There’s no question that real estate is one of the best investments you can make. It offers long-term appreciation, generates consistent cash flow, and provides a strong hedge against inflation. But while owning physical property might sound appealing, it comes with a tonne of responsibility. That’s why more and more investors are choosing Canadian real estate investment trusts (REITs).
When you buy an investment property, there are many things to consider such as the significant upfront capital you need for the investment, ongoing maintenance, tenant management, and exposure to vacancy risk.
That’s why REITs can be such a great investment. They allow Canadians to gain exposure to real estate without the stress and commitment that comes with being a landlord.
Canadian REITs offer investors exposure to high-quality properties that are managed by professional teams. And on top of that, many REITs return a significant portion of their income back to investors in the form of distributions.
Plus, because you can buy REITs just like a stock, they’re one of the easiest and most accessible ways to start building wealth through real estate.
You don’t need a down payment, you don’t need a mortgage, and you don’t need to worry about who’s going to fix the furnace. Plus, you can liquidate your investment anytime you want.
So, if you’re looking to gain real estate exposure without owning physical property, here are three top Canadian REITs worth considering.
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Two top residential REITs Canadian investors can buy now
There are many different investments to consider in the real estate space, but one of the most popular and best places to start is with residential real estate.
And right now, two of the best residential REITs to buy are InterRent REIT (TSX: IIP.UN) and Canadian Apartment Properties REIT (TSX: CAR.UN).
Both InterRent and CAPREIT own a diversified portfolio of residential assets spread all across the country. But in addition to the exposure these REITs offer to residential real estate, one of the main reasons they’re some of the best stocks to buy now is due to their current valuations.
With interest rates still elevated, both InterRent and CAPREIT are trading unbelievably cheap. In fact, InterRent currently trades at a forward price-to-adjusted-funds-from-operations (P/AFFO) ratio of just 18.5 times, which is well below its five-year average of 27.4 times.
Meanwhile CAPREIT currently trades at a P/AFFO ratio of 18.3 times, which is also significantly lower than its five-year average P/AFFO ratio of 23.8 times.
Furthermore, with both REITs trading undervalued, investors who buy now can lock in a higher-than-normal yield. For example, InterRent currently offers a yield of 3.7%, which is significantly higher than its five-year average forward yield of 2.7%.
CAPREIT is in a similar situation. Right now, CAPREIT has a forward yield of 3.8%, which is well above its five-year average of 3%.
So not only do these REITs offer investors exposure to Canadian real estate, but they’re also trading ultra-cheap, making them some of the best investments to buy now.
One of the best real estate stocks on the TSX
In addition to residential real estate, REITs also offer exposure to many other real estate subsectors, such as retail, industrial, offices and much more.
And right now, one of the best real estate stocks you can buy, especially if you’re looking to boost the passive income your portfolio generates is CT REIT (TSX: CRT.UN).
CT REIT is a unique investment because its majority owner, Canadian Tire, is also its largest tenant, accounting for roughly 90% of its revenue.
Therefore, as long as one of the best and most well-known retail brands in the country continues to pay the rent, CT REIT should remain a steady, low-risk investment.
Plus, while it’s not as cheap as InterRent or CAPREIT, it too is trading off its highs. And with the REIT trading below $15 per unit, it currently offers a yield of 6.3%, above its five-year average yield of 5.7%.
Plus, in addition to its compelling yield, CT REIT has increased its distribution every year since it went public.
So if you’re looking for a reliable passive income generator that offers exposure to Canadian real estate, CT REIT is easily one of the best stocks to buy now.
