Throughout 2022, as stocks have continued to sell off, there continue to be many opportunities for Canadian investors.
It’s not just the stock market that offers the opportunity to buy stocks cheaply. In fact, many are hopeful and expecting the housing market to sell off, creating the opportunity to buy rental properties at a discount over the next few years.
However, whether you’re looking to invest in the stock market or want exposure to one of the best long-term industries there is (residential real estate), one of the best investments to buy now is Canadian Apartment Properties REIT (TSX: CAR.UN). Here are five reasons why.
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CAR.UN stock offers incredible diversification
All real estate investment trusts (REITs) offer excellent diversification, which is one of the many benefits of buying these investments over a rental property. However, because CAR.UN stock is the largest REIT in Canada, with over 65,000 sites and suites across the country, it offers incredible diversification, making it one of the top Canadian REITs to buy today.
Its portfolio consists of apartments and manufactured housing communities across Canada. It even has some slight exposure to Europe.
This diversification helps to reduce risk massively. And compared to owning a rental property, you don’t have to worry about the turnover between tenants or even finding renters in the first place. In fact, for the last two decades, CAR.UN stock has had a consolidated occupancy rate of at least 95% every quarter.
The stock offers a growing distribution
Many investors interested in owning a rental property are likely doing so for the passive income it can provide. However, CAR.UN stock not only returns investors passive income, but it’s also consistently increasing its distribution.
The REIT is highly defensive and, therefore, a reliable investment, making it ideal for passive income. In addition, it’s constantly receiving tonnes of cash and is continually expanding its operations.
It’s no surprise that CAR.UN stock has increased its distribution for 10 years straight. Furthermore, over the last four quarters, its payout ratio of funds from operations (FFO) has been just 64%.
Not only is the distribution kept at a safe level, but the REIT also saves cash toĀ reinvest in growth.
CAR.UN stock has a professional management team
When you own a rental property, you often have to do a lot of the work yourself or outsource it to a property manager, which cuts into your profits.
When you own REITs, though, you don’t have to worry about that. And not only are all the properties taken care of by employees, but there’s also a professional management team looking at how to reinvest the capital to consistently grow the value of your investment in addition to the passive income you’re receiving.
In fact, over the last decade, the distribution has increased by over 30%, and investors have earned a total return of roughly 150% holding CAR.UN stock.
The REIT trades at a significant discount today
So far this year, as interest rates have been rising rapidly, CAR.UN stock has already sold off significantly. In fact, the REIT is now trading at a forward price-to-adjusted funds from operations (AFFO) ratio of just 19.1 times.
CAR.UN hasn’t been this cheap since 2017, and over the last five years, its average forward price-to-AFFO ratio was 26.4 times.
Therefore, it’s no surprise that analysts have an average target price for CAR.UN stock of more than $57, offering a potential return upwards of 40%.
You can buy the REIT with only a little capital and add to it over time
When it comes to buying rental properties, they are expensive, it can be a timely process, and the transaction fees can be significant. In addition, even with housing prices coming down in this environment, with mortgage rates climbing, the affordability of rental properties may not change all that much.
With CAR.UN stock, though, you can buy units of the REIT for as little as $40 and add to your investment whenever you save some capital.
In addition, if you ever need that capital back for an emergency or to invest elsewhere, you can liquidate your investment almost immediately.
If you’re looking for top stocks to buy in this environment, CAR.UN stock offers numerous advantages.
