Freestanding commercial real estate is a goldmine of passive income that often goes unnoticed by many investors. These properties, which house grocery stores, restaurants, gas stations, and other essential businesses, provide a steady stream of income for their landlords through net leases. Net leases are agreements where tenants pay rent and other expenses, offering landlords a stable source of passive income.
In the United States and Europe, there is an estimated $14 trillion worth of commercial real estate suitable for net leases. While becoming a landlord may seem daunting, there is a simpler way to access this passive income. Real estate investment trusts (REITs) specialize in net lease real estate, allowing investors to benefit from passive dividend income without the hassle of property management.
One of the leading players in the net lease REIT space is Realty Income. With a vast portfolio of over 15,000 income-producing properties, Realty Income leases to high-quality retailers like Dollar General, Walgreens, and 7-Eleven. The company focuses on retail properties but also invests in industrial real estate, gaming properties, and other property types. Realty Income pays out a portion of its rental income to investors in the form of dividends, offering a dividend yield of over 5% at recent prices.
Another prominent net lease REIT is W. P. Carey, which boasts a diversified portfolio of nearly 1,300 properties across North America and Europe. The company targets paying investors a percentage of its rental income through dividends, currently offering a dividend yield approaching 6%. W. P. Carey has been reshuffling its portfolio to focus on high-quality, operationally critical properties, such as industrial facilities and distribution centers, to drive income growth and dividend increases.
Investing in net lease REITs like Realty Income and W. P. Carey allows individuals to tap into the passive income potential of properties they interact with daily. By allocating a portion of their investment portfolio to these REITs, investors can build a real estate empire that generates steadily rising passive income over time. With a total addressable market of $14 trillion in net lease real estate, there is ample opportunity for growth and income generation in this sector.
In conclusion, freestanding commercial real estate presents a lucrative opportunity for passive income through net lease agreements. By investing in net lease REITs like Realty Income and W. P. Carey, individuals can access this income stream without the complexities of property ownership. With a focus on high-quality properties and a commitment to dividend growth, these REITs offer a compelling investment opportunity for those looking to build wealth through real estate.
