3 REITs to Buy to Easily Invest in Canadian Real Estate

REITs offer an easy, affordable, and, in some cases, more profitable approach to investing in Canadian real estate.

| More on:
edit Real Estate Investment Trust REIT on double exsposure business background.

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

The allure of land and gold has been around since the early days of humanity. It has dulled over the last few decades, thanks to more enticing commodities. Still, when we think about investing in something tangible and safe, real estate and gold are among the first few options that come to mind.

The main problem when it comes to investing in real estate is the cost barrier. You might consider saving enough money to buy real estate (or at least for a down payment), but then the cost of wasted time would be too much.

If you have decided to invest in real estate but don’t have the right amount of capital, REITs offer an affordable and significantly more passive way to investing in this particular asset class.

An apartment REIT

The Nova-Scotia-based Killam Apartment REIT (TSX:KMP.UN) is one of Canada’s largest residential landlords. It has a portfolio of 210 apartment properties (with a total of 17,377 residential units) and 250 commercial properties, and 39 manufactured home communities worth $3.8 billion in total. The breadwinner segment is the apartments, which make up 91% of the total revenue.

The portfolio is geographically concentrated in Nova Scotia (39%), Ontario (21%), and New Brunswick (21%). Killam has been steadily growing the size of its portfolio and its FFO per unit. The occupancy rate of 96.6% is impressive, and the revenues for every quarter have been in green for the past three years. With Killam, you get access to a decent 3.5% yield and steady capital-appreciation potential.

A high-yield REIT

Automotive Properties REIT (TSX:APR.UN) is relatively new. It was founded in 2015 and focused on a relative niche asset class: automotive dealerships. The REIT identified it as a stable asset class for long-term growth and consistent income. The REIT’s portfolio consists of 66 income-producing properties that cover a total of over 200 acres of commercial land in urban areas.

Ever since its inception, the best growth phase the stock went through was the last 12 months, when it grew about 46.25%. But this recovery-fueled growth shouldn’t be taken as an endorsement of this REIT’s capital-appreciation potential. In any case, the most attractive feature of this stock is its 6.3% yield backed by a stable payout ratio of 82.7%.

A venture-capital REIT

Fronsac (TSXV:FRO.UN) is a small-cap REIT (market capitalization: $134.4 million) with decent growth potential and a considerable yield of 3.9%. It has grown about 670% in the last decade and has a 10-year CAGR of 26.5%. And despite its epic growth run, the stock isn’t as aggressively overvalued as other growth stocks with track records like Foransac’s tend to be.

The REIT has 79 properties in its portfolio. About half the NOI comes from five major tenants, including Sobeys and Walmart, and 82% of its tenants have a national presence. The company has been growing its rental income quite steadily and has a strong financial standing. More importantly, it still has a lot of room to grow and can be a powerful addition to the growth side of your portfolio.

Foolish takeaway

The three REITs above can give you exposure to different real estate market segments:  multifamily residential properties, automotive properties, and retail. Almost all offer stable dividends, and none slashed their dividends in 2020.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AUTOMOTIVE PROPERTIES REIT. The Motley Fool owns shares of Killam Apartment REIT. The Motley Fool recommends Fronsac Real Estate Investment Trust.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy Now and Own for 25 Years

These top TSX dividend stocks look oversold and now offer attractive yields for TFSA and RRSP investors.

Read more »

Profit dial turned up to maximum
Dividend Stocks

RRSP Investors: 2 Undervalued TSX Stocks to Buy Now for Total Returns

Top TSX dividend stocks are now on sale for RRSP investors seeking attractive total returns.

Read more »

TFSA and coins
Dividend Stocks

2 Beaten-Down Stocks to Buy for Your TFSA

Two beaten-down, but high-yield TSX stocks are profitable options for TFSA investors.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Inflation Soars to 7.7%: 1 Dividend Stock to Buy Now

Enbridge (TSX:ENB)(NYSE:ENB) stock looks like a magnificent dividend stock to help Canadians deal with inflation at 7.7%.

Read more »

Dividend Stocks

RRSP Investors: 2 Oversold Dividend Stocks to Buy Now for Total Returns

These great Canadian dividend stocks look cheap today for an RRSP focused on total returns.

Read more »

Volatile market, stock volatility
Dividend Stocks

2 Dividend Stocks to Own When the Market Is in Turmoil

Two TSX stocks can sustain dividend payments, even if the present market turmoil extends longer than expected.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Passive-Income Stocks to Help You Through This Market Correction

These three passive-income stocks offer stellar dividends around 6% to help get you to the other side of this market…

Read more »

Coworkers standing near a wall
Bank Stocks

Policy Rate: 2 More Hikes After July 2022 to Reach Neutral Level

The Bank of Canada might need three more rate hikes beginning in July 2022 to reach neutral levels.

Read more »