Individuals buying UK shares in a Stocks and Shares ISA have just seven days to use up this year’s allowance. I myself am searching for the best real estate investment trusts (or REITs) to buy before the clock runs out.
I don’t have to actually buy stocks before the 5 April deadline. Just putting money inside this tax wrapper to use at a later date is enough to make use of my £20,000 allowance.
But I don’t feel the need to wait. There are many top London Stock Exchange-listed REITs that look too cheap to miss following recent stock market volatility.
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Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
2 REITs on my radar
I think REITs in particular are a great way for me to make an extra passive income. In exchange for certain tax advantages, these companies have to pay at least 90% of annual profits from their rental operations by way of dividends.
With this in mind here are two top REITs I’m considering buying today.
The PRS REIT
Paying the rent or the mortgage is one of the few things people must keep paying for even during downturns. This makes The PRS REIT (LSE:PRSR) a dependable dividend payer at all points of the economic cycle.
In fact the outlook for this particular share is improving even as the British economy struggles. That’s because of a growing supply and demand imbalance that’s pushing residential rents rapidly higher.
The number of available residential rental properties has slumped by a third in just 18 months, Zoopla recently told the BBC. This in turn pushed rents for new tenants up by a hefty 11%.
Rents look set to keep climbing as well, as housebuilding activity fails to keep pace with population growth.
The PRS REIT is already capitalising effectively on these favourable market conditions. Net rental income and adjusted earnings rose 20% and 31% respectively in the six months to December.
This UK share carries a meaty 5.2% dividend yield today. I’d buy it even though any changes to rental regulations could hit profits later down the line.
Ediston Property Investment Company
Investing in retail-related shares like Ediston Property Investment Company (LSE:EPIC) carries higher risk than normal. This retail park owner might struggle to collect rents as consumer spending power sinks.
According to Kantar Worldpanel, grocery price inflation hit record highs of 17.5% in the four weeks to 19 March. This equates to £837 less in householders’ pockets each year which, in turn, is smacking shopper demand for non-essential items.
Yet despite this I’m still considering buying Ediston shares for my portfolio. I’m expecting profits here to surge over the next decade as retailers prioritise expansion into retail parks. The rise of click-and-collect, allied with a wider choice of goods and ease of access by car, mean this UK property segment should continue growing rapidly.
I’m also attracted to Ediston due to its huge 7.8% forward dividend yield. In fact I think the business could be a great buy for market-beating, long-term passive income.
