Do you dream of becoming a real estate tycoon and living off rental income from commercial buildings?
We may not have the capital to invest in large commercial real estate, but we can buy REIT stocks to take part in the operation of real estate projects. Then we can earn a steady income while the operations are profitable.
We share what a REIT is, and a list of the best REITs to invest in right now, so you can realise your dream of living off passive rental income.
Contents
What Is a REIT?
A REIT is Real Estate Investment Trust, which is a company that owns real estate projects. A REIT shareholder can take part in the operation of commercial or office buildings run by the company.
Why Invest in REITs?
REITs in the US are required by law to distribute at least 90% of annual taxable income to shareholders, so buying and holding a REIT stock is a good way to accumulate passive income.
Investing in REITs is almost equivalent to real estate investing. It has the advantage of diversifying your risks with real estate using very little capital.
Disadvantages of Investing in REITs
Since more than 90% of the REIT's income has to distribute to shareholders, the company can keep less than 10% of the income for reinvestment. So most REITs are not categorised as growth stocks.
Another disadvantage of REITs is that they are usually highly leveraged in their operations, so we need to review the Debt to Equity constantly to make sure the company is financially healthy. A Debt to Equity ratio between 1 to 1.5 is the best for REITs.
Why Only Invest When REITs Are Undervalued?
The value investing philosophy reminds us to only buy REITs when the margin of safety is large enough to give us a bullish outlook. If the Upside is big enough, we can buy undervalued REITs at a discount.
How to Find Undervalued REITs to Invest In
We use the Dividend Stock Screener to filter highly profitable REIT investment opportunities. We can set the filters as:
- Industry as REITs.
- Upside at least 10%.
To find a list of undervalued REITs instantly, and start planning the passive income for retirement.
Best REITs to Invest in Right Now
We sort the REIT list by Dividend Yield to find high-yield REITs that are great value investing opportunities.
| Stocks | Description | Last | Fair value | Upside | Dividend yield | Debt to equity |
|---|---|---|---|---|---|---|
| BDN | Brandywine Realty Trust | $4.13 | $10.49 | 154% | 16.14% | 1.21 |
| MPW | Medical Properties Trust Inc | $7.27 | $12.62 | 73.59% | 14.70% | 1.20 |
| EPR | EPR Properties | $34.43 | $52.02 | 51.09% | 8.98% | 1.11 |
| PK | Park Hotels & Resorts Inc | $11.02 | $19.26 | 74.77% | 4.99% | 1.06 |
| FRT | Federal Realty Investment Trust | $91.16 | $122.86 | 34.77% | 4.56% | 1.49 |
| VTR | Ventas Inc | $41.69 | $56.93 | 36.56% | 4.10% | 1.18 |
The undervalued REITs can provide us with strong dividend income and a high probability of bullish potential.
Now you know how to find profitable REITs at a discount, you can use the Dividend Screener to find the best long-term investments to grow your passive income.
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