TFSA Investors: Buy the Safest Residential Real Estate Stock in North America

InterRent Real Estate Investment Trust (TSX:IIP.UN) focuses on making opportunistic portfolio purchases. This strategy is likely to serve it well.

| More on:

InterRent Real Estate Investment Trust (TSX:IIP.UN) is a growth-oriented real estate investment trust engaged in increasing shareholder value through the acquisition, ownership, management, and repositioning of strategically located, income-producing, multi-residential properties. The company’s primary objectives are to grow the net asset value through investments in a diversified portfolio of multi-residential properties and to provide owners with sustainable and growing monthly cash distributions.

Stable portfolio

The company’s portfolio comprises of about 85 properties and 10,000 suites. Approximately 15% of the suites in the portfolio are located in mid-sized population markets, while the remaining suites are located in the Greater Toronto Area (GTA) and Montreal. Management invest heavily within the existing assets to create a strong and reputable portfolio of assets. The company refinances the portfolio of properties as necessary to provide sufficient capital to continue to invest in the existing portfolio as well as acquire new properties.

Solid core strategy

The company’s strategy has evolved to primarily target larger properties that require some level of re-positioning that allows InterRent to achieve above average returns. The company has a formal set of acquisition criteria, including an extensive due diligence procedure for selecting potential acquisitions that are undertaken by an experienced management team. InterRent seeks properties with sound structural and mechanical attributes but that have, in the past, demonstrated poor performance due to lack of capital investment, a lack of management expertise, or owner neglect.

The company uses a geographically opportunistic growth strategy and participates in markets where opportunities exist to acquire properties inexpensively. The company purchases buildings that have a sufficient number of apartment suites in newly formed communities to ensure that it maintains economic viability through economies of scale.

Opportunistic purchases

InterRent’s focus is to make opportunistic portfolio purchases, but it also selectively acquires individual properties that meet its acquisition criteria. Management has developed a network of real estate contacts across Ontario and Quebec, which help executives to source properties directly from vendors and to move quickly to acquire accretive properties. This network has allowed the company to purchase properties directly from vendors or through invited tenders, as opposed to fully marketed auctions.

Favourable outlook

The company believes that multi-residential real estate is a favourable asset class to operate within, because it offers stability of cash flow and an opportunity for expansion. This strategy has worked out well as multi-residential asset class has historically been able to withstand downturns in overall real estate markets when higher interest rates increase the cost of home ownership and reduce vacancies as quality shelter remains of high importance for most tenants.

The fragmented nature of multi-residential property ownership presents an opportunity for the company to consolidate ownership. Several residential owners of properties in close proximity to the company’s properties are reaching retirement age and could look for exit point by selling land to the company. InterRent also engages in the construction or development of real property to improve the income-producing potential of properties in which the company has an equity interest.

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 Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing

how to save money
Dividend Stocks

The 1 TSX Stock I’d Buy for Monthly Income as Interest Rates Stay Higher for Longer

This dividend stock could be a huge winner in 2025, even as interest rates freeze.

Read more »

grow money, wealth build
Dividend Stocks

A 36.6% Discount: A High-Yield Dividend Opportunity

A top-tier infrastructure stock is a high-yield dividend opportunity at its current price.

Read more »

ETF chart stocks
Investing

Invest $10,000 in This ‘Growthy’ Dividend ETF for Passive Income

This Vanguard dividend ETF pays a decent yield and has good historical share price growth.

Read more »

gas station, convenience store, gas pumps
Stocks for Beginners

2 Automotive Stocks to Buy and Hold for Transportation Transformation

Automotive stocks are looking a bit tough right now, but these two remain strong options.

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

How I’d Allocate $1,000 in Energy Stocks in Today’s Market

Discover why energy stocks are crucial for Canadian investors as the election approaches amidst tariff challenges.

Read more »

dividend growth for passive income
Investing

TFSA Investing: Strategies to Maximize Tax-Free Growth and Returns in 2025

This strategy makes sense in the current economic environment.

Read more »

Canada day banner background design of flag
Stocks for Beginners

Where I’d Invest $7,000 in the Best Canadian Stocks Right Now for Long-Term Growth

Wondering how to invest your $7,000 TFSA contribution in 2025? These Canadian stocks could be solid long-term winners.

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

Retirees: 2 TSX Dividend Stocks for Passive Income

These stocks pay solid dividends with high yields.

Read more »