The attraction of earth and gold has existed since the earliest days of mankind. It has become blunt in recent decades, thanks to more attractive raw materials. Yet when we think about investing in something tangible and secure, real estate and gold are among the first options that come to mind.
The main problem when it comes to investing in real estate is the cost barrier. You might consider saving enough money to buy real estate (or at least for a down payment), but then the cost of wasted time would be too high.
If you’ve decided to invest in real estate but don’t have the right amount of capital, REITs offer an affordable price and a lot more passive way to invest in that particular asset class.
An apartment REIT
The Nova Scotia-based Killam Apartment REIT (TSX: KMP.UN) is one of Canada’s largest home owners. It has a portfolio of 210 apartments (with a total of 17,377 residential units) and 250 commercial properties, and 39 manufactured home communities with a total value of $ 3.8 billion. The breadwinner segment is made up of apartments, which represent 91% of total turnover.
The portfolio is geographically concentrated in Nova Scotia (39%), Ontario (21%) and New Brunswick (21%). Killam has steadily increased its portfolio size and FFO per unit. The 96.6% occupancy rate is impressive and quarterly revenues have been green for three years. With Killam, you have access to a decent 3.5% return and constant potential for capital appreciation.
A high-yield REIT
REIT Automotive Properties (TSX: APR.UN) is relatively new. It was founded in 2015 and has focused on a relative niche asset class: car dealerships. The REIT has identified it as a stable asset class for long term growth and consistent income. The REIT’s portfolio consists of 66 income producing properties which cover a total of over 200 acres of commercial land in urban areas.
Since its inception, the share’s best growth phase has been over the past 12 months, with growth of around 46.25%. But this recovery fueled growth should not be taken as an endorsement of this REIT’s potential for capital appreciation. Either way, the most attractive feature of this stock is its yield of 6.3% backed by a stable payout rate of 82.7%.
A venture capital REIT
Fronsac (TSXV: FRO.UN) is a small cap REIT (Market Cap: $ 134.4 Million) with decent growth potential and a sizable 3.9% return. It has grown by around 670% over the past decade and has a 10-year CAGR of 26.5%. And despite its epic growth, the stock isn’t as aggressively overvalued as other growth stocks with track records like Foransac’s.
The REIT has 79 properties in its portfolio. About half of the NOI comes from five major tenants, including Sobeys and Walmart, and 82% of its tenants have a national presence. The company has increased its rental income fairly steadily and is in a solid financial position. Most importantly, it still has plenty of room to grow and can be a powerful addition to the growth side of your portfolio.
The above three REITs can give you exposure to different segments of the real estate market: multi-family residential properties, automotive properties, and retail. Almost all of them offer stable dividends, and none have reduced their dividends in 2020.
Item 3 REITs to Buy for Easy Investing in Canadian Real Estate appeared first on The Motley Fool Canada.
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Foolish contributor Adam Othman has no position on any of the stocks mentioned. The Motley Fool owns shares and recommends AUTOMOTIVE PROPERTIES REIT. The Motley Fool owns shares of Killam Apartment REIT. The Motley Fool recommends Fronsac Real Estate Investment Trust.