With the cost-of-living crisis continuing to rage on, having a genuine second income stream has become more important than ever.

For the few lucky people who’ve just received a windfall, maxing out the annual £20,000 ISA allowance is a perfect way to build exactly that. In fact, it’s possible to instantly unlock a tax-free £1,278 a year right now.

Obviously, that’s not a life-changing sum, but it’s a meaningful help toward covering rising bills. So here’s how to get started.

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.

The power of a quality income ISA portfolio

Right now, FTSE 100 index trackers are offering yields of around 3%. That means investing £20,000 across all of the UK’s largest businesses would lock in roughly £600 in dividend income overnight.

That’s certainly not bad. But with many Cash ISAs now offering more attractive interest rates, it seems like a poor trade-off given the added risk of investing in the stock market versus holding money in a near-risk-free savings account.

So is there a smarter way to put that £20,000 to work? For investors willing to buy directly into high-quality, high-yield stocks rather than a broad index fund, a far more substantial second income stream can be unlocked.

A perfect example of this would be real estate investment trust (REIT) LondonMetric Property (LSE:LMP) with its 6.3% dividend yield on offer today. At this level of payout, the same £20,000 investment would generate £1,278 a year. But as all experienced investors know, a high yield doesn’t always last. So is LondonMetric Property actually a good investment, or is it a trap?

What’s driving this REIT’s income?

Looking at this commercial landlord’s latest trading update, it’s hard not to be impressed. Since April, the company added £6.7m of annualised rental income from 72 separate asset management initiatives, including rent reviews that delivered average uplifts of 16%.

As CEO Andrew Jones put it:

Rent reviews, renewals and lettings continue to deliver significant rental growth, further improving our sector-leading portfolio metrics.

Occupancy also climbed to 98.3%, and the group’s actively recycling capital too, selling £96.7m of non-core assets while redeploying proceeds into food retail stores leased out to strong occupiers like Lidl and Tesco.

So far, this seems like a no-brainer… so why aren’t more investors taking advantage of the high yield?

Where’s the catch?

No investment is ever without risk. And LondonMetric is no exception. Like other REITs, LondonMetric remains highly sensitive to interest rate movements. Don’t forget, higher borrowing costs not only put pressure on cash flow but also weigh down on property valuations, hitting commercial landlords with a double whammy. And with a substantial debt position on its balance sheet, the business has already started feeling the pressure.

And if interest rates suddenly start spiking again, then the group’s large dividend yield could end up on the chopping block without much warning.

The bottom line

While the risks are real, the last few years have given LondonMetric’s management team some enormous credibility. While most of its rivals struggled to keep the lights on, LondonMetric not only refinanced and restructured its debt, but also leveraged its superior financial strength to buyout the struggling competition and increase its market share.

In my experience, that’s a rare sight. And it’s why I think investors looking to build a chunky second income should be taking a closer look at this commercial landlord. And it’s not the only investment opportunity I’ve spotted today…

Should you invest £5,000 in LondonMetric Property Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 LondonMetric Property Plc made the list?

Zaven Boyrazian owns shares in LondonMetric Property.