Lazy Landlords: Build a “Mini Real Estate Empire” With These 3 REITs

If you’re concerned about falling house prices in major metro areas, REITs like Slate Office REIT (TSX:SOT.UN) can be a better option.

Andrew Button

Author Bio

Andrew “A.J.” Button is a financial writer with a longstanding interest in value investing and international markets. He began investing at a young age, building a portfolio of dividend stocks to help pay for university. After stepping away from investing for a time, he rediscovered his passion in 2019 when he began working as a freelance financial writer. Since then, Andrew has built a diversified investment approach spanning Canadian, U.S., and international equities, as well as guaranteed investment certificates (GICs) and money market funds. He is particularly interested in international stocks, drawn to their dividend potential and long-term growth opportunities, while maintaining an interest in Canadian businesses. Before joining The Motley Fool, Andrew worked as a freelance copywriter specializing in financial services. He continues to write for financial publications and share his thoughts on stocks through social media.

Education and Professional Credentials

Canadian Securities Course (CSC)
CFA Program Level I examination completed

Areas of Expertise

Value investing, Canadian equities, U.S. stocks, international equities, dividend investing, long-term investing, GICs, money market funds, and portfolio diversification.

Social Media Profiles

Published May 30, 2019 8:00 am EDT

Investing in real estate can be tough. Between collecting rent, doing repairs, and handling tenant complaints, it’s one of the most labour-intensive investments out there. Sure, you could hire a property management firm to do the maintenance work for you. But unless you have an enormous number of properties, the fees will absolutely kill your margins.

So, if you want to invest in real estate but don’t have the time for a second job (or the money to hire a manager), what should you do?

You should buy REITs. REITs are special companies that own and manage properties on behalf of investors. Trading on the stock market, they can be bought and sold easily, bypassing the usual barriers to real estate investments. They also typically have high dividend yields, which makes them attractive to many income-oriented investors.

There’s just one catch: when investing in REITs, you have to be careful. Like any real estate investment, REITs are subject to rising and falling real estate prices, but unlike direct property investments, their earnings are impacted by management, staff, and administrative fees. So, when investing in REITs, it pays to pick carefully. With that in mind, the following are three REITs that may be better than the class average.

Slate Office REIT

Slate Office REIT (TSX:SOT.UN) is a REIT that focuses on downtown office buildings of the type that are usually rented to professional service companies. As such, it’s not exposed to housing or strip malls — two of the weakest real estate niches at the moment. Slate Office pays a dividend of $0.033 per month, which works out to about a 6.5% annualized yield. Although this company cut its distribution recently, the current payout appears safe based on recent earnings figures.

RioCan REIT

RioCan Real Estate Investment Trust (TSX: REI.UN) is a REIT that focuses on commercial, office, and residential real estate. This particular REIT is working on some high-profile “trophy” projects, including The Well and the Yonge-Sheppard Centre in Toronto.

In its most recent quarter, RioCan’s revenue was $324 million, up from $290 million in the same quarter a year before; and its net income was $194 million, up from $137 million in the same quarter a year before. The stock pays a dividend that yields about 5.4% at current prices.

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (TSX:NWH.UN) invests in healthcare office space and hospitals. With a 98% occupancy rate on its international properties, it’s one of the most reliable real estate firms around. NorthWest Healthcare is notable for its financial stability, which is no doubt due to the fact that most of its tenants are major medical organizations.

It posted solid revenue and FFO growth in its most recent quarter and pays a dividend that yields about 6.69%. If you’re looking for a stable REIT in an unconventional and highly lucrative area of real estate, this would be a solid pick.