Story by Alan Oscroft
Motleyfool

I’ve been doing a bit of research on the habits of successful passive income investors, and I came across a bit of a surprise.

They all seem to name dividend stocks as a major part of their investment portfolios — though that’s not the surprising part. No, what I hadn’t expected was to find a large number of them recommending real estate.

Yes, real estate has been profitable for a number of people. But I had a very shaky venture into it. And it has a fair few drawbacks for individual investors.

Not really passive
One is that many of us won’t have the capital to go for, say, rental properties. It’s not the kind of thing we can get started with just a few hundred pounds, like we can with a Stocks and Shares ISA.

It’s not entirely passive either. Finding tenants, collecting rent consistently, and maintenance all take time and effort. And the latter can sometimes prove very costly if you’re unlucky.

But there’s a way we can get into real estate without facing those major hurdles. And that’s to consider buying real estate investment trusts (REITs). They’re investment companies that put their money into various kinds of properties, and they do all the management. All we have to do is buy shares in them, just as we do with shares in general.

I like Primary Health Properties (LSE: PHP), which invests in GP surgeries, pharmacies, dental clinics. Importantly, they’re mostly rented to the NHS on long-term leases.

Having the UK government as its main customer provides some stability and predictability. But it hasn’t made the trust immune to weak property values in recent times. Over the past five years, the PHP share price has fallen 35%.

Higher interest rates are a burden, especially with debt on the books. At the end of the first half this year, net debt reached £1,367m, up from £1,323m in December 2024. There doesn’t seem to be any liquidity problem, but it could keep the shares down for longer.

JPMORGAN RAISES PRIMARY HEALTH PROPERTIES TARGET TO 105 (100) PENCE – ‘NEUTRAL’

Current yield 7.7%