Would you like to earn an extra $300… $400… or even $500 each and every month? It’s very possible. All you need is some initial capital and a selection of Canada’s finest Real Estate Investment Trusts (REITs).
Let me show you how to finally take control of your financial life and start generating some life-altering passive income.
A smarter way to invest in real estate
When you think of someone with a real estate empire, chances are you picture someone who owns an apartment block or two, or perhaps someone who patiently invested in more accessible multi-family housing like duplexes or fourplexes.
But there are a few problems with that approach. Rates of return have fallen, with the average landlord dependent on price increases to make a good profit on their investment. This is especially prevalent in large centres such as Toronto, Vancouver, or Montreal.
And let’s face it; being a landlord is kind of a pain. You basically buy yourself a part-time job, even with just one or two properties. First, you’ve got to show the place to prospective tenants. After that comes the move-in process and all the paperwork.
Next, the property must be maintained, with many landlords opting to save money by doing repairs themselves. Finally, the books must be maintained and an ambitious landlord should go looking for more property.
I want no part of that, and I bet you don’t either. Fortunately, there’s an easier way. Investors can buy shares in top REITs and create a true passive investment. All you need to do is do the original research and then sit back and collect those sweet rent cheques. No other work required.
A great REIT to pick
My portfolio is stuffed with Canada’s top REITs, companies I feel have good growth prospects, excellent yields today, and a safe payout.
Slate Retail REIT (TSX:SRT.UN) is one of my favourites, as it checks off all those boxes. The company owns grocery-anchored real estate in the U.S., focusing on more medium-sized cities. It does this because there are more locations to choose from when looking to expand, and it doesn’t take as much capital to buy property in Atlanta compared to New York or Los Angeles.
In total, Slate owns 79 properties spanning over 10 million square feet. The portfolio is solid, boasting top tenants like Walmart, Kroger, and Publix. Occupancy is currently flirting with 94%.
The company has further bolstered the balance sheet by selling off some non-core assets, giving it the flexibility needed to pursue additional acquisitions.
Slate has grown its distribution each year since its 2015 IPO, increasing the annual payout from US$0.76 per unit to today’s level of US$0.86 per unit. That works out to an 8.9% yield when converted back to Canadian dollars, an excellent dividend. And investors don’t need to worry about the security of the distribution either; the current payout ratio is approximately 70% of funds from operations.
Collect $500 per month
Based on current exchange rates, you’d need 5,280 Slate Retail shares to collect $500 each and every month, which works out to an investment of $68,597 excluding trading commissions or any other associated costs.
Yes, an investment of nearly $70,000 seems like a lot of money. But you’ll easily need that much to even get started buying real estate in a major Canadian city, and then you’d need to take on mountains of debt to make such a purchase possible.
Besides, that isn’t so much. It’s about what a really nice car costs.
If $68,597 is too much, then start smaller. An investment of just over $34,000 would increase your passive income by $250 per month. Or an investment of just $13,717 would increase your passive income by $100 per month.
The bottom line
Buying REITs like Slate Retail REIT has numerous advantages versus acquiring physical real estate. It’s an easier investment that really is passive. And then, once you start with this stock, you can focus your attention on another and then another. Soon, you’ll be sitting on your own mini real estate empire. That truly is the dream.
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Fool contributor Nelson Smith owns shares of SLATE RETAIL REIT and Walmart Inc.