Owning rental housing through a stock means somebody else gets the repair calls. It doesn’t mean the repairs stop costing you money. The rent has to cover operating expenses, borrowing, and upkeep before investors receive their share. Between two apartment landlords, I’d choose the one offering the better income opportunity after those demands, rather than assume Canada’s housing shortage makes every rental investment a bargain.
Apartment real estate investment trusts (REIT), collect rent and distribute part of their earnings to investors. Interest rates influence what they pay to borrow. Local rent rules, vacancies, maintenance, and wages shape what remains. Strong demand for housing helps, but it can’t wish those expenses away.
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CAPREIT
Canadian Apartment Properties REIT (TSX: CAR.UN), known as CAPREIT, owns a large residential portfolio concentrated in Canada. It offers broad exposure to rental markets, with property sales and repurchases helping management reshape the amount of real estate and earnings behind each unit.
Third-quarter funds from operations (FFO) were $0.65 per unit, down 1.7%. FFO adjusts accounting profit for items including property valuation changes. For CAPREIT, the decline shows why selling buildings and paying higher interest can reduce current earnings even when remaining properties keep collecting rent.
At the recent close of $31.99, four quarters matching that FFO would imply roughly 12.3 times annualized quarterly FFO. That’s a rough comparison rather than a full-year forecast, but it gives me a tangible starting valuation alongside the portfolio changes.
The monthly distribution is $0.13. Three payments total $0.39, using about 59% of the latest quarterly FFO. Upkeep still needs funding because FFO isn’t a measure of cash left after every recurring capital expense. I’d want the property sales and repurchases to improve future earnings per unit, rather than merely shrink the business.
KMP
Killam Apartment REIT (TSX: KMP.UN) offers a different mix, including a strong Atlantic Canadian presence. It can grow through existing rents, development, and acquisitions, with local operating experience supporting its appeal. Geographic differences give the comparison more substance than simply choosing the larger landlord.
Killam’s third-quarter adjusted funds from operations were $0.29 per unit, unchanged from a year earlier. This measure allows for maintenance capital and other adjustments. Its $0.06 monthly payment totals $0.18 per quarter, using approximately 62% of that measure.
That leaves room to retain some property earnings, which I like. It also shows that the quarterly result hasn’t yet delivered more cash earnings per unit. New development and stronger rents need to overcome financing costs and any temporary loss of tenant income.
Considerations
Here are alternative $10,000 purchases using recent closes. CAPREIT produces roughly $484 annually on that budget, versus about $407 from Killam. Both pay monthly. The two payout comparisons use different earnings measures, so I’d avoid declaring the smaller percentage the automatic winner.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CAR.UN | $31.99 | 312 | $1.55004 | $483.61 | Monthly | $9,980.88 |
| KMP.UN | $17.66 | 566 | $0.72 | $407.52 | Monthly | $9,995.56 |
I’d narrowly choose CAPREIT for the larger starting income and modest annualized FFO valuation. Killam would appeal more to someone deliberately seeking its regional exposure and development opportunities. My preference would change if CAPREIT’s portfolio actions kept reducing earnings without improving the remaining operation.
I’d hold either among other Canadian dividend investments, keeping the property allocation proportionate. Higher refinancing costs, weaker rental demand, and rent restrictions can affect both. A monthly distribution doesn’t turn a unit price into a fixed bank balance.
Bottom line
CAPREIT gets my next rental-property allocation inside a Tax-Free Savings Account (TFSA), where personal room permits. I’d buy in stages and reinvest until I need the cash. A better-shaped portfolio producing more per unit could eventually make today’s income purchase a stronger source of tomorrow’s rent cheques.
