2 REITs to Buy to Collect Easy Rent Money

REITs can be a significantly more hands-off and often very profitable alternative to becoming a landlord for a passive-income source.

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

Image source: Getty Images

The allure of owning real estate, a piece of land to call your own, has been practically ingrained in our DNA. But as an investor, you should never let the instinct and an inherent love for real estate cloud your judgment, even if you do have enough capital to buy a property outright.

For most investors, buying a rental property directly is not an option. Most investors pay off part of the property and use the rental income (and some of their capital) every month to pay off the mortgage. In these deals, the properties don’t offer positive cash flow for several years (usually over a decade). And it makes sense if real estate (and the capital-appreciation potential it offers) is your primary goal.

But if you wish to invest in real estate for passive/rental income, REITs can offer you a great way to start earning immediately. They also don’t pose as significant a cost barrier to investing as actual real estate does.

And for easy rent money, there are two REITs that you should consider.

An automotive properties REIT

Automotive Properties REIT (TSX:APR.UN) signifies another benefit of earning rental income through REITs instead of an apartment or a commercial property. And it’s that it allows you to invest in asset classes you may not have exposure to otherwise. This REIT gives you the option to invest in some of the most strategically positioned car dealerships in the country.

It also benefits from its partnership with 32 global automotive brands and a comprehensive mixture of regular and luxury vehicles. From a rental income/dividend income perspective, the most important feature of the REIT for you would most likely be the juicy 6.2% yield. If you can invest about $100,000 in the company, you can get a monthly rental income of $516.

A commercial REIT

Another commercial REIT you might consider for generous and relatively reliable payouts is True North Commercial (TSX:TNT.UN). It has a diverse portfolio of 45 properties spread out over five provinces (though mostly concentrated in Ontario). The REIT also focuses on its tenant profile, and for most of its properties, the lead tenants at least are reliable names that are unlikely to default on their rents.

The REIT’s ability to sustain its dividends was tested in 2020, and the payout ratios saw a significant rise from 2019, and the REIT came through. It maintained its dividends and is still sticking to the $0.0495 per share payout. And since the stock has yet to reach its pre-pandemic valuation, this translates to a mouthwatering yield of 8%. At $100,000, this promises you a monthly rental income of about $666.

Foolish takeaway

REITs have a dominant place among dividend stocks, thanks to their high dividends. But these two REITs offer more than just that. They offer healthy dividend sustainability potential as well as exposure to specialty asset classes (at least Automotive Properties does). And thanks to their generous yields, they also offer an enviable dividend income.

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.

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

Got $3,000? 3 TSX Growth Stocks to Buy in January 2023

Top TSX growth stocks that look appealing for 2023.

Read more »

woman data analyze
Dividend Stocks

Need Passive Income? Turn $15,000 Into $851 Annually

This passive-income stock is already climbing higher, up 16% in the last three months! Yet it's still valuable, so you…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: 3 Reliable Canadian Dividend Stocks to Buy Now for Passive Income

Top TSX dividend stocks now appear oversold.

Read more »

Dividend Stocks

For $100 in Passive Income Each Month, Buy 1,500 Shares of This REIT

REITs such as Northwest Healthcare can enable investors create a passive-income stream as well as benefit from capital gains.

Read more »

A colourful firework display
Dividend Stocks

2 Canadian Growth Stocks (With Dividends) to Start 2023 With a Bang

Here are two of the best dividend-paying Canadian growth stocks you can invest in at the start of 2023 and…

Read more »

sale discount best price
Dividend Stocks

4 Insanely Cheap Canadian Stocks to Buy for Passive Income

The recent bear market has created some incredible bargains, especially for those looking for passive income. Here are four cheap…

Read more »

A bull outlined against a field
Dividend Stocks

3 Cheap Stocks I’d Buy Before the Bull Market Arrives

Undervalued TSX stocks such as Savaria and Well Health can help investors generate market-beating gains when markets recover.

Read more »

Increasing yield
Dividend Stocks

5 Canadian Dividend Stocks With Yields of 4% or More

If you want dividends that yield over 4%, you don't have to look far. Here are five large-cap Canadian stocks…

Read more »