Facing Retirement? Buy Telus Corporation Instead of Rental Property

Both options have a 3.68% gross yield. But Telus Corporation (TSX:T)(NYSE:TU) and its dividend come with numerous advantages.

| More on:

If you’re nearing retirement, chances are you’re looking for a way to generate some income from your savings. One option that must surely stand out is rental property.

But there are numerous reasons why you shouldn’t buy rental property, and below we discuss the top three.

1. The hassle

First of all, finding a place to buy can be a daunting task. Then you’ll have to close the purchase, which could involve trying to find financing. You’ll have to do research on the neighbourhood, and find out how much rent you should be charging. Then you’ll have to find tenants. And that’s only the beginning.

Being a landlord can use up a lot of your time. It’s your responsibility to maintain the place, as well as field emergency calls. If you have bad tenants, then the headaches get even worse. It almost seems to defeat the purpose of retirement.

2. The price

Depending on who you ask, Canada’s housing market is in bubble territory. Some people think that we could see 20% declines. They have a compelling argument.

According to the Global Property Guide, Canada’s Gross Rental Yield averages 3.68%. But that number only measures annual rent as a percentage of the purchase price. Once you’re done paying for maintenance, taxes, condo fees (if applicable), and tenant vacancies, your yield will be far lower.

The Global Property Guide only measures “resale apartments and houses … yields for newly-built properties are not included.” So if you’re thinking of buying a new condo, then the gross yield could be even lower. This is possibly the surest sign that properties are too expensive.

Compare this with a dividend stock like Telus Corporation (TSX: T)(NYSE: TU), which also has a yield of 3.68%. But Telus’s dividend doesn’t come with all the same hassles and costs of rental property. Better yet, Telus’s dividend has risen by 38% in three years, and has room to increase further. If you go with rental property instead, you won’t get to raise rent by that much (in fact rental increases are capped).

3. The risk

Buying a rental property comes with yet another major problem: it ties up so much of your savings in just one investment. This is a very risky approach, because if that property’s value declines, then that could take a big bite out of your savings.

But if you bought Telus stock instead, you could buy it in any quantity you want, which allows you to achieve diversification fairly easily. It’s quite simply the more responsible approach.
Of course you’ll need other dividend stocks to round out your portfolio. And the free report below contains three such ideas.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Dividend Stocks

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

2 Everlasting Canadian Stocks for Your RRSP

The Canadian National Railway (TSX:CNR) stock is worth owning for the long haul.

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

3 Stocks Set for Dividend Increases This Year

Here are three TSX stocks that are set to increase their dividends later this year.

Read more »

Dice engraved with the words buy and sell
Dividend Stocks

EQB Inc Stock: Buy, Sell, or Hold

EQB Inc (TSX:EQB) is Canada's fastest-growing bank.

Read more »

pipe metal texture inside
Dividend Stocks

Enbridge Stock: Buy, Sell, or Hold Today?

Enbridge is up 7% in the past six months. Are more gains on the way?

Read more »

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »