No House Flipping Required

​​Many middle-aged adults find themselves questioning their career choice. Some even want to make a career switch. Commonly, I hear of middle-aged adults taking a swing at some type of real estate investment. New real estate entrepreneurs often try to flip a house in a few months' time to make some quick money. A close family member of mine did just that.

She found an old beat-up property near the Interstate 5 freeway in Lake Forest (my home town). Before purchasing the property, we concluded that she would need to drop 30 grand into the remodeling process. After four months of hard work and many long nights, she was able to sell the property for 28 grand above the cost of the house + the fix-up costs. Mind you, this $28,000 profit was after taxes, real estate agent costs, association dues, inspector fees, and the 101 additional fees.

Is $28,000 worth it to make a full-on career change and have to learn everything about a business model you are unfamiliar with? For overachievers like my family member, well worth it. For us average Joe's working 9-5 jobs waiting for it to be the second Friday of the month so we can pay our rent, flipping a house in our spare time just isn't worth it.

I don't wish to speak for the upset real estate enthusiasts reading this, but what If I told you there was a better alternative...

That's right, investing in real estate from the comfort of your computer while receiving 90% of the income generated! That's right, these stocks are mandated by US law to return 90% of their income back into the pockets of shareholders in the form of dividends.

These stocks are referred to as Real Estate Investment Trusts (REIT).

I invest in various partnerships that are involved with apartment communities, hotels, and residential condominiums. You wouldn't normally think of many other types of REITs, like self-storage facilities, nursing homes, and retail spaces. Even more out of the ordinary, there are REITs that own billboards, cell towers, and data centers.

To be specific, there are 192 publicly-traded REITs on the market. All together owning $2 trillion worth of assets.

REITs have outperformed the S&P 500 in 15 of the last 25 years (though they are trailing badly in 2020). This isn't surprising considering the lack of confidence investors have when it comes to businesses paying their rent during the pandemic.

Income investors love REITs because of the generous dividend payout.

Whitestone REIT (WSR) owns a fair amount of the retail space in the Sun Belt. They pay their shareholders a monthly dividend which comes out to more than 6.5% a year.

Sabra Health Care REIT (SBRA) owns senior housing and skilled nursing facilities. Their yearly yield tends to be around 8%

Preferred Apartment Communities (APTS) is a REIT I speak about often. I reference the immense benefits in, 7 Investments In Your 20's That Will Change Your Life. APTS' most attractive feature is its dividend payout of 9.49% (as of Nov. 16, 2020). Since my recommendation to buy APTS on Sep. 23, 2020, stock price valuation has risen 53.9%. Considering the potential, APTS is still undervalued by many standards.

Although these yields are enticing, overloading your portfolio with REITs can negatively impact your portfolio during difficult economic times. But when carefully selected and held as part of a diversified portfolio, investors generate explosive income. Dividends and compound interest, paired with long-term investing, is the engine that drives this train to impressive passive income statements.

Good investing,

​Dan Sarver