Canadians looking for ways to earn extra money besides their primary income source have plenty of options for creating a passive-income stream. You can take several approaches to stock market investing, including using your money to earn a bit of extra money each year. This approach involves strategically allocating funds into income-generating assets that let investors receive regular payouts, along with the potential value of the underlying assets, which can increase the value of their investments over time through capital gains.
In this economy, the dual benefit can be an excellent strategy to live a life that goes beyond simply making ends meet. Today, I will tell you how you can invest in the stock market to generate income like a landlord but without the cash outlay needed to buy investment properties.
What’s the trick? It’s real estate investment trusts (REITs).
Earn like a lazy landlord
REITs are some of the top long-term investments you can add to your self-directed portfolio. Built on reliable and defensive operations generating significant monthly cash flow, these trusts deliver returns to investors in the form of monthly distributions.
These real estate businesses generate income from rental properties. In return for investing in units (like shares in a stock), you get monthly cash based on the amount of units you hold. Effectively speaking, you can earn like a landlord based on how much you invest, but without the hassle of being one.
Here are two REITs that can be excellent long-term holdings for generating extra.
Canadian Apartment Properties REIT
Also called CAPREIT, Canadian Apartment Properties REIT (TSX:CAR.UN) is a residential REIT that primarily acquires and leases multiunit residential properties near major urban centres nationwide. Its portfolio consists of townhouses and apartments and generates revenue in the form of rental income from leasing properties to renters.
Residential REITs are some of the best stocks Canadians can own for a passive income since they are highly defensive businesses. Most people cannot afford to buy homes due to sky-high prices in the housing market, making rental properties attractive. These REITs can consistently return cash to investors and still have money left over to invest in more properties and expand portfolios to increase income further.
As of this writing, CAPREIT trades for $40.28 per share and pays its investors a 3.85% annualized dividend yield.
CT REIT
CT REIT (TSX:CRT.UN) is also a REIT, but it focuses more on retail properties instead of residential properties. The unincorporated REIT invests in retail properties across the country. One of the best things about the REIT is that it generates around 90% of its rental income from one tenant: Canadian Tire. Canadian Tire is the company operating the Canadian Tire retail stores located nationwide.
The tenant base for CT REIT is strong and attributes a ton of reliability to the real estate business. It also explains why the trust can increase its revenue and distributions consistently since going public.
As of this writing, CT REIT trades for $14.42 per share and pays its investors a juicy 6.41% annualized dividend yield.
Foolish takeaway
Remember, it is always a good idea to diversify your investment capital across several stocks. Diversifying your investments means mitigating losses. For the sake of explaining the example, we will see how a $10,000 investment in each of the above two REITs can pay out over $1,000 annually.
| Stock | Dividend Yield | Current Share Price | Annual Dividend Per Share | Investment | Share Count | Total |
| Canadian Apartment Properties REIT | 3.848% | $40.28 | $1.5504 | $10,000 | 248 | $384.50 |
| CT REIT | 6.416% | $14.42 | $0.9252 | $10,000 | 693 | $641.16 |
| Total | $1,025.66 |
