Despite the recent gains and rebounds in the housing market, the housing bubble completely changed the way we live.
In the wake of the housing bubble and the recession, more and more Americans are abandoning the traditional goal of owning a white-picket fence in favor of renting. Either through financial hardship or via choice, America is quickly becoming a “renter nation” when it comes to housing. According to real estate group Green Street, of the 5.5 million estimated new households that will form over the next three years, roughly 70% of them will choose to become renters.
That’s a huge number — one that could provide plenty of profits for investors who bet on the right horses. In this case, we’re talking about real estate investment trusts, or REITs.
Enacted in the 1960s by Congress, REITs were created to let average investors make investments in large-scale, income-producing commercial real estate. And I do mean income. REITs are required by law to spit out 90% of their taxable income back to shareholders annually. That results in some huge dividend yields.
Now, these big dividend yields aren’t considered “qualified” for tax purposes — meaning they don’t get taxed as normal income. That makes REITs and their big dividend yields perfect holdings for an IRA or other tax-deferred account.
With that said, here’s five of the best REIT plays for our growing “renter nation”: