Live Rent-Free in Your House Using This Hack

The average rent in the United States is $1,958, according to NerdWallet, 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 a single-family home that costs the national average of $1,958 per month. Based on that monthly rate, you will need annual dividend income of $23,496 to cover your rent.

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To cover your rent, you could invest in Invitation Homes INVH, which owns and manages a portfolio of approximately 80,000 homes for lease across 16 markets in the U.S. where it's more affordable to lease a home than it is to buy.

Invitation Homes currently pays a quarterly dividend of $0.28 per share, equating to an annualized dividend of $1.12 per share and giving its stock a yield of approximately 3.43% based on its closing price on February 16.

To earn $23,496 annually from Invitation Homes, you'll need to buy about 20,948.5 shares, which will cost about $685,016 based on its closing price of $32.70 on February 16.

To calculate this, you take your desired annual income, which is $23,496 in this case, and divide it by the dividend yield when expressed as a decimal, which is 0.0343 in this case. So, $23,496 / 0.0343 = $685,015.

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.

Invitation Homes is also a serial dividend grower, which will help if your rent increases. Invitation Homes has raised its annual dividend every year since its initial public offering in 2017, making it qualify as both a high-yield and dividend-growth play.

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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