Passive Income Seekers: Invest $10,000 for $38 in Monthly Income

Dividend investors are wise to look at real estate stocks for passive income right now. There are several good reasons for this.

REITs are an excellent investment for monthly passive income

Firstly, many Canadian real estate investment trusts (REITs) are cheap. Many real estate stocks are trading far below their private market value. Despite interest rates dropping significantly over 2024, REITs have yet to catch an equivalent valuation re-rating.

Why would you buy private commercial real estate when you can buy publicly listed real estate portfolios (with established management platforms) at 15%-40% discounts to the private market?

Secondly, top Canadian REITs can provide stable, predictable passive income. These REITs have high quality management teams, great assets, predictable tenants/leases, and strong balance sheets. REITs collect rental income monthly, so they also can afford to pay distributions monthly.

If you want a nice combination of passive income and value, REITs are a good place to look. If you were investing $10,000, here’s a four-stock real estate portfolio that could earn as much as $38.37 in monthly passive income.

A retail REIT for a nice passive income yield

First Capital REIT (TSX: FCR.UN) is one of Canada’s largest urban-focused, grocery-anchored property owners. Even in a tough economy, it has been enjoying a high single-digit rental rate growth through the year.

First Capital had some activist pressure that pushed it to sell off non-core assets, pay down debt, and seek to unlock the value of its large development portfolio. Lately, the REIT has been executing very well. Despite this performance, First Capital remains unjustifiably cheap.

First Capital REIT yields 4.9% today. Put $2,500 into this stock and you would earn $10.03 of distributions monthly.

A top industrial REIT

Dream Industrial REIT (TSX: DIR.UN) is one of Canada’s largest industrial real estate companies. It is focused on well-located, multi-tenanted properties across Canada and Europe.

Estimated market rents remain approximately 30% above where Dream’s current average portfolio rent sits. That should provide several years of steady rental growth and cash flow growth. It also has plenty of other levers (like land development, solar power, and data centres investments) to drive future per unit cash flow growth.

Dream stock yields 5.7%. A sum of $2,500 invested in this stock would earn $11.73 of monthly passive income.

Own this REIT for U.S. apartment exposure

If you want a Canadian stock but with exposure to the U.S. real estate market, BSR REIT (TSX: HOM.UN) is attractive. BSR owns a quality portfolio of garden-style apartments in some of the fastest-growing municipalities in the U.S.

BSR is positioned to see demand (and rents) rise in 2025 as recent new market supply gets quickly absorbed. Despite strong cash flow per unit performance, BSR trades at a wide discount to U.S. peers. Management has been aggressively buying back stock to bridge the gap.

It yields 4.3%. A $2,500 investment in BSR would earn $9.09 of monthly passive income.

A cheap Canadian apartment REIT

If you want exposure to apartments in Canada, Minto Apartment REIT (TSX: MI.UN) is a good name. It has some of the best-located apartment properties in the country. That has supported exceptional mid-teens rental rate growth over the past few years.

Right now, it is one of the cheapest apartment REITs in Canada. That is despite its high quality assets, strong management team, and excellent balance sheet. Management is starting to aggressively buy back stock given its steep value discount.

This passive income stock yields 3.6%. A $2,500 investment in Minto’s stock would earn $7.52 of monthly distributions.