Why Dividend Growth Investing Crushes Rental Properties for Passive Income

Dividends and Income ^ | 09/04/2025 | Greg Patrick

[woodbutcher1963]

I rented twice from a guy that owned 16 houses in southern NH.
He went to plumbing and heating school so he could work on them himself. He also kept his rents a little under the market. He said that way people tended to stay in his apartments longer. When apartments turn over you have to paint and replace carpets. If people stay in them, you don't have to do that. He also plowed the snow in the winter. He would discount rent for one tenant in each house if they mowed the lawn and kept an eye on the property. Even though he lived in town.

He eventually passed and his daughter and son in law now manage the business. Last I knew they had about 60 apartments all in one town. The BIG thing the author of the article leaves out is ASSET DEPRECIATION. Running a property rental business allows you to depreciate company assets. That asset is not onlt the houses, but the pickup truck, the lawn mower and any other thing purchased to maintain those properties. This is why a COMPANY can afford to buy a $100K pick up truck every few years. There have been years recently when the Federal Government allowed you to depreciate the cost of that asset(the pick up truck) in ONE year.

[Governor Dinwiddie]

Yes. That's the way to do it. Smart guy. I completely forgot about equipment depreciation. Sounds like he was a good landlord.

[woodbutcher1963]

On the other side of the coin a guy I used to work with got into the rental business in southern Maine.
He bought a cottage across the street from the ocean in Wells, ME. He rented it that first summer. The next winter it got flooded out in the worst storm in a hundred years.
The cottage got 2+ feet of water in it. He had to gut it down to the studs. Spent $70K rebuilding it. He decided to sell it. He made a small profit and was glad to be done with it.

The next year he got a call about the family living in a duplex about twenty miles inland from the ocean in South Berwick, ME. One of their kids had tested positive for LEAD PAINT EXPOSURE. He spent another $30K(or more) on lead abatement and sealing. He still owns that property. Luckily for him the people moved out and didn’t bring a LAWSUIT. It could have come from the neighbors house next door that had recently been scraped and painted.

He has made most of his rental income off his house in York Beach, ME. It is about five minutes from the ocean/beach. He rents it weekly in the summer as a vacation rental.
This summer he was getting about $650/night from June until Labor Day.

[Governor Dinwiddie]

I guess you could say "third time's a charm".

I've got to admire his "stick-to-itiveness". Pick yourself up; dust yourself off. Start all over again. That guy is a winner.

[bigcat32]

“I just retired in May and I’m going to be living off of SS and stock dividends.”

I retired mid-June of ‘24 and use SS and dividends for living expenses. My portfolio is up 25% since retiring. So far so good but I expect it to not always be smooth sailing.

[Starboard]

And I’m not trashing real estate. I have a couple of properties myself that have appreciated significantly but they are not rentals. As I said on the thread, wisely selected and given the right conditions, real estate can produce a good return. That said, I prefer to invest in financial instruments, but it can be admittedly be a rough ride at times. LOL

Re folks not paying attention, most people don’t seem to have the aptitude, interest or skills to actively monitor their investments. And I don’t mean to imply that they are lazy or ignorant, just that in various phases of life we get preoccupied with other things and tend to neglect keeping a close eye on such things. They can hire help to do it but that too requires some due diligence.

[Mr. Blond]

If you want to invest in real-estate, buy REITs.

[AAABEST]

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.

I guess I coulda got lucky and "simply" picked juuuuust the right stocks and realized a little more - or a little less -equity gains, but none of those stocks would have yielded anywhere near the thousands and thousands (and thousands) in rents I've collected over the years.

[subterfuge]

Well done BC.

[Starboard]

Most stocks grow their dividends over time. Microsoft for instance has a 10 year annual compounded rate of growth in its dividend of slightly over 10%. That’s doubling the (tax advantaged) divided in about 7 years but its possible to do even better with other choices. So stocks can produce both capital appreciation and regular dividend payouts. Of course there’s always the potential for loss as well. Admittedly, there are more variables that can affect a company’s fortune than there are in the world of real estate.

A lot of people don’t want to put any work into investing in real estate, but similarly a lot of people don’t want to put any work into evaluating, selecting and monitoring stocks. Both take time and effort, and a lot of patience, to have any chance of real success.