Posted on 09/15/2025 10:00:59 AM PDT by SeekAndFind
“Passive income.” That’s the sales pitch for rentals. Tenants cover the mortgage, you collect the rent, the property appreciates, and you’re off sipping margaritas. Sounds dreamy… until Saturday morning shows up with a broken appliance. Ask me how I know.
Here’s the reality from my own ledger: one of my rental properties in the Finger Lakes, NY area is locked at $2,200/month. That’s the ceiling. Meanwhile the expense list has no ceiling.
In the last year alone I replaced the gas range, microwave and dishwasher. That’s just a tiny sample of a seemingly never-ending list of surprise expenses. “Passive” income? Cute.
Dividend growth investing is the opposite. Buy once. Collect forever. No clogged toilets, no surprise repair bills, no property taxes and utility rates creeping up on you.
And even if you hire a property manager, you’re still managing the manager, and still paying the fees. If it looks like a part-time job and feels like a part-time job… you know the rest.
Dividend growth investing, on the other hand, is wonderfully boring. You own world-class companies that pay you — and raise your pay — year after year. Checks show up on a schedule with no emergency texts attached. Many blue chips hike payouts annually, so your income compounds without effort.
There are no midnight repair calls, no vacancies, no capex surprises. Rent is negotiated. Dividends are announced. One demands your time; the other deposits into your account.
And when it comes to predictability, dividends win again. Public companies publish payout schedules so you can plan cash flow to the week. With rent, tenants move out, markets cap rent hikes while your costs climb, and what looks steady on paper often becomes “where did the month go?” in real life.
Both rentals and dividend stocks can build wealth, but they do it in very different ways. With real estate, you’re betting on appreciation plus rent checks — both tied to location, cycles, and constant upkeep. Dividend growth investing has two engines working at once: rising payouts and rising share prices. Reinvest those dividends and the snowball rolls itself.
And let’s not forget time, the most ignored line item in most spreadsheets. Rentals demand hours of tenant screening, late-night calls, and vacancy fills — an ongoing to-do list. Dividends? Build the portfolio, then get back to your life. Weekends at the lake beat weekends under a sink.
Numbers matter, but so does cortisol. With rentals, you’re always one call away from a “situation.” With dividend growth, you’re one click away from an income stream that quietly gets bigger. When companies hike payouts, it feels like a raise you didn’t even have to ask for.
| Factor | Rental Property Income | Dividend Growth Stocks |
|---|---|---|
| Income | Capped by lease until renewal | Payouts rise over time (dividend hikes) |
| Expenses | Unlimited: repairs, taxes, insurance, upkeep | None after purchase; no surprise maintenance |
| Time | Hands-on (or pay a manager) | Hands-off once built |
| Predictability | Vacancies & timing risk | Announced schedules; highly predictable |
| Growth | Market-dependent; capex drags returns | Dividends + price appreciation compound |
| Scalability | Capital & debt heavy; slow to scale | Scales instantly with reinvestment |
True stability. True scalability. Truly passive.
Scanned the article quickly...but I didn’t see depreciation mentioned.
I think I see the problem here.
Of course they can, and do. And the author neglected to mention that fact. It doesn't speak favorably of him.
the big problem with cuts is that they can negatively affect the stock price in a big way
DUH! OF COURSE they do ... the dividends are a big part of the stock's value in the first place.
It advisable to keep an eye on a company’s pay out ratio,
Duh! Of course it is. The author sort of glosses over this. Investing isn't a hands-off strategy. Never was, never will be.
Author bought high in one of the absolute worst markets - communist NYC. My (real estate) family ran out of New York for that very reason. Punishing landlords is great for creating slums.
Like many, the author also doesn’t understand that real estate is, almost always, a long, slow game.
The Florida rentals I bought in 2010 after the crash are now yeilding around 75% ROI anually. IOW, in a single year, I’m getting 75% of the full price I paid for the units 15 years ago.
The best part is they’ve increased in value by 700%. Yes, they are worth SEVEN times what I paid during the fire sale.
You don’t get that via Wall St. paper unless your palm-reader gets you into Gamespot at just the right time.
Correction: New York State, not NYC.
As the result of property purchases I have had three rentals. I was never so happy as to be rid of them. One I traded in a barter exchange and it was carted away in a fiasco of a house moving operation. The other two I tore down, burned the mess, dug a big hole and buried what was left. Good riddance to worthless problems.
“With dividend investing, you can easily diversify via ETF’s or mutual funds, but portfolio yield will suffer vs. hand-selecting higher-yielding stocks.”
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I have ETF’s and individual stocks but the thing I like about the latter is being able to select those with consistently strong dividend growth rates. Never any guarantees but I do what I can to get the odds in my favor. :)
Many years ago we did invest in an manage some rental income property. While it was true that on the basis of the mortgage and property taxes the properties did carry their weight. But, realistically the repairs, maintenance and needed improvements greatly reduced the annual “net” revenue. And, we were generally DIY owners for most things, the annual grind got to us, and our “net” would have been even smaller if vendors had been hired to do everything. We kept them too long and merely “broke even” when we sold them. A good quality bond fund or blue chip stocks paying good dividends would have twenty year in netted us more than the rentals did.
