It’s no secret that the housing market is one of the hardest places to enter right now.

My second child, Lexy, is an official homeowner. She’s married now with a baby – my first grandchild, Asher – and with all that to consider, she needed a new house.

As anyone who’s had to buy a home in the last two and a half years knows, that’s not a comfortable position to be in. Moving has always had its stressors, but those have increased exponentially.

As have housing prices.

According to the Federal Housing Finance Agency House Price Index, the national average house price has risen 12.4% over the past year. In states like Tennessee and South Carolina, it’s up around 18%. And that number rises to nearly 23% in Florida.

With rising interest rates making mortgages even more expensive… Many people are finding themselves entirely priced out of buying a home.

Yet the cure for high prices really is high prices. Over the past few months, demand has cooled off a bit. But housing supply is still very low and prices haven’t budged much yet. That could change in the spring when the number of houses on the market tends to spike.

Moody’s Analytics recently indicated many housing markets could drop by 10%, 15%, or more if a recession hits. That clearly can’t benefit Lexy in the immediate term… But it could be good news for anyone who’s been waiting on the sidelines.

It could also benefit certain landlords making money hand over fist in today’s hard-to-buy reality.

As a former commercial real estate developer myself, I’m well aware of the allure of getting rent checks. And here at Intelligent Income Daily, we’re always on the lookout for income-producing opportunities.

Today, I want to tell you about a backdoor way to safely play the real estate market… and three investments worth putting on your watchlist.

Be a Partial Real Estate Owner for Less Hassle and Good Pay

For some, I know I’ll be preaching to the choir. But buying real estate can be a long, expensive process.

It often takes weeks – if not months – to do the legwork, figure out financing, and get the paperwork in order. Add in commissions and closing costs, and your purchase price grows by thousands of dollars.

When you buy real estate you plan to rent out, it adds even more burdens. Because then you also 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.

You could hire someone to manage these responsibilities. But it’ll cost you – usually 8-10% of the rent you collect.

That’s why I’m happy to say there’s a far easier way to collect that extra income: through real estate investment trusts (REITs).

Congress created REITs in 1960 to allow the “little guy” to invest in large-scale, rent-producing real estate… without having to actually manage properties. This way, getting exposure to real estate is as simple as buying shares through a broker.

Better yet, REITs are far better at tackling the 3 T’s.

For one, they’re companies that 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.

Three REITs on My Radar

Thanks to REITs, earning income from real estate can be as simple as clicking your mouse a few times. Then you get to sit back and watch the dividend checks roll in.

Here are three names that could be great rental property buys if housing prices start falling…

  • Mid-America Apartment Communities (MAA) owns nearly 100,000 apartment units across the Sunbelt – particularly in cities like Atlanta, Georgia; Dallas and Austin, Texas; Tampa, Florida; and Charlotte, North Carolina.

  • AvalonBay Communities (AVB) owns more than 80,000 apartment units along the East and West Coasts in cities like Boston, Massachusetts; New York, New York; Washington, D.C.; San Francisco and Los Angeles, California; and Seattle, Washington.

  • Essex Property Trust (ESS) has around 65,000 units, mostly on the West Coast in Californian cities like Los Angeles, San Diego, San Francisco, and San Jose; and Seattle.

To be clear, I’m not recommending buying these REITs today. But there could be attractive opportunities opening in the coming months.

If prices start to fall, that could be a chance for the best REITs to expand their portfolios in impressive and profitable ways… and for you to buy them on the cheap.

In which case, these three are high-quality companies to keep an eye on.

Happy SWAN (sleep well at night) investing,

Brad Thomas
Editor, Intelligent Income Daily