Most, if not all, investors look forward to building a well-diversified portfolio. One of the main components of that portfolio is a monthly income producer.
Here’s a stellar option that isn’t just a monthly income producer, but an exceptional choice for long-term investors to consider right now.
Source: Getty Images
The traditional way to establish an income stream
When it comes to establishing a monthly passive income stream, most investors are immediately drawn to owning a rental property. And there’s a good reason for that.
Owning a rental property provides a recurring income stream for investors. In the longer term, it also represents equity that can continue to generate income or even be passed on.
Unfortunately, that’s where the benefits end. In recent years, the price of buying a home has increased significantly. This, in turn, has put pressure on landlords to raise rents to meet the other big change: interest rates.
And to top it all off, taxes continue to rise, and prospective landlords still need to find (and keep) paying tenants.
Finally, once all those payments are made, any profit from the rental would be minuscule at best, considering the massive upfront downpayment required.
In other words, it’s a risky venture that’s hardly worth its label as a monthly income producer.
Here’s the monthly income producer your portfolio needs
The alternative to owning a rental property is to invest in RioCan Real Estate (TSX:REI.UN).
RioCan is one of the largest REITs in Canada. For those unfamiliar with them, REITs are specific types of companies that own and operate income-producing real estate.
They often span various types of real estate and offer investors an opportunity to invest in diverse real estate assets. More importantly, they can provide a juicy income stream to investors, which is not unlike a landlord collecting rent.
In the case of RioCan, the company boasts a portfolio of commercial retail and mixed-use residential properties. Over the past several years, RioCan has shifted that mix to include more of the latter.
The properties are located primarily on transit routes in Canada’s major metro markets. Additionally, unlike owning a traditional rental unit property, there is considerably less risk when investing in RioCan.
The 6% monthly income producer
One of the main reasons why investors flock to REITs like RioCan is for the monthly dividend. As of the time of writing, RioCan offers a juicy 6.5% distribution.
This means that investors who can drop $25,000 into the REIT (as part of a larger, well-diversified portfolio) will generate a monthly income of just over $135.
Prospective investors should note that this income comes without a mortgage, property tax bill, or property maintenance. The initial outlay in this example of $25,000 is also considerably less than the typical downpayment needed for a single-unit home.
Keep in mind that investors who aren’t ready to draw on that income yet can choose to reinvest it. This allows any eventual income to continue growing until needed. Furthermore, invest in RioCan as part of your TFSA and that income suddenly becomes tax-free.
In other words, RioCan is a 6% monthly income producer that could be a game-changer for any portfolio.
Will you consider RioCan?
RioCan offers investors an opportunity to invest in a monthly income producer that is both well-diversified and growing. The company is also a lower-risk option when compared with a traditional rental property.
In my opinion, investors seeking a monthly income producer should consider adding RioCan to any well-diversified portfolio.
Buy it, hold it, and watch your future income grow.
