Real estate investment trusts (REITs) are often found in the portfolios of UK investors aiming for passive income. This is because the rules around these specific trusts require that 90% of profits are returned to investors in the form of dividends.
The best part is, they provide exposure to the real estate market without the high cost of property investment in the UK.
The FTSE 250 is home to some of the UK’s best REITs, offering high yields, inflation protection and long-term capital growth. Lingering inflation has been tough on REITs lately but this could change soon with the promise of interest rate cuts.
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.
Here are three popular REITs worth considering for passive income in 2025.
Primary Health Properties
For investors looking for stability, Primary Health Properties (LSE:PHP) is a good option to consider. It focuses on medical centres and NHS-backed properties, providing essential infrastructure that generates consistent rental income.
The yield’s higher than most, at around 7.5%, having risen from only 4% in 2020. The company’s also increased dividends consecutively for 27 years at an average of 3.3% a year.
However, the high yield’s largely a result of the share price declining 41.6% over the past five years.
High inflation and rising bond yields have suppressed property valuations, leading to a drop in PHP’s net asset value (NAV). The Bank of England’s hinted at rate cuts this year but if they don’t materialise, there’s a risk the price could fall further.
However, should it recover, the current low valuation could be an opportunity to grab some shares at a low price.
Tritax Big Box REIT
Tritax Big Box (LSE: BBOX) is a logistics-focused REIT that’s popular among dividend-focused investors. It owns large-scale warehouses essential for supply chains, so its tenants are usually well-established companies that sign long-term leases.
Historically, it’s enjoyed annualised rental growth of 5.1% and maintains near 100% occupancy at most times. The yield’s a bit smaller at 5.25% but its price is more stable, up 2.5% in five years. Barring a minor reduction in 2020, the yield has been increasing for 10 years.
But like any property investment, it faces risks from interest rate hikes, tenant stability and rental growth. If construction and labour costs rise faster than rental income, it could squeeze profits and reduce dividends.
Some notable tenants include Amazon, Tesco and Ocado.
PRS REIT
PRS REIT focuses on the private rental sector (PRS), providing exposure to the growing demand for high-quality, affordable rental housing in the UK.
With property prices soaring, the demand for affordable rental housing’s on the up. PRS’ noted this need and positioned itself to benefit from long-term rental income.
At only 3.8%, it has the lowest dividend of the lot but the price is up 17% in the past five years.
Investing in REITs
FTSE 250 REITs offer attractive opportunities to earn passive income from property without the high cost of direct ownership. Whether aiming for high-yield dividends, inflation protection or long-term growth, the above options each offer a unique investment case.
As always, it’s crucial to consider the risks and assess individual investment goals. But for those seeking passive income, REITs are worth considering as part of a well-diversified portfolio
The post 3 FTSE 250 REITs to consider for passive income in 2025 appeared first on The Motley Fool UK.
But what does the head of The Motley Fool’s investing team think?
Should you invest £1,000 in Tritax Big Box right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tritax Big Box made the list?
See the 6 stocks
More reading
Fancy a £1,600 passive income in 2025? Consider these 2 top dividend shares with a £20k lump sum
£20k to invest? 2 dividend stocks to consider for a £1,860 passive income this year!
Prediction: these FTSE 250 stocks could be among 2025’s big winners
How much do I need to invest in dividend stocks to earn a £1,000 monthly passive income?
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Mark Hartley has positions in Primary Health Properties Plc, Prs REIT Plc, and Tesco Plc. The Motley Fool UK has recommended Amazon, Primary Health Properties Plc, Tesco Plc, and Tritax Big Box REIT Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
