Live 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.

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To cover your rent, you could invest in Mid-America Apartment Communities MAA, which owns or has ownership interests in 102,662 apartment units across 16 states in the high-growth Sunbelt region of the United States, including Atlanta, Dallas, Tampa, Orlando, Charlotte, Austin, Nashville, and Houston.

MAA currently pays a quarterly dividend of $1.47 per share, equating to an annualized dividend of $5.88 per share and giving it a yield of about 4.70% based on the stock's closing price of $125.09 on February 14.

To earn $20,424 annually from MAA, you'll need to buy about 3,474 shares of the company, which will cost about $434,553 based on its closing price of $125.09 on February 14.

To calculate this, 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 0.047 in this case. So, $20,424 / 0.047 = $434,553.

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.

MAA is also a serial dividend raiser, so you can count on your dividend payments growing each year, which will help if your rent goes up. MAA has raised its annual dividend for 13 consecutive years, and its recent increase has it on pace for 2024 to mark the 14th consecutive year with an increase.

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.

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