If you are smart enough to begin investing in Dividend stocks, particularly Dividend Aristocrats, early in your life and keep a watch on them you should have no trouble at all in paying for your future at ease. I was not that smart when I was young, I knew nothing and had to learn the hard ways.
They are not fool proof, even the Generals had some bad problems. As in General Motors, General Electric and so forth. A good Dividend ETF should ease that individual risk. When I started there were only Mutual Funds. I don’t know of a single fund that has ever beat the market indices. Why pay for it then?
Too old soon, too late smart.
This... thank you.
Author bought in a bad market and doesn't know what he's doing.
“You don’t get that via Wall St. paper unless your palm-reader gets you into Gamespot at just the right time.”
*************
You could have simply invested in Microsoft. Its total return since 2010 is over 1,200%. Or you could have simply bought the ETF XLK and done nearly as well.
We bought a rental quad, then in four years refinanced and drew out cash and bought another. Structured the deals for max cash flow instead of appreciation and paid for two college educations for our two daughters. Sold out after twenty years and did a 1031 exchange into part of a shopping center with passive income.
My mother in law lives in the Finger Lakes area.
While there are nice vacation homes on the water the towns look like nothing has been repaired for decades.
Some of the roofs are so bad it is hard to figure out how they survive the tough winters.
“It advisable to keep an eye on a company’s pay out ratio,
Duh! Of course it is.”
***************
I said that for the benefit of those reading the thread who might not know what it is. Just trying to post something constructive instead of ridicule.
For the last 20 years I have had a compound annual rate of return of 9.2 to 9.9% with standard risk depending on investment package and BFIT and AFIT accounts. If I had simply invested in an S&P ETF I would have had between 12 and 14% and been about 50% better off than I am today. My dividends that were paying maybe 3% back in the day would now be paying between 3 and 4 times that on my original investment. My capital gains would just be setting there getting bigger most of the time without taxes being due until I sold the principal which I would intend to pass on to my heirs or charity. Blue Chips and Aristocrats will sell their children and borrow money to continue paying their dividend in hard times and the market has always reverted to the mean as a whole. Individual companies do go out of business in failure but not all that often if they are in the top shelf group.
I have tried diversification as per the soothsayers and I consider it to be mediocre. In the last downturn everything went down. If you look at a diversified portfolio it goes down similarly to the market index most of the time. That has been my experience over 50 years of investing per the rules of thumb.
If you invest in the market as a whole from the outset your growth will be such that you can weather just about any 25% drop storm. Usually, in less than three years you will be right back where you were before the crash. It is always elevator or even free fall down and a very long chain of stairs climb back up. The worst in 50 years was that after 2008 made much worse by obama and bidet.
If you don’t start the right way to begin with the diversified approach is best because you will not likely have enough margin for safety against a drop when you need the money.
Once you pick an investment strategy it can be hard to change direction without serious tax consequence. I also have found that out the hard way.
You can have rental property. It is a PITA. In the long haul property hardly keeps up with inflation except for certain charmed markets and covid insanity. On top of that you get to have an annual or periodic bout over taxes, insurance, rents, repairs, damages and delinquent payments. I’ll leave that for Blackrock and the H8 slum lords.
I mentioned the possibility of stocks losing value, and of dividends being suspended, for the benefit of those reading the thread who might not know these things can happen. Just trying to post something constructive instead of ridicule.
For the record, I am NOT trashing the practice of investing in dividend-bearing stocks. Far from it; I do that. Among other things.
Just remember: ALL investing is an active game, not a passive game. Folks should pay attention to what their investments are doing or failing to do.
Is their a reason people do not choose JEPI or ARCC?
They seem to pay a very good monthly dividend.
RE: Is their a reason people do not choose JEPI or ARCC?
The main drawback I can think of is the price of these two could GO DOWN in a bear market.
But then, so can the price of real estate.
WORSE:
AS EACH YEAR PASSES, VARIOUS GOVERNMENTS ARE RESTRICTING HOW MUCH INFO A LANDLORD CAN DEMAND FROM A POSSIBLE RENTER.
A SEX OFFENDER? NOT ALLOWED TO ASK—EVEN IF APARTMENT BUILDING WITH OTHER OTHER DWELLERS ARE INVOLVED.....KIDS, ETC.
A CREDIT RISK? A DEADBEAT? MULTIPLE EVICTIONS? NOT ALLOWED TO ASK...
A CRIMINAL IN ANY CATEGORY? NOT ALLOWED TO ASK.....
WOULD NEVER RENT OUT A HUMAN ENCLOSURE EVER AGAIN.
MIGHT HAVE RENTAL STORAGE SPACES IF I HAD THE $$$ TO INVEST...
DO NOT PAY FOR 2 or 3 MONTHS? YOUR SPACE IS PADLOCKED WITH MY LOCK & SOLD OFF....YOUR FAULT-—NOT MINE...
HOURS OF ACCESS ARE UNDER MY CONTROL.
PRICES ARE UNDER MY CONTROL.
ANYTHING ELSE: “YOU CAN KISS MY GRITS”.
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