Build real estate wealth for just $1 per day (never unclog a toilet)
I’ve talked to a lot of folks who own residential rental properties, and while some of them love it, I’ve heard a lot of nightmare stories too.
Large unexpected expenses, furnaces breaking unexpectedly, tenants who refuse to pay — tenants who trash your property and cost you more hard-earned money.
And that’s to say nothing of the financial stress of having a lot of capital tied up in an illiquid asset that might actually cost more money than it brings in every month.
With interest rates skyrocketing and more and more people due to refinance their loans, rental property stress is about to get more intense than ever.
But what if you could start building a portfolio of real estate assets that paid you monthly, required little to none of your time, and could be sold at a moment’s notice if you needed the money?
And what if you only needed one dollar to start?
Well, there IS a way, and it’s how I’m starting to build real estate wealth in addition to creating digital assets and investing in the stock market.
Let me tell you about it.
The benefits of REITs
Before we go any further folks, I am NOT a financial advisor and this is not financial advice. Speak to a financial professional before making money decisions and never play with money you can’t afford to lose.
OK, so how did I gain access to the residential real estate market without having to put up 10s of thousands of dollars and maintain a property?
I did so using Real Estate Investment Trusts, or REITs.
REITs, which you can buy on the major stock exchanges like the NYSE and the Nasdaq, pool investors’ money to purchase and manage properties.
Like rental properties, REITs are meant to throw off cash flow every single month.
They do that by paying dividends just like other companies like banks, energy companies, and even some tech here and there.
REITs typically pay out higher dividends — usually in the neighborhood of 3–5% — but the trade-off is they might not have as big of an opportunity for capital gains as, say, a software company.
How to get started with $1
Now REITs can vary in price from a few bucks to a few hundred bucks.
So how exactly can you invest with just $1?
You can do so via the magic of fractional shares.
Fractional trading, which is offered by lots of trading apps like Robinhood, WeBull, SoFi, and others, allows you to invest small amounts in companies regardless of the stock price.
Let’s look at a real-world example.
One of the REITs I own is called Sun Communities, which builds, sells, and rents out manufactured homes in 136 cities across the United States.
It also costs, at the time of this writing, $127 per share.
But with fractional trading, you can buy a minuscule portion of a share — as little at a dollar depending on your trading platform — and that portion will pay you a dividend for holding it.
The dividend might be a penny every month to start, but everyone starts somewhere.
Theoretically, a $1,000 investment in REITs yielding 4% would pay $40 per year in dividends, a $10,000 investment would pay $400, a $100,000 investment would yield $4,000, and so on.
Real Estate ETFs
Now let’s say you want even more diversification and maybe want some exposure to international real estate markets.
You can get that too using real estate ETFs.
ETFs are exchange-traded funds, they provide you with broad market exposure to an entire index or even a specific sector — like real estate, for example.
And many of them can be bought in tiny pieces with fractional trading as well.
So to use another real-world example, let’s look at the Vanguard Real Estate Index Fund, which has the ticker VNQ.
This ETF has holdings in a bunch of different American REITs, giving exposure to Commercial, Industrial, and Residential real estate.
It pays dividends yielding, at the time I wrote this, 4.83%.
Not bad, right?
Anyone interested in REIT investing should also take time to think about the risks involved.
Risk 1: Commercial real estate weakness
Now I don’t own any real estate ETFs because I’m only interested in having exposure to the residential real estate market.
The COVID pandemic and the rapid rise of hybrid work tools really hit the commercial real estate market hard, and in my humble opinion, it’s too early to know what the endgame is there.
But one thing I do know is that people will always need somewhere to live.
That’s why I stick to residential.
People interested in taking on more risk might consider commercial, but it’s just not for me.
Everyone needs to consider what they’re comfortable with in their own investment journey.
Risk 2: A housing market downturn
As a lot of people learned in 2008, even the residential real estate market isn’t invincible.
A residential REIT trading at $150 a share today could be trading for $75 two or three months from now.
And not all REITs are created equal — some are solid investments, others hold much riskier assets.
That’s the reality investors should consider before buying anything.
There are no zero-risk investments.
Some REITs only manage real estate loans, so make sure you know what you’re getting into and always do your own research.
Risk 3: Volatility
Because REITs are tradable liquid assets, they can have a lot of volatility. If you’re just investing for dividend income
But if seeing share prices getting whipped around all the time sounds stressful, maybe it’s not the right choice.
You never really know what your house is worth from day to day, but you always know what your REIT shares are worth — for better or worse.
Risk 4: Recession
I believe we’re headed for a recession in 2024, and that could put a lot of downward pressure on stock prices — including REITs.
In my humble opinion, this is a risky time to be in the market.
I’m willing to take that risk because I have a long-term investing horizon, but everyone needs to consider their own situation.
In summary
If you’ve always had an interest in owning a residential real estate property but are intimidated by the money and commitment required, perhaps residential REIT investing is for you.
It only costs a dollar to get started using fractional trading and most REITs pay a generous dividend.
However, everyone should consider their own financial situation, weigh the risks, and speak to a financial professional for information and advice.
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Disclaimer: Numbers in this post were accurate at time of writing and will not be accurate at time of reading. The author of this article is not a financial advisor. This commentary is provided for general informational and entertainment purposes only and should not be construed as financial, investment, tax, legal or accounting advice. It does not constitute an offer or solicitation to buy or sell any securities referred to. Consult your financial advisor prior to making financial decisions.