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Passive Landlords: It’s Time to Buy This High-Quality REIT

If you’re a long-term income investor looking to give yourself a raise, then you may want to consider high-quality REITs. I’m a huge fan of residential REITs because you get to be a passive landlord that gets to collect rent payments. But unlike being an actual landlord, you don’t have to deal with the pains of building maintenance or complaints of tenants.

Sure, interest rates are set to rise over the next few years, but that doesn’t mean you should scratch REITs off your watchlist. If you’ve got a long-term investment horizon, then you can still do very well by holding high-quality REITs, which will provide a reliable stream of income that you can rely on.

Killam Apartment REIT (TSX:KMP.UN) is a stable REIT that currently offers investors a generous 4.93% yield and the comfort of not being exposed to frothy hotspots in an overheated Canadian housing market. Most of Killam REIT’s earnings come from the Maritimes, which I believe is a safe and stable market that is insulated from the risky hotspots that may be on the brink of collapse.

Killam owns over $1.9 billion worth of real estate assets with over 13,900 apartment units and more than 5,165 manufactured home communities (MHCs). Although Killam’s primary market is the Atlantic coast, the company is making the effort to diversify its portfolio of properties by expanding to new markets such as Ontario and Alberta. There’s no question that Alberta is going through a tough time right now, but this won’t last forever. Killam knows the risks involved, and I’m confident that the management team won’t make a deal unless it will provide long-term value to shareholders.

The management team at Killam is firing on all cylinders, and I believe its growth initiatives will result in distribution increases in the years ahead. The company is growing through accretive acquisitions as well as through the development of properties in its core market.

There are approximately $59 million in development projects that will keep the company busy until 2018. These developments are going to add over 1,200 units to the company’s already impressive portfolio of real estate assets.

Killam is a play on stability, growth, income, and value. The stock currently has a 1.1 price-to-book multiple. I think it’s a steal if you’re a cautious income investor looking for a great entry point on a REIT that you can buy and hold for many years.

Stay smart. Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette has no position in any stocks mentioned.

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