Admit it. Buying a rental property has crossed your mind. It’s not a bad idea. Every month you receive a rent cheque. Each year your property values go up a little. We’ve all heard the stories of people retiring on the money earned from their real estate.
But for most of us, becoming a landlord is also kind of a hassle. Imagine spending your retirement chasing down rent cheques from tenants, mowing lawns, repairing leaky faucets, and fixing clogged toilets. Ugh!
You might be interested to learn about a way to collect monthly income without stepping foot on a single property. I’m talking about partnering with already established landlords through real estate investment trusts, or REITs.
As regular readers know, a REIT is a kind of real estate holding company. They own properties and pass on the profits to their investors. Thousands of people use them to collect monthly rental income without becoming a landlord.
Of course, shifting through dozens of financial statements can be a bit of a hassle for the beginner, but if this is something that might interest you, here are my three favourite REITs to get you started.
- Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX: CAR.UN), or CAP REIT, gives you all the perks of being a landlord without the hassle.
This company owns a recession-proof niche in the real estate market made up of student housing, apartment buildings, and manufactured homes. Sure, it’s nothing fancy. But these assets will continue to generate respectable income even while the rest of the economy is under pressure.
In a sense, CAP REIT is like the Wal-Mart of housing. People always need a place to live. That’s why this business produces steady profits no matter what the market is doing.
For unitholders, that has translated into dependable income. Since it started in 1998, this trust has never missed a payment to investors. Today, CAP REIT sends out a monthly cheque of $0.10 per unit, which comes out to an annual yield of 4.2%.
- H&R REIT
Many kinds of real estate have the potential to be lucrative investments. But for the best combination of safety and growth, you just can’t beat commercial property owners like H&R REIT (TSX: HR.UN).
Unlike residential buildings, commercial tenants sign very long leases for up to 15 years. Rent increases are usually baked into the contract. This makes commercial real estate a relatively predictable investment.
H&R owns more than 330 retail and industrial properties across the country. Just to highlight how stable the business is, consider that this trust maintained its distribution even through the financial crisis in 2009. That means you can sleep soundly and watch your money grow over time.
- Chartwell Retirement Residences REIT
Third up is Chartwell Retirement Residences REIT (TSX: CSH.UN). It’s a healthcare-focused business with a collection of senior living and nursing facilities.
For investors, this recession-proof niche has translated into an impressive stream of income. Chartwell has delivered an uninterrupted distribution since 2004. Today the trust pays investors $0.05 per unit each month, which comes out to an annual yield of 4.5%.
I expect this payout to continue growing. As our population ages, the demand for senior care facilities will only increase. That means Chartwell unitholders will likely be cashing distribution cheques for many years to come.
