The honest comparison

Secondary market annuities vs. rental real estate

Rental property can pay well and offers leverage, appreciation, and rents that rise with inflation. It is also a part-time job. A secondary market annuity pays an estimated 4 to 7 percent from a fixed, court-ordered schedule, with no tenants and no upkeep. Here is the trade for an investor who wants income without a second job.

Side by side

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	Secondary market annuity	Rental real estate
Type of income	Fixed, court-ordered schedule	Rent, net of vacancy, maintenance, taxes, and management
Yield	4–7% estimated effective, and truly passive	Gross yields can look higher, but net returns fall after costs and vacancies
Effort	Passive; payments arrive on schedule	Active; tenants, repairs, vacancies, and management
What backs the income	A top-rated carrier or state lottery, plus a court order	The property, the tenant, and the local rental market
Leverage	None	Common through a mortgage, which amplifies both gains and losses
Appreciation and inflation	Level unless bought with an annual increase; no appreciation	Rents and property value can rise with inflation over time
Liquidity	Limited; no public market. Resale or reassignment possible with our help, not guaranteed	Illiquid; a sale takes time and carries transaction costs

What this means for investors: A payment stream gives you real-estate-like income without being a landlord: no tenants, no repairs, and a fixed, court-ordered schedule at an estimated 4–7%. Both are long-term holdings with limited liquidity. These payment rights have no public market; resale or reassignment may be possible with our assistance but is not guaranteed, at a price that moves with prevailing interest rates. Real estate can add leverage and an inflation hedge, but it takes real work and its returns are not guaranteed. Many investors hold a rental for the upside and a payment stream for the hands-off, dependable part of the income.

Income, with or without the work

Real estate rewards effort and leverage. A well-bought rental can throw off strong cash flow, appreciate, and let rents climb with inflation, and a mortgage can magnify the return on your own cash. The flip side is that you are running a small business: screening tenants, fixing what breaks, carrying vacancies, and wearing the leverage in a downturn as well as an upswing.

A payment stream strips all of that out. There is no tenant, no repair, and no management, only a court-ordered schedule from a top-rated carrier. You give up the leverage and the appreciation, and in return you get a fixed, known yield and your weekends back. You can see exactly what a given stream would pay with our yield calculator, and weigh whether the trade suits you in are they a good investment.

Neither has to win outright. An investor can own a rental for the leverage and inflation hedge and still use a payment stream for the hands-off, dependable part of the income, the money that should just show up without a phone call from a tenant at midnight.

Questions we hear most

Is a secondary market annuity better than a rental property?

They suit different investors. A payment stream is genuinely passive: no tenants, no repairs, no vacancies, just scheduled court-ordered income. A rental can pay well and offers leverage, appreciation, and inflation-linked rents, but it is a part-time job and its returns depend on the property and the market. If you want real-estate-like yield without being a landlord, the payment stream is the closer fit.

Which yields more, a rental or a secondary market annuity?

It depends on how you count. A rental's gross yield can look higher than a payment stream's 4 to 7 percent, but the net return arrives only after vacancy, maintenance, property taxes, insurance, and management, and it is not guaranteed. A payment stream's estimated effective yield is fixed, court-ordered, and requires none of that work, so the honest comparison is net-of-effort rather than headline-to-headline.

Does real estate hedge inflation better?

Generally yes. Rents and property values can rise with inflation, while a level payment stream does not, unless it was bought with an annual increase. That inflation response is one of real estate's real advantages, and it is a fair reason to hold some property alongside fixed income rather than instead of it.

Can I hold either one in a retirement account?

Both can be held in a self-directed IRA that accepts alternative assets, though real estate in an IRA carries added rules and complexity, and can trigger tax on debt-financed income. Payment streams are more straightforward to hold that way. Either path is worth reviewing with your own tax advisor. Our guide to buying in a self-directed IRA covers the payment-stream route, and you can reach our team at (800) 449-6311.

What these assets are, and what they are not

Guaranteed and life-contingent structured settlement payment rights, and lottery payment rights, represent the right to receive factored payments that Pacific Structured Assets purchases and assigns to investors through a court-approved process. They are purchased at a discount to their total scheduled payments.

These payment rights are NOT annuities, NOT insurance products, and NOT securities registered with the U.S. Securities and Exchange Commission. They are not bank deposits, are not FDIC-insured, and are not protected by any state insurance guaranty association. The industry term “secondary market annuity” refers to these payment rights and does not mean you are purchasing an insurance annuity contract.

You acquire the right to receive the payments, not the underlying annuity. The annuity itself does not change hands. Unlike the original structured settlement annuity, which may be shielded from creditors under applicable law, the assigned payment rights you purchase generally do not carry that creditor or bankruptcy protection.

Assigned annuities, offered as a separate product line, are existing insurance annuity contracts reassigned to a new owner through a change of ownership or an irrevocable change of payee.

These are long-term holdings with limited liquidity, and may not be suitable for every investor. There is no public trading market and no daily price. Resale or reassignment of a payment stream to another buyer may be possible, and Pacific Structured Assets can assist, but a resale is not guaranteed and the price it would bring is not guaranteed. Because the payments are fixed, that resale value moves with prevailing interest rates: an investor could realize a gain if rates have fallen since purchase, or a loss if rates have risen. These holdings are best suited to capital an investor can commit for the long term. Nothing on this website is tax, legal, financial, or investment advice. Consult your own advisors before investing.

Pacific Structured Assets, Inc. does not provide tax, legal, financial or accounting advice. The material on this website has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial or accounting advisors before engaging in any transaction, including the acquisition of factored structured settlement payments. Pacific Structured Assets is not registered with the Securities and Exchange Commission and is not licensed to sell insurance in any state.

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Secondary market annuities vs. rental real estate

Side by side

Income, with or without the work

Questions we hear most

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