Sunday, March 14, 2010

How to be a Landlord Without All the Headaches

I’ve owned and managed residential rental real estate for over 20 years. Nothing on the sale of Donald Trump … just moderately-priced single family homes, condos, duplexes … even a few mobile homes. 

And from the prospective of a seasoned landlord, there is one sector that I’ve always liked: Self-storage. 

These are the places that rent space to people whose garages are overflowing with junk that they can’t bear to part with it. 

Self-storage facilities have become more upscale looking over the years, with well-lit parking lots and attractive facades. So you probably thought they were just another office building when you drove past them. 

They can be real cash cows without a lot of upkeep. Imagine, every month checks coming in like clockwork. And no clogged toilets, no broken water heaters and no pet-stained carpets to worry about. 

Tenants are on a month-to-month lease. If they’re a few days late on the rent, you can stick a padlock on the door. After a few more days, you go in, sweep the place out, and throw all the stuff in the dumpster or sell it. Try doing that with a residential property, and you’ll be the one standing in front of a judge! 

But you might not be interested in the hands-on experience of taking care of real estate, even something as simple as self-storage. Plus you might not have the bucks available to get in on one, yet you’d like to put some real estate in your portfolio. 

Then you may want to take a look at a real estate investment trust (REIT). A REIT is not subject to federal income tax to the extent that it distributes at least 90% of its taxable income to its shareholders. 

And one that I’ve owned for quite a long time is Public Storage (PSA). With over 2,100 locations totaling more than 135 million rentable space, it’s one of the largest landlords in the world. 

They also have interests in renting out commercial and industrial facilities. 

I’m not saying that Public Storage is the best stock in this sector. It just happens to be what I own. There are other companies in the same business, such as U-Store-It (YSI) and Sovran Self Storage (SSS). 

PSA is trading for about $88 now up from $51 a year ago, which gives it a 65% return. Plus it’s paying a 3% dividend. 

It avoided the tech bust at the beginning of this decade, and fared better than the general market during the recent crash. 

So if you’re looking to add some real estate to your portfolio without getting your hands dirty, check out Pubic Storage. 

Best wishes, 


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