Canadian investors have plenty of choice when it comes to selecting stocks on the TSX, especially in the real estate sector. And after all the economic headwinds and uncertainty in the market over the last year and a half, plenty of high-quality real estate stocks are trading incredibly cheap, making them some of the best stocks to buy now.
Investing in real estate stocks offers several benefits for investors. You gain exposure to one of the oldest and most important sectors of the economy. Not to mention, with as little as a few hundred dollars, you can gain exposure to all types of different properties diversified across the country and, in some cases, across the world.
Many of the best dividend stocks in Canada are also from the real estate sector, as these companies are constantly generating significant cash flow each month.
So, if you’re looking to gain or increase your exposure to the real estate sector today, here are three incredibly cheap real estate stocks to buy now.
A top Canadian REIT with significant recovery potential
First Capital REIT (TSX:FCR.UN) has been one of the cheapest real estate stocks you can buy over the last few years, and while its business is back on track, the price of the stock has yet to fully recover.
The REIT, which predominantly owns retail properties, was impacted significantly by the pandemic as some of its tenants struggled to pay rent, and its elevated debt levels came under scrutiny.
With its operations recovered now and its distribution back to pre-pandemic levels, the fact that First Capital still trades roughly 25% below its pre-pandemic price makes it one of the cheapest real estate stocks you can buy, especially since its yield sits at roughly 5.4%. That’s significantly higher than its five- and 10-year average yield of 4.3%.
Furthermore, First Capital currently trades at a forward price-to-funds from operations (P/FFO) ratio of 12.9 times, which is considerably cheaper than its five and 10-year averages of 14.6 and 16.1 times, respectively.
A top retail REIT with attractive long-term growth potential
When it comes to residential real estate investment trusts (REITs), there are also a tonne of high-quality picks trading undervalued. However, considering its long-term growth potential, InterRent REIT (TSX:IIP.UN) has to be considered one of the best real estate stocks to buy now.
InterRent owns properties in Ontario, Quebec, and B.C., and for years, it has been one of the best REITs for growth investors to buy. Not only does InterRent consistently look to expand its portfolio and buy new properties, but it also recognizes the value of upgrading its existing properties to drive revenue growth.
To consistently invest in growth takes cash, though, and with elevated interest rates, InterRent has faced headwinds as of late. These impacts are only temporary, though, so while InterRent trades cheaply, it’s one of the best real estate stocks to buy.
Currently, InterRent trades at 22.9. times its expected FFO in 2024. That’s below its five-year average forward P/FFO ratio of 26.3 times. Therefore, while this high-potential, long-term growth stock is undervalued, it’s undoubtedly a top pick.
One of the best real estate stocks to buy while it’s incredibly cheap
Finally, another excellent real estate stock to buy for its long-term growth potential, and one that’s ultra-cheap today, is Storagevault Canada (TSX:SVI).
As its name suggests, Storagevault owns roughly 240 self-storage centres all across Canada, a business with attractive economics. Self-storage is an attractive business to get into because the demand is not very volatile, and the operating costs to run a storage centre can be quite low.
For years now, Storagevault has been growing its sales considerably with several acquisitions, expanding its portfolio and optimizing the operation and revenue of its acquired assets by rebranding these locations under its well-known banners.
So, with Storagevault trading off its highs at the same time that it’s expected to generate record revenue and FFO this year, it’s certainly one of the cheapest real estate stocks to buy now. Currently, it trades at a forward P/FFO ratio of 22.3 times, below its five-year average of 27.4 times.
And with the stock expected to see its FFO increase again next year by another 11%, there’s no question this insane discount won’t last long.
