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How to make $25,000 per year in passive REIT income

For many Australians, the lure of an investment property is very strong.

Aussies love to invest in tangible assets and property is usually top of the list – you can see it, you can touch it, you’ve lived in houses all of your life and it has increased significantly in the last 30-odd years.

However, for all the benefits of an investment property, being a landlord is far from a passive income stream with constant tenant disputes, repairs and maintenance.

That’s why I’ve looked at how you can generate a cool $25,000 per year in truly passive income from some of Australia’s top real estate investment trusts (REITs) for less outlay than an investment property.

Crunching the numbers on real estate

Some of my top Aussie REITs at the moment for income including Charter Hall Long WALE REIT (ASX: CLW)Scentre Group (ASX: SCG) and Shopping Centres Australasia Property Group Re Ltd (ASX: SCP).

Charter Hall Long WALE REIT is a commercial real estate REIT which invests in property with long-term lease tenants that anchor the portfolio’s income.

At the moment, the Charter Hall Long WALE REIT is yielding a tidy 4.70% per annum meaning a $100,000 investment would net $4,700 in dividends. 

While this might not seem like much initially if you reinvested your dividends for ten years (holding dividends constant) the value of your holding would be worth $158,295.

That means in ten years time the value of your annual dividend from the Charter Hall Long WALE REIT would be worth $7,440 – before even considering any capital gains.

If we follow a similar logic for both Scentre and Shopping Centres Australasia it is easy to see our passive $25,000 per year portfolio coming together.

Scentre Group is currently paying shareholders a 4.84% dividend which when reinvested would translate to $160,424 in ten years time from a $100,000 today.

Combined with the $172,114 from a $100,000 investment in Shopping Centres Australasia, your future portfolio could be worth $490,833 with combined dividend income of $24,809.

Foolish takeaway

Just from this quick calculation above, it is easy to see how a simple 3-REIT portfolio can generate a strong income stream to match that of any investment property in Australia – without the hassle.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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