Live in Your Apartment Rent-Free Using This Hack
The average rent for an apartment in the United States is $1,702, according to RentCafe, but did you know you could completely cover this cost by investing in a real estate investment trust (REIT) that pays dividends?
It takes a lot of capital to do so, but if you can swing it, you can essentially live rent-free.
How it works
Let's say you find an apartment that costs the national average of $1,702 per month. Based on that monthly rate, you will need annual dividend income of $20,424 to cover your rent.
Don't Miss:
Investing in real estate just got a whole lot simpler. This Dara Khosrowshahi-backed startup will allow you to become a landlord in just 10 minutes, and you only need $100.
Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." Here are 3 high-yield investments to add significant income to your portfolio.
To cover your rent, you could invest in AvalonBay Communities (NYSE:AVB), which owns or has ownership interests in 299 apartment communities containing 90,669 apartment homes across 12 states and the District of Columbia, including 18 communities under development.
AvalonBay currently pays a quarterly dividend of $1.70 per share, equating to an annualized dividend of $6.80 per share and giving it a yield of approximately 3.84% based on its closing price on February 16.
To earn $20,424 annually from AvalonBay, you'll need to buy about 3,003 shares of the company, which will cost about $531,891 based on its closing price of $177.12 on February 16.
To calculate how to cover your monthly rent with a REIT, you take your desired annual income, which is $20,424 in this case, and divide it by the dividend yield when expressed as a decimal, which is 0.0384 in this case. So, $20,424 / 0.0384 = $531,875.
Important note: this calculation does not include participating in a dividend reinvestment program, or DRIP for short, since you will be taking the payments as cash to use to cover your rent.
AvalonBay is also a serial dividend raiser, which will help if your rent goes up. AvalonBay has raised its annual dividend 11 times in the last 13 years, including a 3% increase last month, making it qualify as both a high-yield and dividend-growth stock.
Again, it takes a lot of capital to generate enough dividend income to cover your monthly rent, and you may want to consider diversifying across several REITs to minimize your single-stock risk and sleep well at night.
Read Next:
Commercial real estate has historically outperformed the stock market, but few investors have the capital or resources needed to invest in this asset class. A platform backed by industry giant Marcus & Millichap is changing that, allowing individuals to invest in commercial real estate with as little as $5,000.
Collecting passive income from real estate just got a whole lot simpler. A new real estate fund backed by Dara Khosrowshahi gives you instant access to a diversified portfolio of rental properties, and you only need $100 to get started.
Image Credit: Shutterstock
"ACTIVE INVESTORS' SECRET WEAPON" Supercharge Your Stock Market Game with the #1 "news & everything else" trading tool: Benzinga Pro - Click here to start Your 14-Day Trial Now!
Get the latest stock analysis from Benzinga?
This article Live in Your Apartment Rent-Free Using This Hack originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.