How to Earn Passive Income from Real Estate—No Rentals Required

Key Points

Real estate investment trusts offer a convenient method for earning passive revenue through property investments.
Invitation Homes manages more than 110,000 single-family rental properties which provide dividend revenue to shareholders.
Realty Income operates more than 15,600 commercial buildings, generating consistent rent revenue that helps fund its increasing monthly dividend.
10 stocks that are more favorable compared to Realty Income ›

Numerous individuals invest in one or several real estate assets to create a steady stream of passive revenue. This approach may involve a very good an income-generating approach. Nevertheless, it comes with certain disadvantages, such as a significant initial cost and the requirement for... to take charge of the property to oversee the management of the property to handle the property with active involvement to supervise the property's operations to be responsible for the property's administration to direct the property's day-to-day activities to ensure proper control over the property to maintain active supervision of the property to administer the property proactively to have authority over the property's management .

A simpler approach would be A more straightforward method An effortless alternative A quicker solution Something less complicated A smoother process An easier option A hassle-free choice A more convenient way A simplified technique earn passive income through real estate investments generate steady revenue via property ownership build wealth using rental properties as an income source create ongoing earnings with real estate assets develop a consistent cash flow through property investment utilize real estate ventures for financial growth establish recurring income streams through property management achieve financial independence by investing in real estate leverage property investments for long-term profit use real estate opportunities to generate extra income is to purchase stock in a Real Estate Investment Trust (REIT) These organizations hold extensive collections of professionally administered income-producing rental assets. They share part of the generated revenue with shareholders through dividend distributions. Such characteristics render REITs highly suitable for hands-off investing.

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Below are some leading REITs you might want to explore for simple passive income through real estate investments.

Making money from single-family rental homes without acting as a landlord

Most novice real estate investors typically purchase a standalone house that they intend to convert into a rental property One advantage of this approach is generating some rental revenue, but it comes with numerous possible challenges. For instance, problems with tenants or maintenance concerns can soon transform your property into a costly burden rather than a profitable asset.

Invitation Homes (NYSE: INVH) It simplifies investing in individual family rental properties while avoiding potential challenges. The REIT owns or oversees more than 110,000 residences within 16 major real estate markets. This wide-ranging diversity minimizes risks, allowing the property owner to earn more consistent revenue to back up dividend distributions.

The firm distributes $0.29 per share in dividends every three months ($1.16 per year) to its shareholders. Given that its stock price is currently in the lower 30s, it has a dividend yield approximately 3.5%. In other words, each $1,000 investment in the REIT would generate roughly $35 in passive income. dividend income each year.

Invitation Homes usually distributes slightly above 70% of its available cash as dividends. The remaining portion is kept for investment in additional rental assets. This real estate investment trust acquires residences through public markets, purchases rental units from other investors, and obtains homes directly from housing developers. For instance, the firm has collaborated with multiple builders to secure more than 300 upcoming homes at a cost exceeding $100 million. Additionally, it extended a $32.7 million loan to a builder constructing a neighborhood comprising 156 homes, which Invitation Homes plans to acquire once they're finished.

The landlord's efforts to broaden its asset base have boosted its rental revenue. This allows the REIT to raise its dividends. It has consistently increased distributions each year since its debut on the stock market in 2017, with an upward adjustment of 3.7% just last December.

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As individuals expand their real estate investments, they frequently look to enter the commercial property market. This approach demands substantial financial resources because such assets come at a high cost. Nonetheless, they have the potential to provide consistent rental revenue supported by extended lease agreements.

Realty Income (NYSE: O) simplifies investing in commercial real estate. The REIT manages a varied collection of 15,600 assets throughout the United States and Europe. It holds properties such as single-lease retail spaces, industrial buildings, gambling facilities, and more. net leased to numerous leading companies around the globe (its top occupants include 7-Eleven , FedEx , and Walmart ) Net leases are highly favorable for landlords as they obligate tenants to cover all operational expenses of the property, such as building insurance, property taxes, and regular upkeep. Consequently, the REIT achieves consistent cash flow.

The firm distributes payments to shareholders monthly (at present $0.269 per share, which amounts to $3.228 yearly). Given its stock value is in the middle range of the $50s, Realty Income offers a dividend return exceeding 5.5%. At this level, you would earn approximately $4.60 in dividends each month for every $1,000 put into the REIT.

Realty Income consistently increases its monthly dividend distribution. Since becoming publicly traded in 1994, it has raised the amount 131 times, with growth occurring for the past 111 consecutive quarters. Over the last three decades, the company has expanded its dividends at an average annual rate of 4.2%.

The REIT is expected to keep consistently raising its distributions. It distributes roughly 75% of its steady cash flow as dividends, allowing it to hold onto the remaining 25% for reinvestment into revenue-producing assets. Realty Income also maintains a solid balance sheet, providing further financial agility for property investments. It generates sale-leaseback transactions Working with property owner-operators, purchasing packages from different investors, and funding custom-built development initiatives.

Simple methods for earning passive income through real estate

Not every person is suited for investing in a rental home. Nevertheless, anyone has the ability to purchase shares in a REIT to receive regular dividend earnings. Invitation Homes and Realty Income are excellent choices since they offer consistently increasing dividends backed by strong asset collections and solid financial standings.

Is it wise to put $1,000 into Realty Income at this moment?

Think about this before purchasing shares in Realty Income:

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Matt DiLallo holds shares in FedEx, Invitation Homes, and Realty Income. The Motley Fool holds investments in and advises on FedEx, Invitation Homes, Realty Income, and Walmart. The Motley Fool has a disclosure policy .