Who does not want passive income these days. Wouldn’t it be nice to have regular income coming in without much effort on your part. Although there are many ways to earn passive income, being a landlord is probably a very straightforward way. So you decide to buy a residential condo unit, one of the many studio units for sale in Metro Manila. You opted to stick with the big developers: Ayala Land, Megaworld or Robinsons. You then hire an interior designer, furnish it, look for a tenant, maintain it, pay the overhead expenses (insurance, condo dues, tax) and so on. When you decide to sell, you hire a broker, pay capital gains tax and hope that it sells soon and not a year later! This doesn’t sound very passive in my opinion.

A short distance from your residential rental condo is an office building owned by a REIT (AREIT, MREIT or RCR – the same developers from whom you bought your condo are also REIT sponsors). You buy stocks of the REIT through an online broker, receive quarterly dividends as a share of the rental income, and sell when you want to at a touch of a button. This is more of what I picture passive income to be.

I started buying AREIT (Ayala Land) regularly since 2020 and now have around 7000 shares with a yield on cost of 4.62% p.a. Since I invest regularly, my other alternative would have been to take out a loan to buy a condo from Ayala Land and hope that the rental income offsets the expenses + mortgage associated with that condo. Will that yield more than 4.62%? I don’t know. When I decide to sell in 20 years time, which would have provided more capital gains? Time will tell.

This is not to discourage anyone from investing in physical real estate. In fact, I believe tangible land should be part of one’s portfolio. What I’m trying to say is that REITs now allow us, ordinary Filipino investors, to become commercial landlords. Case in point, as an investor of AREIT, I own a tiny share of commercial buildings in Makati, Pasig, Alabang, Bacolod, Cebu – tenanted by multinational corporations and overseen by professional managers from Ayala Land. And what do I do to receive my share of the rental income from those buildings – absolutely nothing. I don’t get phone calls to fix a broken faucet or faulty lights either. When it comes to becoming a landlord, I prefer the REIT way.