How to Retire as a Passive Landlord in This Market Crash

The market crash allows investors to buy high-yield REITs at super attractive valuations. Become a passive landlord to enjoy their cash flows perpetually.

| More on:
Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House

Image source: Getty Images

This stock market crash provides the opportunity for anyone to retire early (or get much closer to retirement).

One way to retire is to generate substantial income from real estate assets. You can get income from rental properties, but it’s even better if you’re a passive landlord.

That’s right! You can collect rental income from real estate properties without lifting a finger. Thanks to this bear market, investors can boost their passive-income stream significantly by getting high yields from real estate investment trusts (REITs).

Here are some REITs you can consider to build your passive real estate empire.

Market crash provides high yield in this healthcare REIT

Thanks to this bear market, you can lock in juicy yields from solid healthcare REITs like Chartwell Retirement Residences (TSX:CSH.UN).

As an owner and operator of seniors housing communities, from independent supportive living to assisted living to long-term care, Chartwell’s cash flow should be somewhat resilient in this economic downturn.

Chartwell stock has normally traded close to a multiple of 15.5. The market crash has dragged the shares down significantly. It could be due to news that certain senior homes in Canada have coronavirus outbreaks.

Chartwell is doing everything in its power to reduce the risks posed by the coronavirus. In a press release on March 18, Chartwell’s CEO stated, “[S]o far in 2020, we had fewer homes with flu outbreaks than in the same period of 2019.”

At $8.38 per share at writing, the defensive healthcare REIT trades at a discounted multiple of nine, which is about 42% cheaper than normal.

As a result, Chartwell yields 7.3%. Its payout ratio is about 65% in a normal market.

Chartwell’s high yield and attractive valuation should allow investors to generate extraordinary total returns over the next few years.

Market crash: Get a high yield from this retail REIT

The market crash provides a rare opportunity for investors to get a 10.5% yield from SmartCentres REIT (TSX:SRU.UN).

SmartCentres’s 157 properties are largely anchored by a grocery or a pharmacy (e.g., Walmart or Loblaw’s subsidiaries, like Shoppers Drug Mart), which are essential services that will remain open through the coronavirus crisis. Therefore, the retail REIT’s cash flow should be relatively resilient in this economic downturn.

Before the coronavirus hit, it has been maintaining an industry-leading average occupancy of 98%. The virus has dragged the stock to absurdly low valuations.

At $17.52 per share at writing, the retail REIT trades at a discounted multiple of about 7.6. The stock trades at a discount of about 46% from its normal valuation. This boosted its yield to 10.5%. SmartCentres’s payout ratio is about 78% in a normal market.

In late March, SmartCentres REIT renewed its normal course issuer bid, which allows it to buy back up to 5% of its outstanding units. This suggests that the income stock is super cheap!

The Foolish bottom line

There are few businesses that won’t be affected by the coronavirus-triggered downturn. Even though Chartwell and SmartCentres are relatively defensive REITs, their cash distributions may still be suspended temporarily.

However, investors need to focus on their cheap valuations and future cash flow potential. Eventually, this gloomy time will come to pass, and you’ll have locked in your ownership of juicy yields of future cash flows.

Currently, the stocks offer high yields of about 7-10%. So, you can get an average yield of about 8.9% in a normal market. That equates to annual passive income of $26,700 on a $300,000 investment!

You can potentially retire as a passive landlord from this market crash in a few years by selective buying REIT shares and staking claim to future cash flows of quality REITs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any of the stocks mentioned.

More on Dividend Stocks

Dividend Stocks

3 Dividend Stocks I’d Buy and Never Sell

Canadian National Railway (TSX:CNR)(NYSE:CNI) has many things going for it — the least of which is its history as an …

Read more »

Piggy bank next to a financial report
Dividend Stocks

TFSA Pension: 2 Top Stocks to Buy in a Self-Directed Retirement Fund

Canadian savers are using the TFSA to create their own retirement plan. Younger investors are building savings, while retirees are …

Read more »

Canadian Dollars
Dividend Stocks

Got $300? The 3 Best Passive-Income Stocks to Buy Now

A small but regular investment in top-quality dividend stocks could help you create a portfolio that will offer solid passive …

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

Top Stocks for Passive Income: How to Earn $366.75 Per Month Tax Free

Canadian pensioners and other investors focused on passive income have an opportunity to use their TFSA to hold top TSX …

Read more »

Payday ringed on a calendar
Dividend Stocks

2 Ways to Make $679 a Month in Passive Income

Passive income is defined as cash flow that’s enough to cover basic living expenses and is generated without any work. …

Read more »

Cogs turning against each other
Dividend Stocks

Boost Your Passive Income With These 3 Safe Dividend Stocks

With the inflation in the United States reaching a multi-decade high, Jerome Powell, the chairman of the Federal Reserve, has …

Read more »

money cash dividends
Dividend Stocks

3 Cheap Dividend Stocks That You Can Buy Under $30

The ongoing selloff provides long-term investors a chance to buy quality stocks at a lower price. Investors have seen a …

Read more »

Glass piggy bank
Dividend Stocks

RRSP Growth: 2 Top TSX Dividend Stocks to Own for Decades

The market pullback is giving RRSP investors a chance to buy some of Canada’s top dividend-growth stocks at reasonable prices. …

Read more »