As the dice tumbled out of my hands, I prayed for anything but a seven…
I’d rather go to jail than land on Marvin Gardens, where my dad had built a hotel. It would set me back $1,200, and I was out of cash.
In which case, game over.
Monopoly was my favorite game as a kid. I was good at it, too. And it helped fuel my dream of building my very own real estate empire.
Sure, there was some luck involved. But there was also a lot of strategy. I learned the key to winning was scale – not just a hotel here or there, but total domination of the board.
With that lesson in mind, I grew up to become a real estate developer. From site acquisition, to leasing, to construction, to management, I was involved in it all. I was living the dream…until 2008, when my luck ran out.
Since then, I’ve focused on lower-risk income plays instead.
And one of my favorites is real estate investment trusts (REITs).
They produce steady income streams that are perfect for us here at Intelligent Income Daily, where my team and I have one goal: To reveal the most dependable ways to make – and keep – money no matter the market.
Today, I want to tell you why REITs stand out from the stock market crowd… and what makes them my favorite way to deploy the lessons I learned from Monopoly all those years ago.
REITs Are Designed to Be the Ultimate Real Estate Investment
REITs don’t form monopolies, of course. That would be illegal. But they do know a lot about strategy.
Even back in my developer days, I was familiar with REITs. I both bought from and sold to them. I just didn’t realize at the time the real estate they offered through scale and low-cost capital could be game-changing for average investors.
Here are five reasons REITs are my favorite way to invest in real estate:
Reason No. 1:
At least 75% of the assets they own or manage must be real estate. This can include malls, shopping centers, stand-alone properties, office buildings, warehouses, data centers, timberland, hotels or resorts… even cell towers.
This makes it easy for small investors to become landowners.
And that’s what REITs were designed to do. They give the proverbial little guy access to the big money real estate offers.
Better yet, they do it through convenient, liquid stocks – and without the hassles of being a direct landlord. So regular investors can purchase them to get real estate exposure with a relatively smaller starting amount.
Reason No. 2:
They’re pass-through businesses, which means they’re not subject to corporate income tax. This is a big deal, since those financial obligations eat up 21% of traditional companies’ profits.
Uncle Sam never gives anything away for free, of course. So REITs must pay at least 90% of their taxable income to shareholders… which is great for us.
That means REITs can pay much larger dividends than your average income-producing asset.
Reason No. 3:
REITs are more predictable than average stocks.
Analysts often have to guess how a traditional company will perform, sometimes creating wild price swings as a result. But REIT earnings are usually easily forecasted because of their long-term lease contracts.
When you have the same renters committed to paying you year in and year out, it makes for steady business. And that steady business tends to make their stocks less volatile…
Which helps shareholders sleep well at night.
Reason No. 4:
Not only do REITs provide portfolio diversification, they also provide variety within their own sector.
Along with houses, stores, and offices… REITs own everything from farmland to apartments, casinos, hospitals, and even research labs. So investors have their pick of categories.
Plus, a REIT might own dozens, hundreds, or thousands of properties. This reduces its individual risk from things like natural disasters or tenant defaults.
Reason No. 5:
This is a big one, considering the economy we’re in… REITs protect against inflation.
When prices rise, real estate values and rents do, too. In fact, many leases often include terms that increase rent based on inflation numbers.
An S&P Global study showed that… even when inflation spiked over 10% in the late 1970s and interest rates increased by 8.5%… REITs performed nearly 3x better than other stocks.
REITs Are Worth Considering for Your Portfolio
Income, diversification, inflation protection, exposure, and predictability. REITs really do have it all.
That’s why I love them as a safe, income-producing investment. And it’s why I encourage you to evaluate them, too.
Bottom line: With REITs, you don’t have to buy a whole building or put down thousands of dollars on a mortgage. Just a small amount is enough to make you an instant owner in a rent-charging, dividend-paying company.
I’d say that’s the big kid’s way to play Monopoly… and a version where winning can be so much easier than trying to beat my dad.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily
P.S. There are hundreds of REITs out there that span different property types, markets, and sectors. And they offer a wide range of benefits. My team and I spend hours every day researching the best of these opportunities. And that valuable information is available through our premium service, the Intelligent Income Investor. You can learn more, and get one of my favorite ideas for free here.