When most people think of passive income from real estate, they picture renting out a property — maybe even running an Airbnb. While that can bring in decent cash flow, it also comes with plenty of headaches: complicated tax filings, strict local regulations, potential late-night guest issues, cleaning coordination, and the looming risk of property damage.
But there’s a more hands-off route that still gives you real estate exposure and monthly income — without dealing with guests or cleaning services. Enter Canadian real estate investment trusts (REITs) and REIT exchange-traded funds (ETFs).
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Why REITs are the simpler alternative
REITs are publicly traded companies that own and manage income-generating properties, such as shopping malls, apartment buildings, warehouses, or healthcare facilities. When you invest in a REIT, you get a slice of that income in the form of regular distributions — typically paid monthly.
Take Granite REIT (TSX:GRT.UN) as an example. It focuses on industrial properties, such as logistics warehouses, and has a strong track record of reliability. Granite has increased its cash distribution for 14 consecutive years, with a 10-year cash distribution-growth rate of 4.1%. At the current price of $76.53 per unit at writing, it offers a 4.4% yield. That’s pretty decent for monthly passive income.
Analysts estimate the stock is undervalued by about 16%, with nearly 19% upside potential. Technically, the REIT seems to have price support in the $58-$62 range — so a dip into that zone could be an opportunity to lock in a better yield and upside.
An even more passive approach: REIT ETFs
Do you want something even more hands-off? Consider a REIT ETF like BMO Equal Weight REITs Index ETF (TSX:ZRE). Instead of buying individual REITs, ZRE gives you instant diversification across the entire Canadian REIT sector.
ZRE holds about $590 million in net assets and provides exposure to a wide mix of real estate segments:
- 41% in retail REITs
- 30% in multi-family residential
- 9% in diversified REITs
- 5% each in industrial, healthcare facilities, health care REITs, and office REITs
The fund spreads its holdings evenly — no single REIT dominates the portfolio. Top holdings include Chartwell Retirement Residences, Slate Grocery REIT, RioCan REIT, Granite REIT, and Minto Apartment REIT, each making up around 4.8–5.1% of the fund.
The ETF currently yields approximately 4.85%, with monthly payouts. While its management expense ratio (MER) of 0.61% is a little higher than some ETFs, the yield more than covers it.
Over the past 10 years, ZRE has delivered annualized returns of about 7%, which trails the broader Canadian stock market’s 11.4% return — but REITs are income plays first and foremost. The key is buying on dips to boost both your yield and long-term returns.
Investor takeaway: Passive income without the stress
Airbnb might sound like an easy money-maker, but in reality, it’s anything but passive. Between local bylaws, high guest turnover, and wear and tear, many property owners find the demands outweigh the rewards.
REITs, especially through a diversified ETF like ZRE, offer a genuinely hands-off way to generate monthly income — all without cleaning rooms or scrubbing toilets. Whether you prefer picking individual REITs like Granite REIT or going fully hands-off with an ETF, you can still enjoy the income benefits of real estate — minus the work that comes with Airbnb.
