2 REITs I’d buy for a lifetime of passive income!

Investing in real estate investment trusts (or REITs) can be an effective way to create long-term passive income.

Like property stocks, these businesses can raise rents to protect their profits from the erosion of inflation. But this particular business must pay at least nine-tenths of the annual profit from the rental operation out in the form of dividends.

The tax rules governing dividends are more complex than with other UK stocks. And investors should consider their personal circumstances before jumping in. But the 90% rule means that it can still be a great way to make another income.

Below are the top two REITS that I would look into if I had the money to invest.

United Group

There are not enough places to accommodate the growing population of English students. The weak construction pipeline suggests that this phenomenon will persist for a long time.

So I thought United Group (LSE:UTG) could be a great investment for long-term dividend income. Rents here grew by a healthy 3.5% for the 2022/23 academic year, while the occupancy rate reached 99%.

Demand for student accommodation is particularly strong from overseas. So it is encouraging for Unite that this demographic is growing rapidly. The university clearing service UCAS says that “the volume of international undergraduate applicants will increase by 46% to 208,500 in 2026.”

I remember that incomes here can be destroyed by the cost of living crisis. The Observer It is reported that five students at the Russell Group Student Unions are considering leaving due to financial pressures. This is an issue that may affect future academic years.

But on balance, I think Unite remains an attractive buy for a patient investor like myself. The company is rebuilding its dividend strongly after the Covid-19 crisis (full-year remuneration rose 48% last year, to 32.7p). And City analysts expect additional dividend growth in 2023, yielding 3.8%.

Great Yellow Group

The self-storage market is another property segment suffering from a severe supply crunch. This is why Great Yellow Group (LSE:BYG) – a REIT whose average rent rose 10% between October and December – is close to my stock wish list.

Demand for extra space is rising in the UK. And it increases for various reasons, which reduces the risk to the company’s profit forecast.

Increased urbanization is one reason (Statista analysts say urbanization has increased by 3% over the past decade). Then there’s the decline by older homeowners, the good housing market, and the rise of e-commerce. These market drivers look set to continue for a long time.

Interestingly, Big Yellow has a strong development pipeline that should help it exploit the favorable trading environment. Today it has 108 self-storage hubs and has pipelines for 11 more, with a total of 900,000 square meters.

For the years through March 2023 and 2024, Big Yellow’s next dividend payouts are 3.8% and 3.9%, respectively. It’s true that the current property market downturn can impact income. But I still expect it to be a solid dividend payer now and in the future.