Where to Find Safe Double-Digit Yield in Real Estate

Dec. 16 is less than a month away. Dec. 16 matters because it’s the next and last meeting of Federal Reserve officials for 2015. It’s the last call for an interest rate increase this year.
Most signs point to a rate hike: October payroll numbers easily breezed past most economists’ estimates, which dropped the unemployment rate down to 5%. In addition, consumer price inflation is on the rise. Core consumer price inflation is running 1.9% annually, within a whisker of the Fed’s 2% goal.
Traders are certainly betting on an increase. CME Group data show traders are pricing a 74% probability in fed funds rate futures contracts that the Fed will raise rates on Dec. 16. These are the highest odds of the year.
So, is an interest rate increase good news or bad news for income-paying investments?
I wish I had a defining answer, but I don’t. Depending on the data and the time the data cover, conflicting answers are frequently forthcoming. I’ve seen data that show high-yield equity investments do well after a rate increase. I’ve also seen data that show the opposite.
If we look at price action alone, it appears income investors view a rate increase with some disfavor. Financial risk is a concern. High-yield pass-through entities – real estate investment trusts (REITs), in particular – must tap equity and debt markets to grow. Investors fear that higher interest rates will raise borrowing costs, squeeze margins and reduce cash flows. In turn, dividends and distributions will be threatened.
But investors frequently forget that rates are a double-edged sword. Rising rates are also indicative of stronger economic growth. So while capital costs might rise, so will the price that REITs can charge for rent. Many REITs actually hold their own in a rising-rate environment.
I see exceptional high-yield value in the High Yield Wealth REIT recommendations. They continue to perform and they continue to support their high-yield dividends. Recent financial performance suggests that’s unlikely to change. Investors are mispricing these investments, and that’s good news for anyone in the market for additional income. Income investors are able to pick up additional yield in real estate on the cheap.
One of our real estate recommendations yields 11%. The yield is irrationally high, because of an irrational sell-off. This company specializes in leasing properties to federal government agencies. In addition to being worried about interest rates, investors are worried that sequestration could cause reduced government demand for office space.
Worried investors should cease worrying. This real estate company’s properties remain 93% occupied. Moreover, the cash these properties generate amply supports the dividend. The quarterly dividend is $0.43 per share. Last quarter, this company generated $0.59 per share in funds from operation (FFO). FFO is the cash used to pay the dividend. No dividend cut looms.
Another High Yield Wealth real estate recommendation yields 10%. This REIT owns 101 properties covering 11.1 million square feet of rental space in 24 states from Connecticut to Texas to California. That’s up from 77 properties, 7.6 million square feet of rental space and 21 states only three years ago. Tenants range from small businesses to large public companies. Its properties are 98% leased.
Best of all, both of these real estate recommendations have proven track records. Neither has ever reduced its high-yield dividend payout. To the contrary, both have raised their payouts over the years.
Interested in capturing double-digit yield from real estate? Then click here to find out more about these two exceptional high-yield real estate recommendations.