By Brad Thomas, Editor, Intelligent Income Daily
I’ve got good news and bad news.
The good news? Inflation is still inching its way down. Last week the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased just 4.9% over the past year.
That’s a lot better than the 9.1% rate we saw last summer.
The bad news? It’s still much higher than we’d like.
The “Core” CPI number (which excludes food and fuel prices) increased 0.4% in April. And it’s been stuck at that rate for most of the past 6 months. If this keeps up, the headline inflation numbers won’t drop much lower. We might be stuck with 4-5% inflation for a while.
That means the Fed’s job isn’t done yet. Their goal is to get us back to 2% inflation.
The latest culprits for inflation are prices for used cars – which jumped 4.4% in the past month – as well as housing costs – which are up 8.1% over last year.
That’s unwelcome news for people who have been trying to scrape up enough money to buy a home.
But, there is one way you can profit from this trend…
Here at the Intelligent Income Daily, we’re focused on finding the safest income investments on the market. As inflation causes housing prices to go up, rents increase as well. And you can get a piece of those rising rents just by buying a few shares of the right company.
Today I want to show you how to be a landlord without getting your hands dirty. I’ll also give you the names of three companies that can help you get started building a stream of rising income.
The Headaches of Being a Landlord
After shooting up to unaffordable levels last summer, home prices started steadily falling in the second half of 2022. According to the National Association of Realtors, the median price for a single-family home peaked at nearly $421,000 in June last year.
Since then, prices fell back down to about $365,000 early this year.
But prices have started jumping back up again. In March, the median price hit $380,000. Combined with higher mortgage rates, that makes buying a house nearly as unaffordable as it was last summer.
That changes the math for many people who might have been considering moving out of their apartments. And that higher demand means that landlords can ask for higher rents.
When most people think of investing in real estate, they imagine buying a rental property. If you’re thinking about it and haven’t done this before, let me save you from a lot of headaches. Running a rental property is a lot of work. You have to deal with the 3 T’s: toilets, tenants, and taxes.
Toilets – Staying on top of maintenance issues, from unclogging plumbing to landscaping to replacing air conditioners.
Tenants – Finding quality renters that will make it worth your while instead of taking more than they give.
Taxes – Paying business-level taxes, including all the intricacies involved.
Not to mention, you need to have a large amount of money or a bank loan (good luck getting one of those right now) just to buy your first property.
There’s an easier way.
In 1960, Congress created real estate investment trusts (REITs) to allow the “little guy” to invest in large-scale rent-producing real estate… without having to actually manage properties.
REITs are far better at tackling the 3 T’s because they have the resources to get maintenance done more cheaply. They also own dozens, hundreds, or even thousands of properties. So each individual tenant becomes less problematic.
And they have a special corporate structure that allows them to avoid paying taxes. Just as long as they distribute more than 90% of their taxable income to shareholders, they can keep Uncle Sam at bay.
So you can become a landlord just by buying a few shares of a REIT and enjoy the rental income coming into your brokerage account through dividends.
Here are three apartment-focused REITs that could benefit if housing prices and rents continue to rise:
Camden Property Trust (CPT) owns 59,000 apartment units across the Sunbelt. CPT yields 3.6% and has been growing its dividend for 13 years.
AvalonBay Communities (AVB) owns nearly 90,000 apartment units along the East and West Coasts. AVB yields 3.7%.
Essex Property Trust (ESS) has 62,000 apartments focused in the West Coast. ESS yields 4.3% and has been growing its dividend for 29 years.
Inflation may be sticking around for a while. But you can take advantage of appreciating property values and rising rents the easy way by owning shares of a quality REIT.
Our favorite apartment REIT is growing rapidly in Sunbelt markets and has a 3.7% yield. To get its name, consider signing up for the Intelligent Income Investor.
We provide a model portfolio, as well as trade alerts and special reports on the highest quality dividend-paying companies the market has to offer. Our focus is on finding safe and secure dividends to create a growing income stream that will passively support your lifestyle with stress-free investments. To find out more, click here.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily