Over 50 years ago the then President Eisenhower signed a just passed bill on cigar taxes as a routine day at the office. Inside that bill was one of those little sections Congress likes to tuck into these bills to help out some friends. It was about creating a trust for some wealthy families like the Kennedys and Rockefellers so they could better able keep all that lovely money in their families. The simple purpose was to allow these type families the opportunity to keep their assets without selling them and live off the cash flow without any corporate taxation. Yes, tax free from the generating assets directly to whatever the wealthy family wanted it to go. Think the Merchandise Mart in Chicago for the Kennedys and Rockefeller Center in New York for the Rockefellers.
Now of course once the law was passed lawyers and legal beagles got to doing their work on the process and found ways to make what became known as the Eisenhower Trusts more available to lower income people. This is sorta what happened when President Reagan saw that little law tucked into another bigger law and got his legal beagles to find ways to re-apply that section that has become known as the 401-k.
Before we tell you how you might use this law to your advantage let's check out the opportunity.
1. All the income from the trust comes to you tax free. That is take the revenue, subtract the expenses, reinvested capital, and the rest of the cash flow is yours.
2. The taxation is only at your personal rate or if tucked away into your IRA goes there taxable only when you take it out.
3. The asset base is rock solid and you can use cash flow to purchase more assets tax free.
4. The cash flow can be funneled into other trusts that either puts off taxation or avoids future taxation completely.
4. These trusts produce 5% to 7% annually year after year after year. More importantly they offer inflation protection for your assets.
5. In the most recent downturn in 2008 these trusts kept about 90% of their value and kept on producing income with no interruption. As usual even after the downturn they returned to their former values and began moving up again.
Yes we know you are wondering how you might get in on this game, well you can and today they are known as Real Estate Investment Trusts, or REITS.
REITS today come in many forms and even more variety. Apartments, commercial buildings, residential homes, storage units, and the list goes on. Basically anything that can be classified as real estate. However here we will target the category we believe are the very best of these "Eisenhower Trusts" known as Triple Net Reits.
Triple net reits are hands down our very favorite stock period. They provide steady income without corporate taxation. They lease business property that shields the owner from the costs of operating the real estate such as taxes and maintenance. Therefore more of the cash flow goes directly to the owner. Most importantly the real estate leased is generally very long term with built in rent increases year over year. Less hassle, less issues, and more cash flow. Below we will list some of our three favorite triple net reits.
Realty Income...Without doubt the most shareholder friendly reit, maybe the most shareholder friendly company on the planet. Very transparent information online for one to research their owned properties and financial statements. The beauty of Realty Income, symbol O, is that they pay monthly dividends, that increase constantly since like forever. They invest in mostly single tenant commercial property and have a 98% occupancy rate. The current yield is around 5.5% and the stock bought anywhere around $40 or below is a good buy here for long term buyers wanting rising income and stable asset prices. Realty Income's long history of asset management makes for very good sleep at night.
National Retail Properties...This reit has the highest value property. Where Realty Income goes for more properties, this company symbol NNN, has assets in the very highest quality mostly single tenant units. The quality of this reit shows in the lower dividend yield of around 5%, but like Realty Income they raise their dividend annually year after year. The asset price of NNN is as solid as it gets, you can count on it almost never going below $30 per share.
ARCP...The newest of the triple net reits and now the largest as well. This company has a huge portfolio of properties spread over a large number of business types. We have been posting on ARCP for over a month now suggesting purchase at the former price of $12.50. Now nearing $14 per share and with a yield over 7% we expect some additional asset value increase as well as some added dividends too. This company also pays their dividends monthly. Their preferred stock ARCPP is undervalued currently at just over $21 per share with a similar 7% plus yield as well.
These three triple net reits are our favorites. One can divide your money among the three and get a 6% payout right now that will rise annually and protect your asset base. That is how wealthy people like the Kennedys and Rockefellers keep themselves wealthy and have plenty of income to keep living the good life. Maybe you do not have that kind of wealth, but certainly you can use this kind of steady rising income and wealth protection for your size portfolio in these "Eisenhower Trusts".
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