Contemplating Purchasing a Rental Property in 2025? Opt for This Alternative Option Instead.
Dreaming of a stable income stream to cover living expenses and retire early? Look no further than investing in real estate investment trusts (REITs) instead of managing rental properties yourself. Here's why and which top REITs to consider for your 2025 investment plan.
Your hassle-free rental property alternative: REITs
Traditionally, rental property owners start with single-family homes. Yet, limited diversification, high investment costs, and challenges in managing properties outside your local market can pose issues. Investing in REITs like Invitation Homes and Realty Income, on the other hand, offers instant diversification and eliminates the management headaches.
Invitation Homes (INVH) - A superior single-family rental REIT
Investors seeking diversified exposure to top metro markets can consider Invitation Homes (INVH). This residential REIT owns or manages around 110,000 single-family homes across 16 markets, delivering steady income growth. INVH focuses on markets with high job and population growth rates, leading to increased rental demand and rates. By expanding its portfolio through various acquisitions and in-house management capabilities, it ensures a constant ramp-up in income and dividends.
With a steady quarterly dividend of $0.29 per share ($1.16 annually), INVH yields approximately 3.7% based on its current share price in the low $30s. Start an investment of $100, and you'll earn around $3.70 in passive dividend income yearly.
Realty Income (O) - Built for steady passive income
Investors seeking stable income might prefer Realty Income, a diversified REIT with a focus on commercial properties leased to renowned companies. Its vast 15,450-property portfolio spanning the U.S. and parts of Europe includes retail, industrial, and other properties. This widely diversified portfolio brings in predictable rental income, providing stability during market fluctuations.
Realty Income pays a sizeable monthly dividend of $0.264 per share (approximately $3.16 per year), which currently yields 6%. Invest $100 and gain an estimated $6 in passive income each year.
Embrace a hassle-free real estate investment
With the advantages of REITs over traditional rental properties in mind, you can create a reliable passive income stream without having to manage properties directly.
In the context of investing for a stable income stream and early retirement, REITs like Realty Income and Invitation Homes can provide a superior alternative to managing rental properties due to their benefits such as diversification and managed property maintenance. By 2025, investing in these REITs could potentially yield an annual passive income of $3.70 from Invitation Homes (INVH) and $6 from Realty Income (O), depending on the share price and investment amount. Occupancy rates in these REITs are also expected to remain average, ensuring a steady income stream from the average rental income they generate.
