Recession or Not, These 2 Real Estate Stocks Are Already Ultra-Cheap

Although there’s a potential recession on the horizon, these two real estate stocks are highly reliable in addition to trading ultra-cheap.

| More on:
A worker overlooks an oil refinery plant.

Source: Getty Images

There’s no question that if you want to buy stocks that you can rely on today and earn passive income from, ultra-cheap real estate stocks are some of the best to buy now.

All year long, stocks in basically every industry have been selling off, as they face significant headwinds.

Inflation is impacting businesses’ costs and expenses, and, in many cases, it’s also impacting revenue, as consumers now have less buying power.

Interest rates need to rise to help combat inflation, but they are also making it more difficult for companies to do business — especially companies with significant debt. And, of course, rising interest rates can also impact consumers’ ability or willingness to spend.

These two headwinds, of course, are leading to worries of a recession materializing next year, which is also weighing on stocks quite significantly. Therefore, it should be no surprise that we’ve seen massive selloffs this year for the first time since the start of the pandemic.

The risk and uncertainty are certainly high today. However, with that being said, many stocks, especially some of the safer and more reliable stocks that have sold off significantly, are now undervalued.

So, if you’re looking for high-quality stocks that you can buy and have confidence holding through this uncertain environment, here are two of the best real estate stocks to consider while they’re so cheap.

One of the best real estate stocks to buy and hold for the long haul

Residential real estate is always an excellent industry to invest in due to how resilient and reliable it is. So, after the largest residential REIT in Canada, Canadian Apartment Properties REIT (TSX:CAR.UN), has sold off by roughly 25%, it’s offering great value and is one of the best stocks to buy now.

First off, it’s well diversified across the country. Its balance sheet is in excellent shape, and its debt is certainly manageable. It is facing some headwinds and margin compression, as costs rise due to inflation. However, CAPREIT is also an incredibly reliable stock that has proven through past recessions and stock market pullbacks that it can continue to earn strong cash flow for investors.

In fact, through the last major recession in 2008 and 2009, CAPREIT actually saw an increase in both its occupancy and its funds from operations (FFO) per unit.

So, with CAPREIT now trading with one of its lowest forward price-to-FFO ratios it’s had since the start of the pandemic, and at just 0.8 times its estimated net asset value (NAV), it’s certainly one of the top real estate stocks to consider in this environment.

A top growth stock that offers investors a significant opportunity

In addition to CAPREIT, Granite REIT (TSX:GRT.UN) is another one of the best real estate stocks to consider while it trades off its highs.

Granite is a massive REIT that owns industrial properties in North America and Europe. It, too, has an excellent balance sheet, its occupancy rate is consistently in the high 90s, and over the last few years, it and the rest of the industrial real estate industry has seen major tailwinds, as demand for industrial properties rapidly increases.

So, even with a potential recession on the horizon, Granite’s business is so robust, and the fundamentals in industrial real estate are so strong that it actually has the potential to continue growing.

Plus, it offers an even more significant discount than CAPREIT, and its yield is attractive as well. After selling off by more than 26% from its high, Granite now offers a yield of roughly 4% and trades at just 0.84 times its estimated NAV, which is well below where it was at the start of the year when it was trading at 1.2 times its estimated NAV.

Therefore, whether or not a recession materializes next year, if you’re looking for high-quality real estate stocks you can buy and hold for the long haul, Granite is undoubtedly one of the best to buy now.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends GRANITE REAL ESTATE INVESTMENT TRUST.

More on Investing

Beware of bad investing advice.
Investing

2 No-Brainer Growth Stocks to Buy Right Now for Less Than $500

These no-brainer growth stocks have solid fundamentals and are likely to deliver above-average returns in the long term.

Read more »

oil pump jack under night sky
Energy Stocks

1 Energy ETF to Buy With $1,000 and Hold Forever

This Hamilton energy ETF is diversified across North America and pays a 10% yield.

Read more »

bulb idea thinking
Investing

The Smartest Growth Stocks to Buy With $1,000 Right Now

Here are two stocks to buy with $1,000 right now.

Read more »

Canadian dollars are printed
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $15,000

If you have a windfall of $15,000, putting it in a TFSA is a great start. But investing it in…

Read more »

protect, safe, trust
Stocks for Beginners

2 Safe Canadian Stocks for Cautious Investors

Without taking unnecessary risks, cautious investors in Canada can still build a resilient portfolio by focusing on safe stocks like…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, December 12

TSX investors will watch U.S. wholesale inflation data today as the Bank of Canada’s recent rate cut is likely to…

Read more »

ETF stands for Exchange Traded Fund
Investing

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Both of these Hamilton ETFs sport double-digit yields with monthly payouts.

Read more »

engineer at wind farm
Energy Stocks

1 Canadian Utility Stock to Buy for Big Total Returns

Let's dive into why Fortis (TSX:FTS) remains a top utility stock long-term investors may want to consider right now.

Read more »