How to Easily Earn an Extra $125/Month of Passive Income in 2023

Are you looking to load up on passive income in 2023? Check out these ultra-cheap real estate stocks that pay BIG monthly dividends.

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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.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Dream Industrial REIT11.70854$0.05833$49.81Monthly
First Capital REIT16.80595$0.072$42.84Monthly
BSR REIT17.76563$0.0591$33.27Monthly
Stock prices as of December 30, 2022

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 Robin Brown has positions in Dream Industrial Real Estate Investment Trust and BSR Real Estate Investment Trust. The Motley Fool recommends BSR Real Estate Investment Trust, Dream Industrial Real Estate Investment Trust, and First Capital Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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