT but you know it’s more hassle as more reward less
hassle less reward so that those are the trade-offs the last thing I want to
mention is that the value of reach shares can decline if the properties
they hold themselves decrease in value now overall my experience with these
real estate investment trusts has been a positive experience overall I’ll be
honest with you I haven’t received a tremendous amount of appreciation as
opposed to my other investments but REITs definitely make up a good chunk of
my portfolio than happy with him overall so I own
wreaths that hold entertainment properties wreaths that hold commercial
properties medical properties and even reap that house that has a owned
buildings that house computer servers for cloud computing which is a very
popular thing now and I can see that going well into the future so there’s
there’s different kinds of reach I own to diversify myself and I will be
purchasing more rates in the future but like any investment I want to limit my
portfolio to a certain amount in terms of how much I’m willing to invest and
reach because really a REITs only represent remember they only represent
one sector of the economy and that’s real estate currently how much do I make
from REITs well if I take my REITs if I look at the the portion that pays me
monthly and I look at the portion of my reach that pay me quarterly and I
annualize that amount then I’m currently make about a hundred and three dollars
per month from just real estate investment trusts alone and divet some
of those dividends are from a rot so they’re completely tax-free and some of
them are within my brokerage account which is taxable – examples of wreaths I
own include Oh which is the realities income Trust which is probably the most
well known rate on the market today I think we’ve been around for over 25 or
26 years now very conservative company does great at managing their cash their
profits and things like that so I recommend you checking them out I think
they have about a four percent yield right now and I’m and they pay monthly
EPR is a REIT I’ve held for a long time now and they own entertainment
properties such as movie theaters TopGolf amusement parks and things like
that which I think I’ll what I’ll do is I’ll make especially if you want to see
a video around this kind of stuff guys is I think I’ll wanted what I want to do
is make a video dedicated due just to my arete holdings and go over my experience
with REITs with you guys let me know if you would like to see that now fair
warning with REITs it can be extremely addictive to be able to purchase rental
income every month because that’s essentially what you’re doing when
you’re buying REITs is you’re perching purchasing more rental income every
single month to supplement your current earnings but remember REITs only
represent one sector of the economy there’s ten other sectors of the economy
that I don’t choose to ignore you gotta you have to keep all this stuff in mind
when you’re investing in these things so because in
the other sectors of the economy you might actually be able to obtain even
higher returns a minute ago I mentioned a few of the stocks I own like Realty
income Trust and EPR but you don’t have to go the individual stock route if you
want you can actually purchase read through ETFs I think the Vanguard ETF
for real estate like the real estate investment trust is v NQ v NQ and if
I’ve said that wrong they’ll make sure I correct it on the screen here but that
ticker symbol within that ETF you can just buy that one index fund and that
one index fund from Vanguard owns numerous different kinds of REITs if you
want to invest and REITs through an index fund you can even an
investor reach through mutual funds within your 401 K if you choose to do so
alright ladies and gentlemen well that is all the information I have for you in
today’s video if you liked the video make sure you subscribe down below if
you’re new to the channel and make sure to drop a like I look forward to reading
your comments down below in the comment section and tell then have a fantastic
week and take this information and use it to live your life on caves take care
everybody love you all pase you

Author:

38 thoughts on “REIT Dividend Investing: Buying Rental Income For Less than $100 Per Month! REIT Pros and Cons πŸ’°”

  • Money and Life TV says:

    Time Stamps so you can jump ahead to any spot in the video.:

    0:00– Introduction to REITS

    1:11 – When did REITs begin?

    2:10 – Equity REITs vs Mortgage REITs

    3:23 – Types of Properties REITs can hold

    4:20 – How Equity REITs work and when dividends are paid

    5:44 – REITs and Taxes

    6:56 REIT Investing Pros and Cons

    12:54 My experience with REITs and REIT income

    14:15 Two REIT stock examples (I own these)

    15:30 REIT Etf example

  • Money and Life TV says:

    Other important videos:

    How To Buy Dividend Stocks: https://youtu.be/isDiBoFxH-g

    Roth IRA Rules Explained: https://youtu.be/3MzZfRrgEYg

    How Rich Can A Roth IRA Make You: https://youtu.be/2nx0vHGNVmE

    To learn the differences between investments accounts follow this link: https://youtu.be/FoWzmJt5M3A

    Our complete investing library can be found here:

    Stock Market Investing: https://goo.gl/hi2kK4

    Dividend Investing Playlist: https://goo.gl/njSrk2

  • Money and Life TV says:

    What's up my YouTube family, hope you had a great week. Thanks for continuing to like, comment, and for sharing these videos with others it really helps this information reach more people. REITs are a great way to build a passive income of dividends without becoming a landlord. Can't believe we hit 25,000 subs! I am beyond grateful for your support. I'll have a special video coming out in the next week or two so tuned. Also, you will notice I finally bought a green screen. First time using it, but it was a lot of fun.

  • Happy Sunday! Thanks for the great info! Love the new background! I definitely have a REIT addiction, I have O, MPW, BPY, VNQ, in my Roth at 20%. I want to add REITS to my individual account but I'm scared of the tax implications. I feel my taxable portfolio would not have dipped so much last week if I had my REITS in there, my Roth was positive last week and only difference is the REITS! Perhaps I can just add the same REIT pie to my individual to balance it out?? πŸ€”

  • I was waiting for this video! Great info. IMO REITs are best if your investing strategy is for income and you don't care as much for appreciation. Any appreciation is just a bonus.

  • kevin fernandes says:

    If you reinvest the dividends earned from holding the REITs in a taxable brokerage account, do you still have to pay taxes? Or do you only pay taxes when you withdraw and transfer the funds to your bank account?

  • Hi, another great video, just wondering can you reinvest the dividends to buy more stock or do you have to take the money?

  • The Laughing Lion says:

    fantastic beginner's guide to REITs. I'm a long term investor of REITs. I've had some REITs lose over half their value/share price. as a former landlord, i like no hassle aspect of this investment and liquidity of it.

  • RealLife Money - Weekly Financial Videos says:

    REITS are a great way to diversify. Stinks that they are ordinary income, but it’s better than a savings account! Might get more popular cause rates might be decreasing further 😱

  • Although I have owned Rental Income Properties in the past I have never invested in REITs. I will have to do some serious research πŸ’΅ πŸ’΅ πŸ’΅ πŸ’΅ πŸ’΅

  • Another good video on introduction to REITs
    which will make Chipper the boss proud.

    REITs aren't paying _corporate income tax_. If you invest in a normal for profit corporation,

    the corporation pays corporate income tax after they deduct their allowable expense. The

    shareholders might receive dividends from the corporation which then gets taxed at their

    personal income tax. Such is what's called double taxation of dividends and why the tax

    code currently allows lower tax rate on qualified dividend income.

    With a REIT, the entity expenses whatever it is allowed including paying property tax and

    interest on its loan and also building depreciation then whatever is left, there's no

    corporate income. However, as mention in this video, you don't get the tax break on

    qualified dividend. Also mentioned in the video need to pay most of its earnings to its

    shareholder insures the government gets their cut of the action.

    Hinted in the video, the lack of capital needed to keep operating because REIT is paying

    so much of its cash flow to its shareholder. Some REIT's chose to covert to a normal

    corporation to not be restricted to paying out most of its earnings to its shareholder.

    Those entities then become Real Estate Operating Companies subject to normal corporate

    income tax but all of the REIT specific restrictions get lifted by electing that option.

    Other entities have been known to convert itself from a corporation to a REIT for the

    corporate tax break.

    One related drawback is that most REITs do have a fair amount of debt to acquire the

    property. When a downturn happens in the real estate market, the little equity in the

    real estate goes to zero or negative. Banks may decide to demand loan payment and because

    REIT's do not have a lot of cash that they carried over from previous year, it can cause

    a substantial risk of the REIT itself to go bankrupt. The last real estate crisis truly

    illustrated the huge swings the REIT market can be subject to because of this risk.

    Advantage that should noted is that because individuals most often do not have capital to

    buy a 100+ unit apartment complex, the scalability of the investment is better in a REIT

    than those buying real estate outright.

    When investing directly into rental real estate for lower income landlord, they can write

    off loss against their ordinary income of up to $25,000/year. REIT's cannot distribute

    loss so you won't benefit from it by investing directly in REIT. Direct real estate

    investing is more like a part time job that is on call unless you outsource that activity

    to a management firm. When you outsource too much, the extra profit disappears and lack of

    scalability makes it harder to compete with REITs.

  • Nathan Stevens says:

    My #1 favorite stock right now that I'm increasing my position in within my ROTH is NRZ. Love me some high yield dividends

  • With the ability to buy fractional shares I just pick out the best performers over the course of 10 years out of the ETF and mutual funds and create my own fund mix

  • Good video Mike, thanks. Alot of YouTubers have made intro to REIT's video's recently, which is great. None though have made videos on the current market conditions for REIT's and if this may be a good time to start a position. REIT's have run up since the start of the year, much more than they historically have. Right now there doesn't seem to be many undervalued REIT's and doesn't seem like a good time to start investing in them. I have quite a large REIT watch list though and I am waiting for a pull back or correction. Thoughts?

  • Love your videos, especially Chipper, would you do one on the top ten best assisted living REITS? Where I live the main road is exploding with these! I wonder if our car insurance rates will go up because of this! LOL!

  • Ross Macintosh says:

    Thanks Mike the CPA. Good clear information. You mentioned REIT ETFs — why did you choose a series of individual REITs instead of buying a more diversified ETF?

  • I was just thinking maybe the way to go then is individual REITS in the Roth so dividends aren't taxed then Real Estate ETFs in the Taxable account so dividends are taxed at the lower capital gains rate. I have both VNQ and VNQI. Look forward to more videos on this topic. πŸ™‚

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