Mid-America Apartment Communities Inc: Rental Income Without Becoming a Landlord
Earn Retirement Income From Housing
Rentals might be the best source of retirement income around, but who really wants to spend their “golden years” chasing down deadbeat tenants?
So rather than going through the headache of buying physical properties, I’ve been telling my readers to own “virtual real estate” instead. As regular followers know, real estate investment trusts, or REITs, buy properties, collect rents, and pass on the income. Some top names pay out yields of three, five, or even seven percent.
Case in point: Mid-America Apartment Communities Inc (NYSE:MAA). Management has built a sprawling real estate empire, totaling some 100,000 apartment units. If you live in the southeast United States, you probably drive by one of their properties every day.
I love this REIT for a couple of reasons. First, it’s recession-proof; after all, people always need a place to live. Tenants usually skip their rent bill last, so payments are steady, like bond coupons.
For unitholders, this translates into reliable income. Mid-America has paid a distribution every quarter since 1994. Even through the chaos of the financial crisis, executives didn’t cut the payout one red cent.
Better still, you have no headaches. A hired management team handles all of the daily operations. That means no lawns to mow, no deposits to collect, and no tenants to chase down.
Investors never have to step foot on a property and getting started only takes a click of the mouse. You just have to sit back and wait for the rent checks to arrive in your brokerage account.
Finally, this name gushes cash flow. Because of how the firm is legally structured, Mid-America pays no taxes on profits. In exchange for this benefit, however, management must pass on most of the income to unitholders.
As a result, this trust has one of the highest payouts around. Today, Mid-America sends out a quarterly distribution of $0.87 per unit, which comes out to a tidy 3.4% yield. And while the trust gets little coverage in the press, owners have quietly made a fortune.
I expect that payout to surge in the years ahead. Tighter lending requirements have barred millions from home ownership, creating a shortage of rental housing across the country. Landlords like Mid-America could make a fortune through rent hikes and higher property values.
Bottom line: owning “virtual real estate” through REITs can be a great source of extra cash. You earn steady rent checks, and most years, they go up. If you’re looking for extra retirement income, take a look at Mid-America Apartment Communities Inc.
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