Developing an Effective, Low-Cost Real Estate Portfolio Generating Passive Income in Installments under $250 Each
Exploring the realm of property investment, real estate can prove to be an excellent means of generating passive income. Properties often yield more cash than their monthly expenditures, leaving investors with a surplus that they can collect as passive income.
For beginners, venturing into rental properties might seem daunting. However, there are alternative methods to invest in the real estate market. One of the most popular and straightforward options is to invest in real estate investment trusts (REITs). These entities are cost-effective and require minimal management, making them an ideal choice for novices.
Three remarkable REITs for beginners to invest in are Realty Income (O, 0.13%), Invitation Homes (INVH, -0.84%), and Extra Space Storage (EXR, -0.57%). The cost of purchasing a share of each of these REITs is less than $250, allowing investors to gradually build up their real estate portfolio whenever they have an extra $250 or so to spare.
A Centralized Real Estate Hub
Realty Income is almost like a one-stop solution for real estate investing. This REIT owns an extensive portfolio of about 15,450 properties spanning all 50 states and various European countries. Its real estate holdings include retail (approximately 79.4%), industrial (14.6%), casinos (3.2%), and other types of properties like data centers (2.8%). The REIT mainly focuses on owning freestanding properties with long-term net leases, which ensure predictable rental income due to the tenant's obligation to cover all operational expenses, including maintenance, taxes, and insurance.
Realty Income stands true to its name. It pays a monthly dividend of $0.264 per share or $3.168 annually, making an attractive yield of 5.8% with a share price of around $55. This dividend has been increased 128 times since it went public in 1994, resulting in consistent growth of 4.3% per year. Its financial stability and vast growth potential give it the capacity to continue enhancing its dividend payout in the future.
Extraordinary Income Growth
Extra Space Storage is the leading self-storage REIT, owning or managing 3,862 properties and occupying 296 million square feet of rentable space across 42 states. With an industry-leading 14% market share and a robust third-party management platform, it generates a stable income through management fees.
Extra Space pays out a $1.62-per-share dividend each quarter, amounting to $6.48 annually. With shares trading around $155, the REIT yields 4.2%. Over the past decade, its dividend payment has tripled in size. This growth is primarily due to the increasing demand for self-storage space across the country, maintaining high occupancy rates and enabling the REIT to constantly raise rental rates. It has also capitalized on opportunities to expand its owned portfolio and third-party management platform, including the acquisition of rival self-storage REIT Life Storage for $15 billion last year. Its robust financial health allows it to continue expanding its leading self-storage portfolio.
A Leading Real Estate Landlord
Invitation Homes is a residential REIT specialized in single-family homes. The company manages over 110,000 homes in 16 main markets, with a focus on areas with above-average population and job growth rates. This approach keeps occupancy high and drives strong rental growth.
Invitation Homes recently boosted its dividend payment by 3.6% to $0.29 per share each quarter, resulting in an annual dividend of $1.16. With a share price under $35, the REIT offers a 3.6% yield. Since its public offering in 2017, the REIT has consistently increased its dividend. Its growth strategy includes expanding its existing portfolio, buying additional rental properties, and growing its third-party management business. Recenty, it invested $50 million into a joint venture for newly built homes and communities in high-growth markets and has a pipeline of 2,500 homes under construction.
Realty Income, Invitation Homes, and Extra Space Storage are reliable REITs for new real estate investors to consider. Their diverse portfolio spans various property types, including retail, industrial, self-storage, single-family rentals, and others. Their robust financial profiles showcase their reliability and potential for further dividend growth, empowering investors to construct a high-quality portfolio while spending less than $250.
Investing in real estate investment trusts (REITs) like Realty Income, Invitation Homes, and Extra Space Storage can be an excellent way for beginners to diversify their finance portfolio and enjoy passive income. Realty Income, for instance, owns a wide range of properties across multiple industries and offers a consistent dividend yield of 5.8%, making it a popular choice for beginner investors.
