How To Earn $1,000 In Yearly Passive Income From These Red Hot Residential REITs

Essex Property Trust and Equity Residential Inc. are two of America's largest multi-family residential REITs. More importantly, their Q2 2024 earnings impressed analysts and investors alike. Both REITs have similar business models for delivering investor returns. They own and operate A-rated multi-family communities in markets where housing prices are high and vacancy rates are low. Here is how a theoretical investment in these two REITs could earn you $1,000/year.

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How to Earn $1,000/Year in Dividends by Investing In Equity Residential Inc.

Equity Residential Inc. (NYSE: EQR) operates one of the largest REITs in the multi-family residential sector in terms of market share. The real estate data firm Alreits currently estimates that Equity's portfolio represents approximately 21% of America's multi-family residential REIT sector. According to Benzinga's estimates, Equity Residential Inc.'s market cap stands at $26 billion. Its shares are trading at $69.63 and paying a 3.88% dividend yield.

Here's how to earn $1,000 annually on Equity Residential Inc.: With a share price of $69.63 and a 3.88% dividend yield, investors earn $2.70 per share annually. To earn $1,000 in annual passive income, you would need to purchase 370.37 shares of Equity Residential Inc. This would require an initial investment of $25,788.86. If you wanted to earn $10,000 annually, you would need to increase your investment to $257,886.

How to Earn $1,000/Year in Dividends by Investing in Essex Property Trust

Essex Property Trust (NYSE: ESS) is one of America's most well-respected multi-family residential REITs. Since making its debut in 1994, Essex Property Trust has grown into a massive operation that includes 255 properties and over 62,000 units. Alreits estimates this REIT's portfolio, the bulk of which consists of assets in high-dollar West Coast markets, represents approximately 15% of the multi-family sector. It has a $17 billion market cap and a share price of $278.36.

Here's how to earn $1,000 annually on Essex Property Trust Inc. shares: With a current dividend yield of 3.49%, which would pay a dividend of $9.71 per share, you would need to buy 103 shares of Essex Property Trust at the current price of $278.36 to earn $1,000 in annual dividends. That investment would cost you $28,671.08. If you wanted to increase your annual earnings to $10,000, you would need to raise your investment to $286,710.80.

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Which One is Best?

In terms of sheer mathematics, Equity will pay the $1,000 annual dividend with a lower initial investment ($25,788.86 vs. $28,671.08). However, the price difference between the two REITs is not so large that it makes Equity the obvious choice. It's also important to remember that REITs also generate investor returns by selling assets at a profit.

It only takes one big deal in a quarter to entirely change a REIT's earnings profile. That could also happen in the reverse, where a REIT expects to profit from an asset but doesn't make as much on the deal as originally projected. So, choosing which one of these REITs is right for you would require a deep dive into their asset profile and their plans going forward for the next several quarters.

Other Considerations

Another thing to always keep in mind is that dividends are never guaranteed. Regardless of a REIT's historical performance, it's always possible that adverse market conditions can force a REIT to lower its dividends or leave the REIT in a position where it pays no dividends at all. Consider this possibility and be sure to familiarize yourself with all the potential risks before investing in any offering.

Disclaimer: Data points such as share prices, dividends or market cap can fluctuate based on current conditions. Depending on when you read this article, there may be some variance between the data quoted here and the most current information. 

 Looking For Higher-Yield Opportunities?

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For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000. Benzinga Readers: Earn a 1% return boost on your first EquityMultiple investment when you sign up here (accredited investors only).

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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