Wednesday, October 29, 2008

dividends over tenants

I have had the pleasure to engage in some interesting discussions with real estate investors lately. Specifically those who buy property with the intention of renting out units and drawing the rent as income. Investing is investing, and this has it's similarities to buying shares of publicly traded corporations and drawing income that way in the form of dividends as I am doing.

Real estate investing is really not for me though, at least not at this stage in my life. I prefer investing in dividend paying stocks. Here are some of the reasons why:

  • No pesky rent cheques to cash. My dividends flow electronically into my brokerage account without hassle, fees, or paper (eco friendly too).
  • If given the choice I'd rather not receive phone calls at 4am from tenants with plumbing issues. To date I have not received one phone call from any of the companies that I own.
  • Why chase people for rent cheques or listen to a hard luck story about why it's late? Clorox (CLX) is never late with their quarterly dividend, and they don't complain.
  • People break leases and decide to move out occasionally, taking your future monthly rent with them. Stocks never go away unless you want them to. They can also be acquired in which case their value spikes.
  • I like the word 'DIVIDEND' better than the word 'RENT' just sounds cooler and more profitable.
  • Owning stocks I can diversify across industries and geographies. Owning an 18 unit apartment building in Windsor, Ontario, I can not.
  • My stocks do not require maintenance that involves getting my hands dirty or paying someone else to dirty theirs.
  • Stocks are liquid. It would take me about 10 minutes to sell every stock that I own in an emergency. It could take years to sell real estate in a poor market.
  • I don't have to decide by what percentage to increase the rent, the companies that I own decide that for me.

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Anonymous said...

"Stocks never go away unless you want them to."

Might want to scratch that line out. I haven't seen WAMU or Lehman on a listed exchange lately, must have gone away like dozens of other stocks did in the last few months.

MG (moneygardener) said...

Ha ha, I thought someone would mention that. For those who were counting on WaMu or LEH for dividend income, there were many hints along the way that they were 'going away'. Companies can go bankrupt, however this is extremely rare with mega cap long term dividend growers.


Good Article!

You might want to add: Its easier to get rid of a stock than a tenant, it takes seconds to dump a stock, but could take months to dump a tenant.

Another plus for stocks

Mr. Cheap said...

Hey MG: A comment on my rebuttle post to this ( asked if our opinions on this have changed due to the recent market turmoil (in both markets). I said that my feelings were still pretty much the same, how about you? (I'm assuming you still feel the same way too)

MG (moneygardener) said...

Hey Cheap,

My feelings have not changed. Sh#t happens in both markets, it's all about the long term.