It’s one of the greatest income sources available… owning investment real estate.
You collect a rent cheque each month and every year your property values go up! Some people even retire on the income earned from their rental properties.
However, becoming a landlord is also a hassle. You have to deal with regular maintenance like shoveling driveways and unclogging toilets. There are also the headaches of collecting security deposits and chasing down late payments. Or at least, that’s how it used to be.
As regular readers know, owning real estate investment trusts, or REITs, are a great way to collect regular rental income without becoming a landlord. In essence, a REIT is essentially a real estate holding company. REITs own properties, collect rent from tenants, and pass on the income to unitholders.
Some of these trusts sport yields up to 5%… 7%… even 10%. And because many of them are publicly traded, they can be bought and sold as easily as any common stock. Here are three of my favourites to get you started.
1. Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX: CAR.UN) owns a “recession-proof” niche consisting of affordable housing, manufactured homes, and mid-tier apartment buildings.
Sure, it’s nothing fancy. But people always need a place to live. That’s why these properties continue to crank out profits even while the rest of the economy is under pressure.
For unitholders, this means Canadian Apartment Properties delivers some of the most reliable income around. Since it started making distributions in 1998, this firm has never missed a single payment to investors. Today, it pays a monthly distribution of 9.83 cents per unit, which comes out to a yield of 4.7%.
2. H&R Real Estate Investment Trust
Operating in nearly every industry, REITs have proven to be resilient investments through even the worst recessions. H&R Real Estate Investment Trust (TSX: HR.UN) is a great example of this.
Altogether, H&R’s business empire spans some 52 million square feet across Canada. The trust owns 41 office, 164 retail, and 109 industrial properties. Thanks to this vast diversity, a downturn in any one particular region or industry won’t have a big impact on the firm’s bottom line.
H&R is now starting to distinguish itself as an income all-star. Management has hiked its payout for five consecutive years and today units yield 6.2%.
3. Chartwell Retirement Residences REIT
Chartwell Retirement Residences REIT (TSX: CSH.UN) owns, operates, and develops senior housing communities across Canada and the United States.
In 2008, the trust overextended itself with too much debt. Since then, however, management has done a great job of turning around the business while cleaning up the balance sheet. Today, the trust pays a monthly distribution of 4.5 cents per unit, which comes out to an annualized yield of 4.5%.
You can expect that payout to continue growing, as well. In North America, people 75 and older total 28% of the population. However, over the next decade, this demographic is expected to balloon to 38%. This puts Chartwell and its 236 retirement communities in a fortunate position.
