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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
Things are getting much tougher for the average buy-to-let landlord, but that\u2019s not something many real estate investment trust (REIT) investors have to worry about.<\/p>\n
When held inside an ISA, REITs can generate chunky dividend yields from rental property for shareholders who don\u2019t have to worry about paying any taxes. That\u2019s quite the opposite compared to a direct investment in a property, which also comes with all the extra costs of repairs and managing tenants.<\/p>\n
This doesn\u2019t mean buy-to-let\u2019s dead. It\u2019s still a good way for experienced landlords to profit from the UK property market. But with new rules coming in this year, there\u2019s no denying that it\u2019s becoming harder.<\/p>\n
That\u2019s why REITs remain my favourite way to invest in real estate. And in 2026, there\u2019s one REIT in particular that looks like an excellent investment, in my eyes.<\/p>\n
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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.<\/p>\n
Out of all the REITs listed on the London Stock Exchange, my personal favourite right now is LondonMetric Property (LSE:LMP).<\/p>\n
The firm\u2019s vast commercial real estate portfolio covers a wide range of property types, including healthcare, convenience, entertainment, and a large concentration in urban logistics. But what makes its business model unusually robust is its triple-net lease (NNN) structure.<\/p>\n
NNN means that tenants are ultimately responsible for paying rent, maintenance, insurance, running costs, and taxes like business rates. As such, beyond the initial cost of acquiring or building a property, LondonMetric has virtually no property-level operating costs, turning it into a free cash flow-generating machine.<\/p>\n
This structural advantage is a big reason why the business is on track to deliver its 11th year of consecutive dividend increases. And even in April, with a chunky 6.6% dividend yield, the group\u2019s rental cash flows are still more than enough to cover its substantial payout.<\/p>\n
Pair that with an average lease duration of 16.4 years, 98% occupancy, and 67% of lease agreements including an annual contractual uplift, and LondonMetric\u2019s dividends look exceptionally secure.<\/p>\n
So what\u2019s the catch?<\/p>\n
Even as a bullish shareholder, LondonMetric Property isn\u2019t a risk-free REIT, and there are some important risk factors that investors need to consider carefully.<\/p>\n
The company carries a lot of debt on its balance sheet. And while management has recently refinanced \u00a31.5bn of its outstanding loans to remove maturity risk until 2029, interest rates also impact the group\u2019s property valuations.<\/p>\n
Changes in real estate prices don\u2019t impact its rental cash flows. But it does nonetheless move its share price.<\/p>\n
Another potential risk factor is over-expansion. In the past, LondonMetric focused exclusively on logistics properties. But following its acquisition of LXi, a wide range of new property types were thrown into the mix.<\/p>\n
Yet with a limited history and experience of being a landlord to supermarkets, hotels and theme parks, the impact of poor execution in the short-term could have a noticeable impact in the long run.<\/p>\n
Every investor has their own personal risk tolerance limit. So before buying any shares in LondonMetric, it\u2019s crucial to consider both the risks and potential rewards.<\/p>\n
For me personally, the combination of rock-solid fundamentals paired with a juicy 6.6% yield makes LondonMetric a REIT worth buying. That\u2019s why it\u2019s already in my passive income portfolio.<\/p>\n
The post I\u2019m ignoring buy-to-let in 2026 and buying this REIT for passive income!<\/a> appeared first on The Motley Fool UK<\/a>.<\/p>\n More reading<\/p>\n Zaven Boyrazian has positions in LondonMetric Property Plc. The Motley Fool UK has recommended LondonMetric Property 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.<\/a><\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images Things are getting much tougher for the average buy-to-let landlord, but that\u2019s not something…\n","protected":false},"author":2,"featured_media":16989,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[4],"tags":[5716,321,7945,7944,7947,5,7946,6],"class_list":["post-16988","post","type-post","status-publish","format-standard","has-post-thumbnail","category-uk","tag-dividend-yields","tag-london-stock-exchange","tag-property-types","tag-real-estate-investment-trust","tag-rental-property","tag-uk","tag-uk-property-market","tag-united-kingdom"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116430451664435058","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/16988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=16988"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/16988\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/16989"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=16988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=16988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=16988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}