Real estate investment trusts, or REITs, are some of the best long-term investments on the market at the moment for those investors looking to diversify their portfolios with a real estate investment without actually taking out a mortgage.
The advantages of investing in REITs are numerous: there’s the incredibly diverse portfolio of properties, sometimes amounting to hundreds of properties scattered over a large geographic area, and the incredible distributions that REITs offer to investors.
If the idea of earning a monthly income from an array of properties sounds appealing, then a REIT might be the perfect investment for your portfolio.
Here are two intriguing REIT options for investors to consider.
RioCan (TSX:REI.UN) is one of the largest REITs in the country, with a portfolio that is primarily focused on large retail properties such as shopping malls.
At first glance, this may sound like a risky option, particularly considering the ongoing shift in consumer preferences away from traditional brick-and-mortar retailers towards a mobile-first shopping experience. Fortunately, RioCan is in the midst of an impressive transformation that will see the company diversify its portfolio by adding a slew of residential/retail mixed-use properties, the first several of which are currently under construction and set to open later this year.
By shifting towards residential properties, RioCan is both offsetting any potential slowdown in the retail sector while concurrently offering what will be thousands of residential units in the major metro areas across the country, where rising home prices have effectively priced younger professionals that still want to live in the city out of the market.
It’s a brilliant move by RioCan, and the company is financing much of the construction and launch of the move into the residential sector by offloading non-core assets, raising approximately $2 billion towards the venture. Investors evaluating RioCan should take those non-core asset sales into consideration, as the short-term impact could be a decrease in revenues until the new properties are completed.
In terms of its dividend, RioCan offers an impressive monthly payout that carries a yield of 5.64%, making it a perfect addition for any long-term portfolio.
Another intriguing REIT with exposure to the residential sector is Northview Apartments (TSX:NVU.UN).
Unlike RioCan, which places an emphasis on developing properties within Canada’s major metro areas, Northview has instead opted to expand into secondary markets, such as in the north and Atlantic regions of the country. As strange as that strategy may sound, there is some logic to it.
The secondary markets that Northview targets have significantly lower upfront prices, particularly when compared to the current rates on offer in the larger metro areas across the country. Additionally, lower competition in those secondary markets translates into higher occupancy rates for the company, and there are plenty of units in those secondary markets; Northview currently owns over 27,000 units that are scattered across eight provinces and two territories.
Northview is an ideal dividend investment for nearly any portfolio, thanks to an attractive monthly distribution that carries an impressive 6% yield that is also incredibly stable thanks to a respectable payout level that averages near 75% of funds from operations.
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Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.