The Real Estate Secret Your Portfolio Needs

Are you looking for the best real estate secret to counter market volatility? Here’s a stock to consider for long-term, lower-risk growth.

| More on:
a person looks out a window into a cityscape

Image source: Getty Images

The white-hot real estate market remains an issue for many would-be landlords. Fortunately, there’s an option for investors that doesn’t involve taking out a massive mortgage and hunting for tenants. That option is a real estate secret that your portfolio really needs right now.

The problem

The best way to describe the current real estate market is by calling it a tug-of-war. Sellers want to get the best (or highest) price possible, which has no limit. Buyers, however, such as would-be rental landlords, are limited by how much they can pay.

The result is an endless tug-of-war, with external factors, such as rising interest rates, only having a partial effect, if any, that will trickle down to the bottom line of homebuyers. To put it another way, a drop in home prices is offset by an increase in interest rates.

At the end of the day, the core issue (affordability) is not being solved, and that’s pricing would-be rental landlords out of the market entirely.

The solution

For a real estate solution, landlords should look at RioCan Real Estate (TSX:REI.UN). RioCan is one of the largest real estate investment trusts (REITs) in Canada, with over 230 properties, mainly situated in Canada’s metro areas.

Those properties are mainly commercial retail, but that mix is changing. RioCan has added mixed-use residential units into the mix recently. Those units comprise residential units sitting above several floors of retail. The properties are situated in transit corridors within major metro areas, where demand is high.

RioCan offers several major advantages to would-be landlords.

First, that initial investment is broken out over potentially hundreds of properties and units, not one. With a rental unit, if a tenant leaves, the revenue stream is dried up until a new tenant is found, vetted, and begins to pay rent.

Second, the management of the rental unit is taken care of. There is no need to chase down tenants, acquire deposits, and do repairs on the unit.

Third, the cost of entry is significantly lower. With the average price of a home still well above $1 million, few landlords will have $200,000 or more for a down payment. Contrast that with the share price of RioCan, which is just above $20.

Finally, there’s your income. Instead of monthly rent, investors in RioCan receive a monthly distribution. The yield on that distribution works out to a juicy 4.93%. This means that a $60,000 investment in RioCan (still far below a traditional down payment), will earn just shy of $250 per month.

Even better: long-term investors can opt to buy RioCan as part of a TFSA and reinvest that income until needed. Oh, and speaking of tax free, let’s not forget one final advantage: no property taxes! That’s a real estate secret that all would-be rental investors should know!

Final thoughts: The real estate secret

No stock is without risk. Fortunately, in the case of RioCan, that risk is lower than taking out a mortgage on a single property.

In my opinion, a small position in RioCan should be part of every well-diversified long-term portfolio.

Buy it, hold it, and watch it grow.

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 Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

Technology
Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »