When it comes to establishing a passive-income stream, one of the most tried and trusted ways is to own real estate. But what if there was a better way to generate that income stream without a mortgage or a tenant?
Enter RioCan Real Estate Investment Trust (TSX: REI.UN). Here’s a look at why prospective investors should consider RioCan as a way to generate passive income over owning a traditional rental property.
Source: Getty Images
All about RioCan
For those who are unfamiliar with the stock, RioCan is one of the largest real estate investment trusts (REITs) in Canada. Historically, RioCan’s portfolio has leaned more toward commercial retail, but that mix has shifted in recent years.
That shift, which was towards mixed-use residential properties, is where a massive opportunity exists for investors. That opportunity comes thanks to the growing affordability issue across metro areas in Canada.
The average price of a home in Canada is now well north of a million dollars in major metro markets. This means that a recommended downpayment is well north of $100,000, and monthly mortgage payments are several thousand.
Already, that doesn’t sound too promising for prospective would-be landlords, and I haven’t even mentioned taxes, maintenance, or finding (and keeping) a tenant.
What RioCan offers is an alternative known as RioCan Living. That comprises a growing number of mixed-use properties located in major metro markets across Canada. The properties are located along high-demand transit corridors and serve both retail and residential needs.
In short, investing in the REIT, particularly over owning a single property, provides several distinct advantages.
First, there’s the lower upfront cost. Investing $10,000 in RioCan is considerably smaller than a downpayment of $100,000 or more. Again, that’s without factoring in maintenance or taxes, which doesn’t leave much for passive income.
Another key consideration is risk. Investing in RioCan spreads the overall risk across hundreds of units in dozens of properties in multiple markets across Canada. That’s a considerably lower risk than owning a single property to rent out.
That juicy income
One of the main reasons why investors should consider RioCan is the passive income potential that it offers. As of the time of writing, RioCan offers a monthly distribution that carries an appetizing yield of 5.92%.
For those investors with $10,000 to invest, that works out to a passive income of nearly $600. That’s not enough to retire, but it is enough to generate a few shares through reinvestments.
More importantly, this allows any eventual income to grow on its own, making RioCan a great buy-and-forget investment option for any portfolio.
RioCan also provides that distribution on a monthly cadence, just like a landlord collecting rent.
Will you choose to generate passive income?
No investment, even the most defensive, is without risk. Fortunately, RioCan offers investors a defensive and growing way to generate a passive-income portfolio.
In my opinion, RioCan is a great option for any well-diversified portfolio.
Buy it, hold it, and watch your future income grow.
