Lazy Landlords: 1 High-Yield Canadian REIT to Build the Perfect Passive-Income Stream

SmartCentres REIT (TSX:SRU.UN) is a great Canadian high-yield REIT for passive-income investors that are looking to become lazy landlords.

| More on:
Pixelated acronym REIT made from cubes, mosaic pattern

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Being a landlord isn’t all it’s made to be. There’s chasing tenants for the month’s rent, the pain and labour of maintenance, mortgage payments, leasing, and showings.

Being a landlord can really be a full-time job, and for prospective retirees, getting into the real estate game for a passive-income stream may not be the best course of action. Of course, you can pay someone to manage a property. But unless you’ve got a considerable amount of capital to sink into the world of residential real estate, you’re probably better off with one of the many cheap REITs that can help you build your own mini real estate empire.

And best of all, you can stash top REITs in your TFSA (Tax-Free Savings Account) and keep every dime of the distributions you’ll get.

Moreover, you’ll have some of the experienced, more efficient property managers to give you the best bang for your buck. And finally, you’ll also be able to invest in income-producing properties beyond just residential. With a relatively small investment, you can spread your bets across a broad range of real estate sub-industries to further diversify your passive-income stream. Think battered office and retail real estate, two of the cheaper places to be in the REIT space amid the COVID-19 pandemic.

Be a lazy landlord with top passive-income REITs

So, unless you’ve got millions in capital that you’re willing to invest into a single real estate sub-industry and can deal with the pains that come with the day-to-day operation of an income-producing property, consider the following Canadian REIT while it’s still near bargain-basement prices.

SmartCentres REIT (TSX:SRU.UN) is one of my favourite plays in the REIT space these days. After enduring a brutal 2020, the REIT sport yields of 6.4%.

SmartCentres REIT: Passive income and value meets momentum

SmartCentres REIT is a strip mall-focused play that’s fallen drastically out of favour during the first COVID wave. Shares have since come roaring back, surging 67% from its March 2020 bottom to $29 and change, where shares currently sit today.

While the distribution isn’t nearly as bountiful as it was just a few months ago (the yield has compressed as a result of recent appreciation in the stock), I still think the name is cheap, given the more prosperous environment that lies ahead and the yield, and it is well covered by funds from operations.

While a reopening has mostly been baked in, I think that longer-term passive-income investors will enjoy a potential re-valuation to the upside over the next five years, as Smart diversifies its property book into residential. If Smart can strike the perfect balance between retail and residential, its quality of cash flows could warrant a major solid rally that could be sustained well into the post-COVID world.

Foolish bottom line

Smart isn’t just a reopening play; it has so much more going for it over the next decade. With rent collection rates en route to normalization, I think it would be a wise idea for lazy landlords to punch their ticket into the name now before value and high yielders are bid up ahead of a potential inflation surge.

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 Joey Frenette owns shares of Smart REIT. The Motley Fool recommends Smart REIT.

More on Dividend Stocks

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Parents: Here’s Every Credit and Benefit You Can Claim From the CRA

Parents have it hard already, so make sure the CRA is doing everything for you by dishing out payments you're…

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

3 Canadian Dividend Stocks to Buy and Hold for Life

These dividend-paying stocks have solid earnings base to support their payouts for decades.

Read more »

A golden egg in a nest
Dividend Stocks

Create a Million-Dollar TFSA With Just $1,000

If you have a TFSA, you can easily make a million-dollar portfolio by investing on a consistent basis in this…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

3 Canadian Stocks With Over 6% of Dividend Yield

Boost your passive income with three safe dividend stocks.

Read more »

TFSA and coins
Dividend Stocks

TFSA Pension: 2 TSX Dividend Stocks to Buy Now and Hold for Decades

These top TSX stocks pay great dividends and look cheap to buy right now for a TFSA retirement fund.

Read more »

Dividend Stocks

TFSA Dividend Income: 2 TSX Stocks to Buy on the Pullback

These TSX stocks look oversold and pay attractive dividends that continue to grow.

Read more »

oil tank at night
Dividend Stocks

1 Top TSX Energy Stocks for Summer 2022

TSX energy stocks have tanked recently, but they could enjoy a nice summer rally. Here's one top stock I'm eyeing…

Read more »

Dividend Stocks

Market Correction: 2 Cheap TSX Dividend Stocks to Buy Now for a Self-Directed RRSP

These top TSX dividend stocks look cheap right now for a self-directed RRSP focused on total returns.

Read more »