Alternative Real Estate Income: Collect The Rent Checks Without The Hassle Of Being The Landlord

Outside of a personal residence, real estate is an asset class that often is underrepresented in investor portfolios. One reason is that it takes a lot of capital or taking on a lot of debt to buy an apartment building, office building, or a farm.

Real estate investment trusts (REITs) offer a stock exchange-traded way to get real estate exposure into your portfolio. Structured as pass-through entities, REITs are companies that own real estate or real estate finance assets. A pass-through structure allows a company not to pay corporate income taxes as long as at least 90% of net income is paid to investors as dividends. REITs are one just a few asset types that have been allowed to use the pass-through feature.

If you are familiar with REITs, your thoughts will likely go to the more visible classes of commercial property. Most REITs own a single type of real estate, such as shopping centers, office buildings, healthcare facilities, or warehouses.

However, specialty REITs provide investment exposure to some types of real estate you may not know you can own through an REIT. Here are five investment ideas to consider:

Lodging REITs, which own hotels, have been decimated by the pandemic. While most REITs have fixed revenue streams from rent or lease payments, hotel REITs are different.

A hotel REIT participates in the profits of its portfolio of hotels. That means when the hotel business is good, a REIT in this category can do very well, with growing dividends and an appreciating share price. Most hotel REITs have suspended dividends. The time to buy into this group will be when they announce the restart of common stock dividends. RLJ Lodging Trust (RLJ) owns 103 premium-branded hotels in 23 states and Washington, D.C. RLJ was an $18 stock with a 7% dividend yield before COVID shutdown the hotel industry.

Crown Castle International (CCI) is a REIT that owns cell phone towers. Cell towers are a great business: you build one tower and then grow its revenue by adding more transmitter leases.

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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