Investing in real estate has long been regarded as one of the best ways to grow your wealth in the long run. Canadians who bought houses a couple of decades ago have seen the value of their investments grow several times over due to skyrocketing home prices throughout the country.
Unfortunately, becoming a real estate investor is not accessible to everyone — at least not with the traditional approach of buying an investment property. Purchasing a home and renting it out to tenants allows you to create a passive-income stream that pays out each month.
Still, does a rental property really count as a passive revenue source? Between marketing for your listing, dealing with tenants, rent collection, various taxes, and maintenance costs, owning rental property requires a lot from landlords. You could always hire a property manager to handle all those tasks, but it would eat into your monthly returns.
All of these things become factors to consider, provided that you have the upfront capital to tie down in an investment property, to begin with. Fortunately, there are alternatives to buying a house to generate monthly income — with the added advantage of not facing the hassles of being a landlord.
Investing in REITs
Real estate investment trusts (REITs) are companies that own, develop, and manage portfolios of real estate properties. Publicly traded on stock exchanges, stock market investors can purchase REIT units to earn a share of the rental income generated by REITs through their portfolios. REITs effectively give you the best of real estate and stock market investment.
Owning shares of a REIT means you get to generate rental-like monthly income but without worrying about managing the affairs of the properties yourself. Instead, you rely on the trust to handle your investment capital and provide you with monthly distributions.
It is crucial to find and invest in REITs that have the potential to generate revenues undisrupted by macroeconomic factors to give you a reliable revenue stream. NorthWest Healthcare Properties REIT (TSX:NWH.UN) is one such trust you could consider for this purpose.
NorthWest Healthcare REIT is a $2.97 billion market capitalization trust that offers investors access to a portfolio of high-quality real estate focused on the healthcare sector.
The company offers you exposure to a geographically diversified portfolio of various healthcare properties in Canada, Australia, Brazil, and Germany. Most of its portfolio is in regions where the healthcare industry is funded by governments, virtually guaranteeing stable revenues.
NWH.UN has also started expanding to the U.S., where the healthcare industry is paid for by the government or major insurance companies. It is safe to say that the trust’s tenants have the means to pay rent.
Stability is one of the biggest factors that make NWH.UN a strong buy for rental-like income-seeking investors. Additionally, the company consistently puts up strong financial performances quarter after quarter. Its recent-most quarter saw its operating income increase by 10% — a 69% bump in its net income, and an uptick of 24% in its adjusted funds from operations.
NorthWest Healthcare Properties REIT trades for $12.43 per unit at writing and boasts a juicy 6.31% forward dividend yield. It is among the highest dividend yields you can find on the TSX today without worrying about the company’s ability to deliver the monthly distributions. It could be a worthwhile addition to your investment portfolio.