So if you drop $300k into this investment–the price of the average American home–you’ll instantly trigger a $24,000 yearly income stream.
And no, we’re not going to parade through open house after open house to do it. We’ll buy in right from the comfort of our brokerage accounts!
Best of all, we can be assured that our “properties” will be in the hottest neighborhoods, setting us up for fast price gains, too.
Zero Deadbeat Tenants, Zero Hidden Costs
If you already own rental property, I don’t have to tell you that it’s far from a passive investment. Deadbeat tenants are a constant risk, as are noise complaints in the middle of the night. Plus, of course, you’re on the hook for everything from clogged toilets to leaky roofs.
Then there are the hidden costs of real estate that no one talks about, like the king’s ransom you have to pay to buy and sell the property in the first place!
According to the National Association of Realtors, the average closing cost to buy property in America is 1.8% of the purchase price. While that doesn’t sound like much, it means our $300,000 investment is already going to cost $5,400 just to get started–and that’s before renovations, costs of marketing for prospective tenants, background checks and so on.
Then there are the closing costs to sell. In addition to the 6% you’ll end up paying an agent, you’re facing another 1.8% for other closing costs, resulting in a total of 10% transaction costs throughout the life of your investment!
This “1-Click” Strategy Slashes Your Real Estate “Commission” to $4.95
Stocks, of course, are a lot cheaper to buy and sell. You can buy $300,000 worth of stock for $4.95 with some brokerages–and spend another $5 when you sell.
Total transaction costs for stocks: 0.0033%, a lot less than 10%!
You might object by arguing that rental properties get you a much bigger yield. In fact, RealtyTrac estimates that the average gross rental yield in America is 9%–a heady number!
The key word here, though, is “gross.” When you take away those extra costs from buying the property, the future costs of selling, the time in between tenants, the losses from deadbeats and the maintenance costs, the average landlord in America will be lucky to get 6%.
You might think that still sounds decent. After all, stocks yielding that much are risky and prone to dividend cuts, right?
No way. Or at least not if you fish in a slightly offbeat corner of the market and buy real estate investment trusts (REITs).
REITs: Nest Egg Protection and 8%+ Cash Dividends
REITs are stocks in a company that trade on the market, just like regular blue chips. You can buy or sell them through a normal brokerage in increments much smaller than the $100k-plus needed to buy a house (plenty of REIT shares trade for $10 or less each).
And the most important thing is that these REITs yield a lot. Some yield over 10%, but many yield over 6% while offering growing dividend payments.
How is this possible?
It’s simple: REITs collect money from investors and use it to buy property, then lease these buildings out and collect rent. Because of their professional management, REITs can often find properties of much higher quality and rent potential than the average Joe’s single-family house. And because of their scale, they can borrow money more cheaply than the average landlord, boosting returns even higher.
Top-notch REITs also give you extra protection because many of them own hundreds of properties in many parts of the country, safeguarding you from a crash in any one market.
And you can amp up that safety factor (and boost your REIT dividends up to 8.4%) by purchasing REITs is through a mutual fund, like the 2 I’ll show you now.
2 REIT Fund Buys for Safe 8% Average “Rent Checks”
The Invesco KBW Premium Yield Equity REIT ETF (KBWY) gives you a nice 7.4% dividend yield as I write. But it also gives a tremendous total return over a long time:
A Soaring Return
This fund alone has more than doubled in less than a decade–but that’s not the best part. KBWY has also increased dividend payouts over that period, as well:
Shareholders Get a Raise
The fund has also given the occasional bonus special dividend payout, but the best part is that the regular payouts come on time, every time–unlike the checks you may have to chase down from shifty renters.
Want an alternative? The Global X SuperDividend REIT ETF (SRET) is up nearly 35% in just three years since its IPO in 2015:
A Solid Rise
Oh, did I mention its 8.4% dividend yield? That’s right–this is one of the biggest dividends of any ETF, and the best part is that its income stream is more sustainable, thanks to that rental income base from the REITs it holds.
Yours Now: My Top REIT Pick (8% dividends and double-digit upside ahead!)
The GlobalX SuperDividend REIT ETF may have a place in your portfolio, but I’ve got an even better “slam dunk” real estate play waiting for you now.
It’s a special kind of fund called a closed-end fund (CEF). And unlike the GlobalX ETF, this one doesn’t follow a “dumb” computer algorithm.
Instead, it’s run by one of the smartest minds in the real estate business. He’s a battle-hardened pro who uses his proven system to toggle between REIT stocks and debt issues to nail down huge–and safe–gains and income.
The results? This fund has turned in a steady 63% total return since inception in 2012, with a huge portion of that gain in CASH, thanks to its outsized dividend payouts, which yield 7.9% as I write.
A Retirement Lifesaver With a 7.9% Cash Payout
Better yet, this one pays dividends monthly (and gives you an “advance” on your January dividend in December, the most expensive month for many people). So you can look forward to your payouts nicely lining up with your bills, too!
A Steady Monthly Payout
Best of all, this one trades at an absurd 12.5% discount to the value of its top-notch portfolio–an absurd discount that simply can’t last, especially when you consider that this fund traded at just a 1% markdown as little as 3 years ago.
The bottom line?
When it returns to that level, we’re lined up for fast “snapback” gains here, in addition to our 8% dividend yield!
Get My Top REIT Fund Pick–and 15 Other Buys–Now
This winning REIT CEF is just one of the 16 buys you get when you road test my CEF Insider service now, with no risk and no obligation whatsoever.
And that’s not all. You’ll also get …
My 5 Very Best CEFs for 8.2%+ Dividends and 20%+ Gains–Yours FREE
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The Vanguard High Dividend Yield ETF (VYM) was unchanged in premarket trading Tuesday. Year-to-date, VYM has gained 4.26%, versus a 9.49% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Contrarian Outlook.