2-Minute Money Manager: Is ‘Federal Rent Checks’ a Legit Program?

Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about investing; specifically, whether a heavily advertised investment program called “Federal Rent Checks” is worth your time and effort.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

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Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Cathy:

What do you think of the “Federal Rent Checks” I have been hearing so much about lately. Is this a legit program? Seems a bit too good to be true?

I have to admit, I’d never heard of “Federal Rent Checks” before Cathy sent me this question, so I had to do a little homework on this one. But I found an article or two, so now I’m ready to help.

What’s the ‘Federal Rent Checks’ investment program?

Cathy is asking about an investment program called “Federal Rent Checks” that she saw online. You can see it as well — just do a web search for “Federal Rent Checks.” But look, don’t touch.

The pitch basically implies that since the federal government pays rent on some of the buildings it uses — and you, as a taxpayer, “own” the federal government — you’re entitled to your fair share of the monthly rent the government is paying.

Simple, right? Here’s a cut and paste of a few words they use:

“Each of your ‘Federal Rent Checks’ could initially be made out for $1,795. But over time, those checks could be worth much, much more.”

After a brief written pitch, you’ll be asked to view an online video that explains the concept further and is packed with pictures of “real” people and the fat federal rent checks they’re getting every month. Some of the checks are more than $15,000.

Wow!

Is it legit?

If the question is, “Are federal rent checks a real thing?” The answer is, “You bet!”

Uncle Sam absolutely occupies lots of office space in lots of buildings nationwide. Many of those buildings he owns, but some of them he rents. So, sure, the feds are definitely paying rent.

But who are they paying it to? Here’s where the logic kind of breaks down.

Think about it: When you pay rent, whom are you paying it to? Answer: You’re paying the landlord — the building owner.

And who owns the buildings being rented by federal government agencies? One likely landlord is a real estate investment trust, otherwise known as a REIT.

A REIT is simply a company that owns, manages and/or finances real estate. In other words, it collects rents from tenants, like Uncle Sam, then passes along the income to the company’s shareholders, one of whom could be you.

How do you become a shareholder and get a chunk of the rental income the REIT collects? You buy shares of a REIT like you would any other stock, wherever stocks are sold. You can also buy groups of different REITs with mutual funds and/or exchange traded funds, also known as ETFs.

So, here’s your bottom line: If you want to collect federal rent checks every month, no problem: You just need to own shares in the company — the REIT — that owns the buildings.

And that’s ultimately what this pitchman is telling you to do: Buy REITs. But here’s what he’s not telling you: In order to collect $15,000 monthly, you’d likely have to put $2,000,000 or more into a stock — one that’s not guaranteed and, like all stocks, has risk attached.

Here’s the takeaway

Pitches like this one are common, and they’ve been around longer than I have.

Like many stupid investment tricks, it starts with a kernel of truth: Federal agencies pay rent. But it paints this simple truth as a shocking secret; one that few understand and only our pitchman can reveal — for a price.

Bottom line? The same thing I’ve now said at least a billion times over my 40-year career: If it sounds too good to be true, it is.

Hope that helps, Cathy! And hope to see you all right here next time.

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About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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