Live Rent-Free at Your Apartment 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 UDR UDR, also known as United Dominion Realty Trust, which owns or has ownership interests in over 51,000 high-quality apartment homes across some of the most desirable markets in the Northeast, Mid-Atlantic, Sunbelt, and West Coast regions, including Boston, Dallas, Denver, New York City, Orlando, Philadelphia, San Francisco, Seattle, and Washington, D.C.

UDR currently pays a quarterly dividend of $0.42 per share, equating to an annualized dividend of $1.68 per share and giving its stock a yield of about 4.66% at the time of this writing. 

To earn $20,424 annually from UDR, you'll need to buy about 12,157.64 shares of the company, which will cost about $438,283 based on its closing price of $36.05 on February 15.

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 0.0466 in this case. So, $20,424 / 0.0466 = $438,283.

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.

On top of having a high yield, UDR is a serial dividend raiser. It has raised its annual dividend for 14 consecutive years, and its recent hike has it on pace for 2024 to mark the 15th consecutive year with an increase. This means you can count on UDR to provide higher income each year, which will help if your rent goes up.

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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