If you are looking for monthly passive income, real estate investment trusts (REITs) are the place to look. Unlike a rental property, you have no management responsibility, no late-night maintenance calls, and no hassling tenants to collect rent.
Through a REIT, you get to own a stake in some of the highest quality real estate in North America. REITs collect rents monthly, so they also tend to payout their distributions monthly.
Own a diversified portfolio of high-end real estate for passive income
You can even diversify your holdings by owning REITs in differing sectors such as industrial, multi-family, retail, office, storage, and even healthcare properties. With interest rates rising, the market has compressed REIT valuations. However, if you have a multi-year time horizon, now may be a very attractive time to add certain REITs to your portfolio.
In fact, if you put $30,000 to work in three different REITs today, you could earn as much as $125 of monthly passive income. Here’s how it could work.
A top industrial REIT producing ample passive income
Dream Industrial REIT (TSX:DIR.UN) yields close to 6% right now. With $10,000 you could buy 854 units at $11.70 per unit. That would yield $49.81 of monthly distributions.
With its stock down 30% in 2022, this stock is attractive. It trades at a substantial discount to its private market value. Dream owns and manages multi-tenanted warehousing and distribution properties in Canada, the United States, and Europe.
It should grow earnings by about 8% in 2022. The recently announced Summit Industrial REIT joint-venture deal should provide further growth upside in 2023.
A cheap retail REIT
Another REIT that pays an attractive distribution is First Capital REIT (TSX:FCR.UN). At $16.80, it earns a 5.16% yield right now. If you put $10,000 to work in First Capital stock, you could buy 595 units. That would earn $42.84 of passive income per month.
First Capital operates a portfolio of retail properties across Canada. These are largely anchored by recession-resilient tenants in grocery, hardware, and essentials. However, it also sits with a substantial underutilized land footprint that could be very valuable if developed prudently.
This REIT has underperformed for several years. It trades at 30% discount to its net asset value — a significant discount. Just recently, a well-known activist investor has begun stirring the pot to unlock some value in the stock (including a possible sale). This may take time, but investors can collect an attractive dividend while they wait.
An undervalued multi-family real estate stock
BSR REIT (TSX:HOM.UN) is a great stock to buy for exposure to multi-family residential. At $17.76, this passive-income stock yields close to 4%. Put $10,000 to work in BSR, and you could buy 563 units. That would earn $33.27 per month in passive income.
BSR owns affordable, amenity-rich apartment properties in Texas and Oklahoma. Its properties are in some of the fastest-growing municipalities in America. Consequently, it has been enjoying very high occupancy and strong rental rate growth.
It trades at a near 40% discount to its net asset value. Management owns a large stake in the business, so its incentives to unlock value are highly aligned with unitholders. This is a cheap stock with great assets, and it makes a for a great buy-and-hold passive-income investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Dream Industrial REIT | 11.70 | 854 | $0.05833 | $49.81 | Monthly |
| First Capital REIT | 16.80 | 595 | $0.072 | $42.84 | Monthly |
| BSR REIT | 17.76 | 563 | $0.0591 | $33.27 | Monthly |
